Hamilton Pratt

Administration and records

All UK companies must (unless they are dormant) keep accounting records and prepare annual accounts which requires them to prepare a profit and loss account and balance sheet for each financial year.  The accounts are subject to strict requirements as to form and content in the Companies Act.  A UK company must not only appoint auditors to audit the accounts but it must also file its accounts at Companies House within 10 months of the end of its accounting reference period.  Only dormant and small companies escape the requirement that accounts be audited.  The auditors and the directors must report to the shareholders on the accounts.

In addition to accounting records, a company must keep statutory registers recording details of directors and company secretaries, directors' interests in shares or debentures of the company, shareholders, charges and mortgages affecting the company's assets and debenture holders.

Statutory restrictions on company activities

The Companies Act is designed to ensure that in return for the limited liability of shareholders, companies are regulated so as to protect their creditors.  This leads to various general restrictions on day-to-day corporate activities.  For example, a UK company is either not permitted or is permitted, but only subject to certain conditions, to:

  • pay dividends other than out of distributable profits;
  • purchase its own shares;
  • give financial assistance to a person to enable that person to buy shares in the company;
  • reduce its share capital.

Filing and Disclosure Requirements

Whether you choose to set up a representative office, a branch or a subsidiary in the UK, you will need to comply with statutory requirements to file certain information with Companies House and the Inland Revenue.

Representative office/Branch:  If opening a representative office (which in Companies Act terms is a "place of business") or a branch, you must register with Companies House within a month of doing so.  For this purpose you must file certain statutory forms and supply company details, constitutional documents, directors' details and other information.  The registration requirements for a branch are more extensive than for a place of business.  You will be required to update information at Companies House concerning a branch or place of business as it changes.  In addition, any overseas company with a branch or place of business in the UK which creates a mortgage or charge must register details of it within 21 days of doing so.

Subsidiary:  The disclosure and filing obligations of a UK company are more onerous than for a branch or representative office.  In addition to the initial filings it must make before incorporation (as described above), a UK company must file details of changes in its constitution and other administrative information, such as changes in directors' details.  It must also file an 'annual return' (setting out details of its directors and shareholders), its annual accounts (which generally must be audited and reported on by the company's external auditors) and details of certain one-off transactions such as the issue of shares or the creation of mortgage or charge over the company's assets.

The Inland Revenue keeps a computerised database of all companies incorporated in the UK.  It usually sends a form CT41G to the registered office of a new company. This form requests details of the company's business, its directors, registered office and intended accounts period.  After the end of the accounting reference period the Inland Revenue usually sends a notice requiring the company to file its tax return and accounts.

Information required by Companies House must be filed within relatively short time limits.  Companies House may impose automatic late filing penalties where certain types of information are filed late.  In addition, directors may be prosecuted and fined or in extreme cases, disqualified from acting as directors of UK companies for not filing certain documents.  All information filed at Companies House is available to the public.

Web links:

Companies House:  www.companies-house.gov.uk  This site enables you to check whether your choice of company name has already been registered and provides brief details of companies registered at Companies House.  It also offers various on-line guidance booklets intended to give an introduction to topics relevant to small and new companies, particularly from the perspective of compliance with administrative and filing obligations.

Department of Trade and Industry (DTI):  www.dti.gov.uk/pip/contents.htm.  The DTI site provides details of free publications covering a wide range of topics (including inward investment) which you may order on-line.