FORMITRITE
Company Formations and
Searches
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EXPLANATION OF TYPES OF COMPANY AND PARTNERSHIP PRIVATE LIMITED COMPANY A
limited company is owned by its members (the shareholders) and run by the
director(s), whose assets are protected from loss if the business should fail.
This is sometimes referred to as limited liability. The company's
profits, losses, assets and liabilities are its own.
Because a company has a life of its own, the business can continue despite
the resignation or death of any directors or shareholders, and the sale of the
business or the introduction of outside investors is simplified. Reasons for
wanting or needing a limited company may include ownership of property,
obtaining finance, taxation, status and protection from risk. A public limited company is a company which is registered as such and complies with the following:-
For example, if a share with a nominal value of £1 is sold for £6, then it is said to have a premium of £5. This premium must be paid to the company, together with a minimum of a quarter of the nominal value of each share. That is £0.25p plus £5, making a total payment of £5.25. 2. When can a PLC start business? A newly formed PLC must not begin business or exercise any borrowing powers until it has a certificate issued under section 117 of the Companies Act 1985 confirming that the company has issued share capital of at least the statutory minimum. You can get this certificate from Companies House by completing a Form 117. Once issued, the certificate is proof that the company is entitled to do business and borrow. 3. Are there any other restrictions on a PLC? Yes. There are four main restrictions:- (i) A PLC must have at least two members and at least two company directors. The secretary (or each joint secretary) must also be a person who appears to the directors to have the necessary knowledge and ability to fulfil the functions and who: (a) held the office of secretary or assistant or deputy secretary on 22 December 1980; or (b) for at least three of the five years before their appointment, held the office of secretary of a non-private company; or (c) is a barrister, advocate or solicitor called or admitted in any part of the United Kingdom; or (d) is a person who, by virtue of his previous experience or membership of another body, appears to the directors to be capable of discharging the functions of secretary; or (e) is a member of any of the following bodies:
- the Institute of Chartered Accountants in England and Wales (ii) A PLC normally has only seven months after the end of its accounting reference period to deliver its accounts to the Registrar. A civil penalty will be incurred if it delivers accounts to Companies House after the statutory time allowed for filing. (iii) A PLC cannot take advantage of many of the provisions and exceptions applying to private companies under the Act, such as audit exemptions for small private companies. (iv) A PLC cannot apply for voluntary strike-off under section 652A, Companies Act 1985. 4. What then is the advantage of a public company? A PLC has access to capital markets and can offer its shares for sale to the public through a recognised Stock Exchange. It can also issue advertisements offering any of its securities for sale to the public. By contrast, a private company may not offer to the public any shares in itself.
Most Guarantee Companies do not have profit making as an objective, and therefore will not wish to issue shares and will usually have non-profit distribution clauses, ensuring that all income and property of the company shall never be distributed amongst the members, but used to further the aims of the company. In the main, Guarantee Companies are formed by professional bodies, trading organisations, clubs, educational establishments and charities. If the Company will be seeking charitable status, it is recommended that this is done after incorporation - this will save considerable delay in the Incorporation.
An LLP is similar in some ways to a standard Partnership, except that the individual members have lower liabilities to any debts which may arise from running the business. There are more administrative duties involved, compared to the Partnership business structure. In fact, an LLP is more similar to operating a Limited Company. In terms of liability, the Limited Liability Partnership is itself liable for debts run up in running the business, rather that the individual members of the LLP. As a result, LLP's are only recommended for profit running businesses. Individuals or existing businesses can be members of a Limited Liability Partnership, and the LLP must have at least 2 members. The rights and responsibilities of all members would usually be laid out in a "Deed of Partnership". The LLP would typically select a "Designated Member" (or members) who would be responsible for maintaining communications with Companies House, preparing accounts and acting for the LLP if for some reason it is dissolved further down the line. An LLP should draw up a "Deed of Partnership" at the time of formation - a legally binding agreement between members which lays out the rights and responsibilities of each party to the agreement. Alongside administrative details such as the names and addresses of members, the deed will also include details on the amount of capital each partner will inject into the business, what their individual roles and responsibilities will be in running the business and what would happen if a partner leaves the business. |
FORMITRITE
Company Formations and
Searches
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