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how to guide by Tom Fogg | February 2000

How To Be A Company Secretary - Part 2

Now I know part two has been a long time coming (click here for part one), and I'm well aware that I'd made a firm promise to you all that this would be a weekly thing, but one does get so tied down with ones blasted schedule what what! Not only that, have any of you ever tried running a company and promising to provide an easy guide on how to run it legally. As one trawls through countless steel bound books written by pompous and, quite frankly boring sadists, one learns more and more of ones company's own illegalities. It is really dreadfully depressing!

Enough excuses!

I apologise and I thank one Emma Heeks for bringing this unforgivable tardiness to bear on my sorry arse. So, Thank you Emma and one more apology, sorry you didn't get this on Monday like I promised!
I shall endeavour to keep the guide flowing regularly from now on but, like I said back in February, don't trust this guide because it is only a guide. I'm not, I'm very happy to say, a registered Chartered Company Secretary and never will be.

Company Secretary Guide: 2^nd Instalment

Sections Covered:-

Types of Company
Formation of Company
Useful Addresses

Types of Company

The first thing to consider before acquiring a limited company is exactly what type of company would suit the nature of your business. For example, you may want to consult a professional to gain a better understanding of the tax effectiveness of, say, a private or a public limited company. This section should, I hope, help you decide which would suit your needs.

Public Limited Companies

This is a company limited by shares or limited by guarantee and having a share capital, although the latter is now extremely rare. The difference between this and a Private Limited Company is that it can offer shares or debentures to the public through the Stock Exchange (if the shares are listed and when authorised by a certificate from the Registrar). The name must end with 'plc', its Memorandum must be in the form specific to a plc and finally, the value of its allotted share capital must be at least £50,000 with 25% paid on issue.

The advantage is that your company will be able to trade on the Stock Exchange, offer shares to the public for cash or otherwise but, with this freedom come very strict controls that begin with the very appointment of the company secretary. He/She must either

Have been the company secretary ( or assistant/deputy company secretary) of a company on the 22^nd December 1980,
Have been a company secretary of a plc for at least 3 of the 5 years prior to the appointment,
Be a member of one of the following:

The Institute of Chartered Secretaries & Administrators,
The Institute of Chartered Accountants (England & Wales, Scotland or Ireland),
The Chartered Institute of Public Finance & Accountancy,
The Institute of Cost & Management Accountants,
A UK Barrister, Advocate or Solicitor,
or
Appears to the directors to be capable of carrying out the functions by virtue of being a member of another body or by having held a similar position.

To ensure your company stays within the boundaries of the law I strongly advise that you consult someone from any of the above bodies before you register. In my experience, I've found it helps if that person is either related to you by blood or some other close bond that will save from you being charged £10/minute (or there abouts).

Don't let these officious sounding requirements deter you if you feel that a plc is the type for you, a chartered company secretary really only has a part time involvement in the running of your business. Their charges are high but they have the experience and knowledge to keep you out of trouble and their advice often extends a great deal further than their role.

Private Limited Companies

This is simply a company that is not public and is the most frequent type of incorporated company and, like a public limited company, shareholders receive profits through a dividend. The advantage of this type is that one can reap the benefits of limited liability whilst being regulated by the companies acts. Although some of these requirements may seem like chores, in carrying them out one is forced to learn basic but fundamental legalities and business management skills.

Companies Limited By Guarantee

These are usually non-profit making companies like clubs, associations and charities and thus, do not have a share capital but must have at least one director and a company secretary. These companies have members rather than shareholders that invariably contribute to the assets of the company by agreeing to pay a token guarantee sum (usually £1) to its assets. This is guarantee is only paid in the event that the company is wound up and debts are needed to be repaid through liquidation. As a safety measure against certain parties gaining from the company's assets, most include a clause in the Articles of Association that prohibits any distribution of dividends or those of assets in the event that the company is wound up.

Unlimited Companies & Sole Trading

An unlimited company is a registered company does not limit the liability of its shareholders and is not, for the most part, required to file company accounts. These are quite rare and are often formed for one of events like concerts or sporting friendlies because this type of company is allowed to reduce their issued share capital in any way.

Sole Traders or partnerships are not obliged to incorporate their companies. They can be formed either by a formal written and signed agreement or by a handshake over coffee (if anything at all) and the life of the company only extends to the death of the owner/s or to the next agreement. The company's accounts are private (not listed at Companies House), profits are subject to Income rather than Corporation tax (are payable by the owners) and any changes to the nature or operation of the business can be made verbally. An unincorporated company has no separate legal identity which means that the trader or partners are liable for their own debts and different rules apply when they wish to sue or are sued as to who's name the action is brought about.

Formation of a Company

After you have decided which type of company will suit your purposes, you will need decide whether you would like to buy a company off the shelf or form it from scratch. Either way you will have to choose a name.

Instructions on how to register a name are detailed in our 'How to register a limited company for £31' section but a few important points are worth reiterating.

When checking with Companies House for the availability of a name, check if there are any other names that are similar in any way. This will safe-guard you from: (a) being associated by similar name with a company of dubious credibility and, (b) possible action being brought against you by a company keen to protect the individuality of its own name.

Bear in mind also that there are certain words that are prohibited because they are either offensive or misleading or that they need approval from the Secretary of State. Some are also restricted by the nature or structure of your business, common sense should navigate you but if you are in doubt, order a 'Company Names' leaflet (GBF2) from Companies House.

Internet domain names are also a potential issue to be dealt with. If you are likely to want to launch a web site as your business or alongside it, check to see if your desired company name is available as a domain name. Equally, check that another company does not own a similar name or owns the same name with a different suffix (generic top level domain name).

Lastly, run a check on names protected by a trade mark. This can be done quite quickly by going to or contacting the Patent Office in London or by paying an agent to do it for you. The former is free of course and the staff at the office are mostly very efficient.

To incorporate a company from scratch, you must sign and complete the following forms that one can obtain from the Companies House web site (www.companieshouse.gov.uk):

Form 10

Form 12

Memorandum & Articles of Association

Incorporation fee

For further information on how to register click here.

Buying a Company of the Shelf

This is often a quicker, and some say, a cheaper way of setting up a company. Contact a company registration agent who may sell you a company or carry out a special registration for you but you will need to amend the nature of the business on the Memorandums and Articles of Association. Also, you will need to have a registered company address established but note that, if you are renting a property, you'll need the permission of your landlord first. The reason being, you must have a notice or sign with the company name visible to the public (in a window/on or next to your front door).

Useful Addresses

Companies House Addresses

Companies House (English/Welsh companies)
Crown Way
Maindy
Cardiff
CF14 3UZ

029 2038 8588

The London Search Rooms
21 Bloomsbury Street
London
WC1B 3XD

029 2038 0801

Companies House
Manchester Branch
75 Mosley Street
Manchester
M2 3HR

0161 236 7500

Companies House
Birmingham Branch
Central Library
Chamberlain Square
Birmingham

0121 233 9047

Companies House
Leeds Branch
25 Queen Street
Leeds
LS1 2TW

0113 233 8338