Company Formation & Corporate Governance.

Setting up a private limited company involves incorporating it at Companies House. The core steps are: choosing a company name that is available and complies with the rules; deciding on the company's directors and shareholders; determining the share structure — how many shares, of what type, held by whom; adopting articles of association (the company's constitution); identifying any people with significant control; and providing a registered office address. The company is then registered at Companies House, which issues a certificate of incorporation confirming the company legally exists. Incorporation itself can be quick, but setting the company up properly — with appropriate articles, the right share structure, and, where there is more than one owner, a shareholders' agreement — is what protects the business and its owners. It is also important to consider the tax position and to register with HMRC. Taking advice at the formation stage helps ensure the company is structured correctly from the outset, which is far easier than restructuring later.

A limited company has a number of ongoing obligations to Companies House and HMRC that must be met to keep the company in good standing. The main Companies House obligations are: filing an annual confirmation statement, confirming the company's details are up to date; filing annual accounts in the required format and by the deadline; and notifying Companies House of changes — such as new or departing directors, a change of registered office, changes to people with significant control, and the issue or transfer of shares. The main HMRC obligations include filing company tax returns and paying corporation tax, and dealing with VAT and PAYE where applicable. Companies must also maintain their statutory registers and records. Missing filing deadlines can result in penalties, and persistent failure can lead to the company being struck off the register and the directors facing consequences. Many companies use an accountant or company secretary to manage these obligations. Keeping on top of compliance is a basic but essential part of running a company properly.

The articles of association are a company's constitution — the rulebook governing how the company is run and the relationship between the company, its directors, and its shareholders. They control matters such as: the rights attaching to shares; how directors are appointed, removed, and how they make decisions; how board and shareholder meetings are conducted; how shares can be issued and transferred; and the procedures for company decision-making. Most companies are incorporated using the standard model articles provided by law, which are adequate for many simple companies. However, the articles can be tailored to the company's specific needs — for example, to create different classes of shares with different rights, to include pre-emption provisions on share transfers, to set out specific decision-making requirements, or to reflect arrangements agreed between the owners. Where a company has particular requirements — multiple shareholders, different share classes, or specific governance arrangements — bespoke articles are advisable. The articles are a public document filed at Companies House, and any changes generally require a special resolution of the shareholders.

As a business grows, its governance needs evolve, and planning ahead avoids problems. Issues a growing business should consider include: whether its articles of association and share structure still suit its needs, particularly if bringing in investors or new shareholders; putting in place a shareholders' agreement if there is more than one owner and none exists; establishing clear decision-making processes and board procedures as the number of people involved increases; ensuring compliance obligations are reliably met as the company becomes more complex, which may mean appointing a company secretary or strengthening administrative support; planning for bringing in investment, which raises questions about share classes, dilution, and investor rights; considering employee incentives such as share schemes, which need to be structured correctly; and planning for succession and exit over the longer term. Good governance is not just about compliance — it provides the structure that allows a business to grow, raise investment, and operate smoothly. Reviewing governance arrangements periodically, and taking advice at key stages of growth, helps ensure the company's structure keeps pace with the business. We can advise on governance as your business develops.

A company secretary is an officer of the company responsible for administrative and governance matters — such as maintaining the statutory registers, ensuring filings are made, organising board and shareholder meetings, and keeping minutes. Whether a company needs one depends on its type. A public limited company (PLC) is required by law to have a company secretary. A private limited company is not required to have one — since the Companies Act 2006, private companies can operate without a company secretary, with the directors taking responsibility for the relevant duties. However, many private companies choose to appoint a company secretary, or to outsource the role to their accountant or a professional firm, because the governance and compliance responsibilities are significant and benefit from dedicated attention. Appointing a company secretary, or ensuring the directors have proper support to carry out these functions, helps ensure the company's administrative and compliance obligations are reliably met. The decision depends on the size and complexity of the company and the directors' capacity to manage the responsibilities themselves.

A person with significant control (PSC) is an individual who ultimately owns or controls a company. The PSC regime, introduced to improve transparency about who is behind companies, requires companies to identify their PSCs, record them in a PSC register, and notify the information to Companies House, where it appears on the public register. A person is generally a PSC if they meet one or more conditions — broadly, holding more than 25 percent of the shares, holding more than 25 percent of the voting rights, having the right to appoint or remove a majority of the board, or otherwise exercising significant influence or control over the company. Companies must keep their PSC information up to date and notify Companies House of changes. Failure to comply with the PSC requirements is a criminal offence. For most small companies the PSC will simply be the main shareholder or shareholders, but the rules can be more complex where there are corporate shareholders, trusts, or layered ownership structures. Identifying and recording PSCs correctly is an important compliance obligation.

Companies take certain decisions through formal meetings and resolutions, and the requirements depend on the type of decision. Shareholder decisions are taken by resolution — an ordinary resolution requires a simple majority (more than 50 percent), while a special resolution requires at least 75 percent and is needed for more significant matters such as changing the articles or the company name. Private companies can pass shareholder resolutions either at a general meeting or, more commonly, by written resolution circulated to the shareholders, avoiding the need for a physical meeting. Directors take decisions at board meetings, usually by majority, with the proceedings recorded in minutes. The articles of association set out the detailed requirements — notice periods, quorum (the minimum number who must participate), and voting. Proper procedure matters: decisions taken without following the correct process may be invalid or open to challenge. Keeping clear records of meetings and resolutions is both a legal requirement and an important protection. For most private companies, decision-making is straightforward, but following the correct process is essential.

These are three different ways of structuring a business, with important legal, tax, and liability differences. A sole trader is an individual running a business in their own name — simple to set up, but the individual is personally liable for all the business's debts, with no separation between the person and the business. A partnership is two or more people carrying on business together; in a traditional partnership, the partners are personally liable for the partnership's debts (a limited liability partnership offers protection from this). A limited company is a separate legal entity, distinct from its owners (shareholders) and managers (directors); the company itself owns the assets and owes the liabilities, and the shareholders' liability is generally limited to the amount unpaid on their shares — offering valuable protection of personal assets. The right structure depends on the nature of the business, the number of people involved, the attitude to risk, and the tax position. Because the choice has significant consequences, taking coordinated legal and accounting advice before deciding is sensible.

These related terms describe different aspects of company ownership. A share is a unit of ownership in a company — it represents a proportion of the company and carries rights, such as the right to vote, to receive dividends, and to share in the company's assets on a winding up. Share capital is the total value of the shares a company has issued — the capital the company has raised from its shareholders in exchange for shares. A shareholding is the particular block of shares held by a specific shareholder — for example, a shareholder holding 30 of 100 issued shares has a 30 percent shareholding. Companies can have different classes of shares (such as ordinary and preference shares) carrying different rights, which allows ownership, control, and economic return to be structured flexibly. Understanding these concepts matters because the share structure determines who owns and controls the company, how profits are shared, and what happens on a sale or winding up. The share structure should be set up thoughtfully at formation, as changing it later can be more complex.

Issuing new shares and transferring existing shares are different processes. Issuing (allotting) new shares creates new shares and brings in a new investment or shareholder; it generally requires the directors to have authority to allot, consideration of any pre-emption rights that give existing shareholders first refusal, the passing of any necessary resolutions, the issue of share certificates, updating the register of members, and notifying Companies House. Transferring existing shares moves shares from one person to another; it typically involves a stock transfer form, payment of any stamp duty due (where the consideration exceeds the threshold), approval of the transfer in accordance with the articles (which may give directors power to refuse a transfer or require pre-emption to be followed), the issue of a new share certificate, and updating the register of members. The articles of association and any shareholders' agreement may impose specific requirements or restrictions on both processes. Getting the procedure right matters, as defective share issues or transfers can cause real difficulty later — for example, on a sale or investment. Legal advice ensures the steps are properly followed and documented.

Beyond their general legal duties, directors are responsible in practical terms for ensuring the company is properly run and compliant. This involves: ensuring the company meets its filing obligations to Companies House and HMRC on time, including the confirmation statement, accounts, and tax returns; maintaining the company's statutory registers and records; ensuring company decisions are properly made and documented — through board minutes and shareholder resolutions; keeping the company's details up to date and notifying changes; ensuring the company complies with the law applicable to its business, including employment, health and safety, and data protection obligations; and acting in the company's interests and keeping adequate financial records so the company's position is clear. Directors should also be alert to the company's financial health and take advice promptly if solvency is ever in doubt. While day-to-day administration is often delegated to staff, an accountant, or a company secretary, the directors remain responsible for ensuring it is done. Good governance — proper records, timely filings, and well-documented decisions — protects both the company and the directors.

A company is legally required to maintain certain statutory registers and records. The statutory registers include: the register of members (shareholders); the register of directors, and a register of directors' residential addresses; the register of people with significant control (PSC register); and, where applicable, a register of charges. Companies must also keep adequate accounting records sufficient to show and explain the company's transactions and financial position, and to enable accounts to be prepared. In addition, companies should retain board minutes and shareholder resolutions recording decisions, copies of filings made to Companies House, and other corporate documents. These records must generally be kept at the registered office or another notified location, and certain registers must be available for inspection. Since reforms allowing private companies to keep certain information on the central register at Companies House, some companies elect to do so rather than maintaining their own registers. Keeping proper records is not just a legal requirement — it is essential for the orderly running of the company and is invaluable if ownership, governance, or decisions are ever questioned.