Hamilton Pratt

Setting up a UK Subsidiary – Specific Issues

There are various legal and practical issues which you need to address once you have taken your decision to set up a company in the UK.  These include the following:

What type of company?:  You must decide what type of company you wish to establish.  As discussed above, by far the most popular type of company is the private company limited by shares.  As a result, as already mentioned, this guide focuses on this type of company.  A private limited company may be set up by one shareholder with a paid-up share capital of only £1.  It may not offer its shares or other securities to the public.  There are a large number of differences between a private company and a public limited company (plc).  For example, a plc may offer its shares to the public (subject to certain regulations intended to protect investors) and it is subject to stricter requirements in relation to its share capital and in relation to its affairs generally.  Other types of company may also be established, namely a private company limited by guarantee or an unlimited company but these are very uncommon in a business context.

Incorporation:  To set up a UK subsidiary from scratch, you must file certain statutory forms with (and pay a fee to) Companies House. You must supply details of:

    • the company's proposed name;
    • the company's proposed business;
    • the initial shareholder(s);
    • individuals who have agreed to act as directors and company secretary;  and
    • an address in the UK which will be the company's registered office, where all official correspondence and legal papers can be received and dealt with.

The statutory forms must be filed with the company’s constitutional documents, called the memorandum and articles of association.  The memorandum of association sets out the most important information about the company required by statute.  This includes the purpose for which the company is established and the company's 'objects' being what it is permitted to do by way of business.  The articles of association set out detailed regulations for the day-to-day management of the company by its directors and the relationship of the company and its board with its shareholders.

Companies House will issue a certificate of incorporation as an official record of the company's formation.  A UK company cannot commence business until it has been officially incorporated. Once incorporated, a company is a separate legal entity, which enjoys limited liability.  In return for limited liability, a limited liability company is subject to a large number of obligations set out in the Companies Act.

Although it is possible to incorporate a company within 24 hours, it usually takes at least several days to make the necessary arrangements and to incorporate a new company.  A quicker and more reasonably priced alternative is to purchase a ready-made (or shelf) company which has the advantage of having been formed already.  This requires only limited administrative steps to transfer ownership to you.

Restrictions on company names:  In broad terms, you are free to choose any name for your company provided that (1) it is not too like an existing company name, (2) it does not infringe another's trade or service mark, (3) it is not offensive and (4) its use would not be a criminal offence.

Some words and expressions may be used in company names only with the consent of the government.  Examples of such "sensitive" words include "British", "International", "Holding", "Group", "Royal" and "United Kingdom".

A UK company may also use a business or trading name under which to conduct its business. The only restrictions on a business name are (1) that it is not too similar to another business name and (2) it does not require prior government approval because it contains "sensitive" words.  As a safeguard for customers, suppliers and others, a company must show its company name on all business letters and contracts, including invoices.