Company Formation Specialists

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Accounting period

A company has to provide a financial statement detailing its profit and loss during the accounting period.

A company’s accounting reference period is determined according to its accounting reference date. This date is given to the company upon incorporation and is always the last day of the month in which the company was incorporated.  A company’s first accounting reference period is the period of no less than 1 day but not more than 18 months (if extended), beginning with its date of incorporation. Its subsequent accounting reference periods are successive of 12 months beginning immediately after the end of the previous accounting reference period and ending with its accounting reference date. This can be shortened or extended by filing the form AA01 (see below).

Accounting Reference Date

This is date on which the company’s financial year ends (see above). The company’s accounts should be filed up and until this date. The date is the same each year, unless the company request to change their Account Reference Date. Filing the form AA01 at Companies House can change this date. This form may be filed online, via Companies House ‘Webfiling’ service, or by paper and must reach Companies House BEFORE the deadline for filing the accounts (the deadline is detailed on Companies House ‘Webcheck’). Remember that when you extend your first accounting period to the maximum 18 months, you must count the date of incorporation as the first day of the period. Many companies make the mistake of simply adding 6 months to the end of the period (in some cases extend the period beyond the maximum of18 months).

Aggregate

The total amount of (for example ‘Aggregate nominal value of issued shares = the total sum of the issued shares).

Allotment

The issue of shares by a company. To allot further shares, the form SH01 should be completed and sent to Companies House.

Allottee

A person whom shares have been allotted by a company; a shareholder

Alternate director

A person appointed by a director to represent him as a director, particularly at board meetings that the appointer is unable to attend

Annual General Meeting (AGM)

Subject to the company’s Articles of Association and Table A, public companies (PLCs) must hold an AGM. Private limited companies are not required to hold an AGM, unless they choose to do so.

Annual Return
An annual return is a snapshot of certain company information at the made-up date (this date can be found on Companies House Webcheck service by entering your company name or number. It is usually the anniversary of the company’s incorporation). It is a separate document from a company's annual accounts. An annual return must contain the following information:

• the name of the company;
• its registered number;
• the date to which the annual return is made-up (the made-up date);
• the principal business activities of the company
• the type of company it is, for example, private or public;
• the registered office address of the company;
• the address (single alternate inspection location - SAIL) where the company keeps certain company records if not at the registered office, and those records held there;
• the details of the company secretary (corporate or individual), where applicable; and
• the details of all the company's directors (corporate or individual).

If the company has share capital, the annual return must also contain:

• a marker to indicate whether the company was a ‘Traded company’ at any time during the return period;
• a statement of capital; and
• details of the shareholders.

The Annual Return can be completed on paper, by filing the AR01 and sending it to Companies House with the fee of £30, or online via Companies House Webfiling Service, for the fee of £15.

Articles (of Association)

This is the ‘internal’ section of the Memorandum & Articles of Association, which are essential documents on incorporating a limited company. The articles set out the procedures and regulations covering how the company is to be run (i.e. meetings, appointments & removal of officers and shares). The ‘Articles of Association’ are prescribed by Companies House, based on ‘Table A’ and can be adjusted as per the company’s requirements, within in law. The Articles are sent to Companies House on incorporation and may be adjusted by Special Resolution.

Asset value

The underlying value of a share expressed in terms of the assets that it represents. It is calculated by taking the net value of all the assets of the company and dividing this figure by the number of shares that the company has issued.

Authorised Share Capital

Companies incorporated before October 2009 will have an Authorised Share Capital. This is the number of shares the company has available to issue at any time and is laid out in the Memorandum & Articles of the company. The Companies Act 2006 removed the requirement for companies to have an ‘Authorised Share Capital’. Companies who wish to increase their issued share capital over and above the number stipulated in their Memorandum of Association are required to either file a resolution or update their Articles in line with the Companies Act 2006.

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Bankruptcy

The formal state in personal insolvency where a person’s assets move by operation of law to his trustee in bankruptcy for the benefits of their creditors.

BIS

The Department for Business, Innovation and Skills (formerly known as BERR / DTI). This is the government department that oversees and supervises commerce and Industry in the UK.

Bona Vacantia assets

Literally “vacant goods” and is the technical name for property that passes to the Crown because it does not have a legal owner. The company’s bank account will be frozen and any credit balance in the account will be passed to the Crown.

Book debts

Cash sums owing to a company, for example after the supply of goods or services to a customer.

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Certificate of Incorporation

The 'birth certificate' for a limited company; Companies House issues the certificate to the company upon its incorporation.

Charge

In company law the word ‘charge’ is usually used to mean a secured loan (‘mortgage’). This means that the debt is secured against an object (e.g. a property).

Chose in action

A right to sue for recovery of a debt

Class right

A right attached to a share. The share capital of a company may be divided into different ‘classes’ of share, each class having its own ‘rights’ attached (for example payment of dividends or voting rights). The ‘rights’ attached to each share are set down in the company’s Articles of Association. We will be happy to assist you should you wish to stipulate different ‘Class Rights’ for your company.

Common Seal

The seal of a company, a hand held metal embossing stamp used to imprint the company’s name onto documents into order to authenticate them. We offer Traditional Company Seals free of charge with our Professional Package, or for a fee of £20.00.

Companies House

The office of the Registrar of Companies.

Consideration

The price for the promise; the value moving from one party to the other. On our ‘transfer of shares or stock’ form, the consideration is the number of shares being transferred from our original subscribers to the new shareholder.

Court of Chancery

The Division of the High Court that hears cases concerning matters of Company Law.

Crown Court

The criminal court that deals with the most serious charges

Crystallisation

The process where a floating charge becomes fixed

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De facto

In reality

Debenture           

The document that creates or gives evidence of a debt. Where the debenture is secured (‘fixed’), the creditor holding the debenture has a priority over other creditors. All debentures must be filed at Companies House.

Discretionary Grant

A dissolved company may apply to the Treasury Solicitor to temporarily restore the company to the register in order to release frozen funds of up to £3,000.

Distributable profits

Profits within the company that may be used for the payment of a dividend.

Dividend

The part of the profits of a company that is paid to the shareholders (‘members’).

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Elective resolution

Companies incorporated before October 2007 may pass an ‘Elective Resolution'. This is a resolution passed by the members of a private company under the Companies Act 1985 s. 379A. An elective resolution requires permission from all (100%) of its members. There are 5 types of elective resolution:

• To give the directors general authority to issue shares
• To dispense with the need to file accounts before the general meeting
• To dispense with the need to hold an annual general meeting
• To reduce the majority of shareholders whose consent is required for the holding of an extraordinary general meeting at short notice from 95% to 90% or anywhere between 90% and 95%.

Under the Companies Act 2006 elective resolutions excluding section 80a (now section 549-55 of the 2006 Act) have been repealed. As of 1 October 2007, four of the five elective resolution types are no longer necessary to be filed for private limited companies - these being:

• Dispensing with the laying of accounts and reports before a general meeting (s252)
• Dispensing with the holding of annual general meetings (s366a)
• Reduction of majority required to authorise a meeting at short notice (s369(4) or 378(3))
• Dispensing with the annual appointment of auditors (s386)

But if they are filed they will be placed on the public record.

If a company formed before October 2007 wishes to take advantage of these new provisions, they are required to change their Articles of Association by resolution. Please contact us for further information.

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Fixed charge

Security created over a fixed asset, for example an office block

Floating charge

A charge secured on a class of assets, present and future. This class is likely to change in the ordinary course of business from time to time. It is expected that the company will be free to deal with those assets subject to the charge until such a time as the company ceases to carry on business in the usual way.

Floatation

The offer of shares to the public

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Gazette

An official publication of the Crown in which formal announcements concerning companies are made, for example when a winding up order is made or when a winding up resolution is passed.

General meeting

A meeting of the members of the company

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Indemnity

Compensation for loss

Indictable

A serious criminal offence capable of trial in the Crown Court.

Insolvency jurisdiction

The court having the power to make a winding-up order in respect of a company.

Instrument of Transfer

A stock transfer form, used to transfer stock or shares to a new shareholder

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Liquidation

The winding up of a company; the process where the existence of a company is brought to an end.

Liquidator

The person appointed to liquidate the company.

London Stock Exchange

The place in London where shares in quoted companies are dealt.

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Member

A shareholder in a company limited by shares (public or private) or a guarantor in a company limited by guarantee.

Memorandum (of Association)

The constitutional document of a company, stating the names of the initial ‘Subscribers’. This document is sent to Companies House on incorporation of a company.

Misfeasance

Breach of duty / misconduct. The remedy brought about by a liquidator against directors and other officers of a company whom they think may have been in breech of their duty towards the company.

Mortgage

Security for a creditor traditionally crested by the transfer of property to a lender on terms that upon repayment of the debt he will transfer the property back to the borrower.

Mortgage Debenture

A secured loan evidenced in writing and giving the lender priority over the other creditors of a company.

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Negotiable instrument

A money order used to transfer funds from one person to another, for example a cheque.

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Ordinary Resolution

A resolution passed by a simple majority of the members (shareholders) in a general meeting.

Ordinary Share

A share entitling its owner to receive a divided (if one is paid by the company).

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Passing off

Where a company wrongly names itself a name similar or that of a similar business in an effort to cash in on its reputation and so expropriate its goodwill.

Pre-emption right

The right if an existing shareholder to acquire further shares in the company. A private company may remove this right by Special Resolution or by adjusting their Articles. A Public company cannot.

Preference share

A share giving its holder preferential rights in respect of dividends and sometimes in respect of a return of capital on a winding up.

Premium

The amount paid for a share over and above the nominal value of the share

Prima facie

On the face of it – at first sight

Pro rata

In proportion

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Recognised Investment Exchange

A place where shares in a quoted company may be dealt

Registrar of Companies

The person at Companies House to whom documents are sent to form a company and to whom the necessary returns are made during the lifetime of the company.

Registration

The process by which a company comes into existence. Documents are sent to the Registrar of Companies and in return, the certificate of incorporation is dispatched

Register of Members

The record that a company must keep of its members (shareholders)

Restoration

A dissolved company may apply to be ‘Restored’ to the register, either to release frozen assets or to carry on trading as if it had not been dissolved.
Return Period

In relation to an annual return, is the period beginning immediately after the date to which the last return was made up (or, in the case of the first return, with the incorporation of the company) and ending with the date to which the return is made up.

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Shareholder

A member of the company – a person who owns shares in the company.

Statement of Capital

The statement of capital is completed on incorporation of the company (on the form IN01) and on certain forms completed during the company’s lifetime (e.g. Annual Return or on the SH01 form when the company issues new shares).

a) the total number of shares of the company;
b) the aggregate nominal value of the shares;
c) the class to which each share belongs:

• the voting rights attached to the shares
• the total number of shares of that class; and
• the aggregate nominal value of shares of that class, and

d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
If a company has converted shares into stock, it must give the corresponding information in relation to that stock, stating the amount of stock instead of the number and nominal value of the shares.  

Stock Transfer Form

Instrument of transfer: the form completed by the transferor of shares to transfer the share to the transferee.

Subscriber

A signatory to the Memorandum of Association upon incorporation of a company

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Transfer

The process whereby a share passes from one person to another on sale or by way of gift.

U

Ultra vires

‘beyond its powers’. Usually used to refer to a transaction entered into by a company that it is beyond its powers. Sometimes it is also used to refer to a transaction beyond the powers of the directors.

W

Winding up

The liquidation of a company.

 

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