Forming a limited company is just the initial step in a line of fixed legal processes to follow throughout the lifetime of that company. Incorporation has converted your business into a corporate body. In return for the benefits of trading with limited liability, your company must deliver certain information to the Registrar at Companies House so it is available for public inspection. People can then make informed decisions about companies they may wish to do business with or invest in.
Failure to comply leads to automatic fines and, possibly, prosecution. Initially the process appears daunting, but the rules are clear. In fact the Companies Act 2006 which came into force from January 2007 – with further changes implemented in October 2009 – introduces a number of changes which should make life easier for small limited companies.
First steps
Tell Companies House who owns your company and who runs it within 14 days of incorporation. You need to send:
- a Memorandum of Association, giving details of the company’s name, location and what it will do.
- Articles of Association describing how the company will be run, the rights of the shareholders and the powers of the company’s directors
- Form IN01 (Statement of the First Directors, Secretary and Registered office) giving details of the company’s registered office and the names and addresses of its directors and company secretary (if appointed).
Duport will have provided most forms you need. Download any addition forms from the Companies House website.
The Company’s Officers
The officers of the company are the people formally appointed to run it – the company directors and company secretary (if appointed). Legally companies must have at least one director in place at all times and their name(s) and address(es) must be on the company registration documents. When officers resign, new ones are appointed, or personal details change the Registrar of Companies must be informed immediately.
At present private companies must have at least one director. If there is only one director, the Articles of Association must state that this director cannot also be the company secretary. From October 2009 private companies have no longer had to have a company secretary, but if they do, the duties and authority of the secretary remain the same. At least one director is needed for a public limited company. There is no upper age limit for company directors but they must be at least 16 years old. Generally anyone can be a director (unless already disqualified by a court from doing so, or is an undischarged bankrupt).
A single person can form a company – a “single-member” private company as the sole director, and you are no longer required to have a company secretary, although many companies find it useful.
Obligations include managing the company’s affairs in accordance with its articles of association and the law. Company directors and secretaries are responsible for delivering information to the Registrar. All directors have certain responsibilities, whether executive or non-executive, trading or not.
Director responsibilities include sending accounts (for limited companies), annual returns and notice of change of directors or secretaries. Notice of change of registered office is also required by law. Failure to file accounts or annual returns is a criminal offence and a director can end up with a criminal record and fine up to £5,000 for each violation. Alternatively, if the Registrar believes the company is no longer in business it can be struck off the register and dissolved. If this happens, company assets, including bank accounts and property are taken by the Crown. Around 1,000 directors are prosecuted annually, and persistent failure to deliver statutory documents on time can lead to a director being disqualified from taking part in the management of a company for a specified time.
Companies House Yearly Responsibilities
You must complete an Annual Return and supply a signed set of annual accounts to Companies House every year.
Annual Accounts
A private company filing its first accounts must do so within 21 months of the date of incorporation, and after that within 10 months of the company’s Accounting Reference Date. (ARD) The company’s first ARD is a year after the last day in the month of its incorporation.
Confirmation Statement (Annual Return)
Key information about activities, directors, shareholders, share capital, etc on what is known as the Legal Return Date (LRD) or “made up” date must be sent each year. The LRD is usually the anniversary of the incorporation of the company, or the anniversary of the made up date of the previous annual return registered at Companies House, if this is different to the anniversary date. Information already held by companies House is sent to the company registered address a couple of weeks before the LRD and must be returned within 28 days of the LRD with amendments if necessary. There is a filing fee of £30 (or £15 on-line, see below).
Deadlines and Penalties
Late accounts automatically receive a ‘late filing penalty’, so it is vital to follow the rules. Penalties for private companies filing late range from £150 for three months or less to £1,500 for delaying more than 12 months. Public fines are higher still. There is a maximum time limit of 10 months from the accounting reference date to deliver accounts and returns to the Registrar. The accounting reference date is the date to which accounts must be prepared. Directors of public limited companies have only seven months. Remember that if a company’s first accounts cover a period of more than 12 months they must reach Companies House within 21 months of the date of incorporation for private companies and 18 months for public companies.
Directors – and not accountants – are responsible for making sure paperwork is delivered to Companies House on time. All limited companies, whether trading or not, must keep accounting records and file accounts for each accounting period with the Registrar. Unless claiming exemption (e.g. dormant), the accounts need to include the following: A directors’ report, a balance sheet, a profit and loss account, an auditors’ report and notes to the accounts and group accounts, if appropriate. All must be signed by the relevant parties.
A director or the company secretary should ensure that company records are available for inspection by those entitled to see them. Essentially, the director or company secretary needs to maintain the statutory registers, ensure that statutory forms are filed promptly, provide members and auditors with notice of meetings, supply copies of accounts to those entitled to them and keep minutes of meetings. If a company has a seal, the director or company secretary is responsible for it. Although the company secretary has no powers, he or she is allowed to sign most forms.
Within a month of shares being allocated, the company secretary needs to fill in a Companies House form and send it to Companies House. The secretary needs to maintain a record/register of shareholders and issue Share Certificates to the shareholders. Copies of any special or extraordinary resolutions and certain types of ordinary resolutions need to be sent to Companies House within 15 days of them being passed by the company.
All documents and forms delivered to Companies House are scanned and stored as an electronic image. Members of the public can then view this information online. Much of the work can be done easily online under Webfiling, is fast and efficient and produces a fast acknowledgement.
But if documents are sent they should be sent on plain white A4 between 80gsm and 100gsm with a matt finish. Text should be black, clear and legible or it will be rejected. Send in portrait format (i.e. with the shorter edge across the top) and remember to include the company number in the top right-hand corner of the first page.
Companies can send information to the Registrar by hand (personally or by courier), including outside office hours, bank holidays and weekends to Cardiff, London and Edinburgh.
To use WebFiling, a customer needs to register to get a security code and authentication code. The security code is sent immediately to the sender’s specified email address and the authentication code is sent by post to the company’s registered address. Both codes are required to sign in and submit data on-line.
Tax Responsibilities and Deadlines
The financial year for a new company starts on the day of incorporation; you have a legal responsibility to immediately contact HMRC and keep accounting records – even if not trading. Your details will automatically be passed onto HMRC by the Companies Registrar, but you must also contact your local tax office to let them know about your company.
Limited companies have to pay corporation tax on their income and profits. In addition they also need to operate a PAYE system to collect tax and pay income tax and NI contributions from their employees – including company directors.
Limited companies must complete a corporation tax return (form CT600) every year and supply a set of accounts to go with it. Most companies must pay corporation tax within nine months and one day of the end of their financial year. Automatic penalties apply for late returns. The limited company will also need to operate a PAYE system to collect and pay income tax and NIC from employees – including company directors.
Company directors, employed by their own company will also have to send self assessment tax returns by 30th September each year if they want HMRC to calculate tax or 31st January otherwise. Partners pay their own tax by making two payments on account and the deadlines are 31st January and 31st July each year.
If you are a VAT registered business you will also have to complete a VAT return form for each tax period, (usually every three months).
Other Legal Essentials
Legally you are obliged to:
- Display your company’s name clearly on the outside of all its offices or other places of business.
- Display your company’s name clearly on all its business stationery, including letters, invoices, receipts and cheques.
- Show your company’s place of registration, registered number and office address on all its business letters and order forms as well as on electronic business communications.
- Send all necessary registration documents and forms to the Registrar of Companies, completed and signed.
- Check your certificate of incorporation
- Contact HMRC
- On your company website(if you have one) you must show the company’s name, registered office and geographic addresses, registered company number, VAT number and the place of registration. It must also include an email address.
Keeping on top of the paperwork and knowing the rules and regulations that bind a limited company are essential. If this seems too daunting, remember companies like Duport can take some of the hassle away and act as company secretary and registered office and we have experts you can speak to for free advice. Also look at the other guides, particularly those on tax.
