Private company limited by shares
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A private company limited by shares is a type of company incorporated under the laws of England and Wales, Scotland, that of certain Commonwealth countries and the Republic of Ireland. It has shareholders with limited liability and its shares may not be offered to the general public, unlike those of public limited companies.
"Limited by shares" means that the company has shareholders, and that the liability of the shareholders to creditors of the company is limited to the capital originally invested, i.e. the nominal value of the shares and any premium paid in return for the issue of the shares by the company. A shareholder's personal assets are thereby protected in the event of the company's insolvency, but money invested in the company will be lost.
A limited company may be "private" or "public". A private limited company's disclosure requirements are lighter, but for this reason its shares may not be offered to the general public (and therefore cannot be traded on a public stock exchange). This is the major distinguishing feature between a private limited company and a public limited company. Most companies, particularly small companies, are private.
Private companies limited by shares are required to have the suffix "Limited" (often written "Ltd" or "Ltd.") or "Incorporated" ("Inc.") as part of their name, though the latter cannot be used in the UK or the Republic of Ireland. In the Republic of Ireland "Teoranta" ("Teo.") may be used instead, though this is limited mainly to Gaeltacht companies. "Cyfyngedig" ("Cyf.") may be used by Welsh companies in a similar fashion.
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[edit] Company founders
In the UK the Companies Act allows one or more persons to form a company for any lawful purpose. In the Republic of Ireland, a private limited company may have a maximum of fifty shareholders.
Private companies are the easiest form of company to begin and run in their early stages.
[edit] Single member companies
A single member company is a private company, limited by shares or by guarantee, which is incorporated with one shareholder or whose membership is reduced to one person.
Unless the company's articles of association specify anything to the contrary, a single member - present in person or by proxy - may constitute a quorum at a meeting of shareholders. However, if such a meeting is held it must be recorded in minutes. If a single member takes a decision at a meeting then that decision must be given to the company in writing.
If the company enters into an unwritten contract with the sole member who is also a director of the company (and the contract is not in the ordinary course of the company's business), the company must ensure that the terms of the contract are set out in a memorandum or are recorded in the minutes of the next board meeting. for any purpose.
[edit] Company officers
Every company must have formally appointed company officers at all times. By statute, a private company must have at least one director and a secretary. The company's articles of association may require more than one director in any case, and frequently do. At least one director must be an individual, not another company. There is no requirement to have a company secretary since April 2008. (Companies Act 2006)
Anybody can be a director, subject to certain exceptions. A person who has previously been declared bankrupt or who has been banned from being a company director by the court will also be restricted. Nor can a person be a director of a limited company if he or she is unable to consent to their appointment. From October 2008, all directors must be over the age of 16. This change will be applied retrospectivley, with any directors under the age of 16 being removed from the register (Companies Act 2006).
No formal qualifications are required to be a company secretary.
In Scotland the Registrar will not register the appointment of a director under the age of 16 years old for any company, as such a child does not have the legal capacity to accept a directorship - see the Age of Legal Capacity (Scotland) Act 1991.
Certain non-British nationals are restricted as to what work they may carry out in the UK.
From October 2008, it will no longer be necessary to obtain a Court Order to withhold a Directors address, as you will be able to instead supply a Service Address as well with your residential address being held as protected information at Companies House. (Companies Act 2006)
[edit] Requirements
[edit] Share Capital
Only £1 share capital is needed to start up a private limited company. Limited Companies are formed with both an authorised share capital and an issued share capital. The authorised share capital is the total number of shares existing in the company multiplied by the nominal value of each share. Not all such shares may have been issued. The issued share capital is the same calculation in respect of all the issued shares.
A company incorporated in England and Wales can be created with any number of shares of any value, in any currency. For example, there may be 10,000 shares with a nominal value of 1p, or 100 shares each of ₤1. In each case the share capital would be ₤100.
Unissued shares can be issued at any time by the directors using a Form 123, subject to prior authorisation by the shareholders.
Shares in a private company are usually transferred by private agreement between the seller and the buyer, as shares in a private company may not by law be offered to the general public. A stock transfer form is required to register the transfer with the company. The articles of association of private companies often place restrictions on the transfer of shares.
[edit] Company Accounts
A company's first accounts must start on the day of incorporation. The first financial year must end on the accounting reference date, or a date up to seven days either side of this date. Subsequent accounts start on the day following the year-end date of the previous accounts. They end on the next accounting reference date or a date up to seven days either side.
To help companies meet this filing requirement, Companies House send a pre-printed "shuttle" form to its registered office several weeks before the anniversary of incorporation. This will show the information that has already given to Companies House. If a company's accounts are delivered late there is an automatic penalty. This is between £100 and £1,000 for a private company.
The first accounts of a private company must be delivered:
- within 10 months of the end of the accounting reference period until April 2008, when it will reduce to 9 months; or
- if the accounting reference period is more than 12 months, within 22 months of the date of incorporation, or three months from the end of the accounting reference period, whichever is longer.
A company may change its accounting reference date by sending Form 225 to the Registrar.
[edit] Registered Office
Every company must have a registered office, which does not need to be its usual business address. It is sometimes the company's lawyers or accountants, for example. All official letters and documentation from the government departments (including Inland Revenue and Companies House) will be sent to this address, and it must be shown on all official company documentation. The registered office can be anywhere in England and Wales (or Scotland if the company is registered there). If a company changes its registered office address after incorporation, the new address must be notified to Companies House on Form 287.
[edit] Formation
To incorporate a company in the UK (other than Northern Ireland) the following documents, together with the registration fee, must be sent to to the Registrar of Companies:
- The memorandum of association
- The articles of association
- Form 10
- Form 12
The memorandum of association states the name of the company, the registered office and the company objectives. The objective of a company may simply be stated as being to carry out business as a general commercial company. The memorandum delivered to the Registrar must be signed by each subscriber in front of a witness who must attest the signature.
The articles of association govern the company's internal affairs. The company's articles delivered to the Registrar must be signed by each subscriber in front of a witness who must attest the signature.
Form 10 states the first directors, the first secretary and the address of the registered office. Each director must give his or her name, address, date of birth, occupation and details of other directorships held within the last five years. Each officer appointed and each subscriber (or their agent) must sign and date the form.
Form 12 is a statutory declaration of compliance with all the legal requirements relating to the incorporation of a company. It must be signed by a solicitor who is forming the company, or by one of the people named as a director or company secretary on Form 10. It must be signed in the presence of a commissioner for oaths, a notary public, a justice of the peace or a solicitor.
In other jurisdictions companies must make similar applications to the relevant registrar - the Northern Ireland Registrar of Companies in Northern Ireland, the Companies Registration Office, Ireland in the Republic of Ireland, or the Registrar of Companies in India.
[edit] Additional Information
[edit] Redundant companies
Private companies that have not traded or otherwise carried on business for at least three months may apply to the Registrar to be struck off the register. Alternatively, the company may become voluntarily insolvent.
[edit] Converting to a public limited company
A private company limited by shares and an unlimited company with a share capital may re-register as a PLC. A private company must pass a special resolution that it be so re-registered and deliver a copy of the resolution together with an application form 43(3)(e) to the Registrar.
