What is a Limited Company
A limited company is a business organisation that has been registered with Companies House (in the UK).
A limited company is a separate legal entity from its directors, shareholders and employees. It has it’s own assets and liabilities which are separate from it’s owners. This is very different from a sole trader or partnership, where the business assets and liabilities legally belong it’s owners.
Think of a limited company as a virtual person. A limited company can sue or be sued, it can even be a director of another company. The liability of it’s owners is limited. This legal distinction between a company and it’s members (shareholders) is sometimes called the “veil of incorporation”.
A privately owned limited company normally has “ltd” or “limited” after it’s name, whereas a company, whose shares are quoted on the stock exchange is a “plc” (public limited company).
The Role of a Director
The role of a director is to make sure the company is successful and make decisions on behalf of the company.
Every company director has a personal responsibility to make sure that the company files its statutory returns to Companies House on time. Directors can be prosecuted if they fail to do this. It’s a criminal offence, so if you are convicted, you will end up with a criminal record and possibly a hefty fine, too. According to Companies House, around 1,000 directors are prosecuted every year. Persistent offenders can also be disqualified from acting as directors.
The directors are responsible for signing off the company accounts. Accounts are rejected by Companies House if they do not contain the correct statements.
Even if you have an accountant filing your returns on your behalf, it’s still your responsibility. If necessary, chase up your accountant. If things are late, its not the accountants who get prosecuted, it is the directors!
The Role of the Company Secretary
Company secretaries do not have specific responsibilities or powers but they may be criminally liable for company defaults (such as late filing of returns and so on). They are also allowed to sign most of the forms required by Companies House.
A company secretary usually performs the following tasks:
- maintains the statutory registers (such as register of members, register of directors and secretaries etc)
- ensures that the company returns are filed on time
- giving shareholders and auditors notice of meetings, such as the AGM (annual general meeting)
- sending the registrar (at Companies House) copies of resolutions and agreements
- supplying copies of the company accounts to those entitled to receive them
- keeping minutes of directors meetings and general meetings
- ensuring that those entitled to, can inspect the company’s records
- looking after the company seal (if there is one – this is no longer a legal requirement)
Who Can be a Company Secretary
- Any fully qualified accountant (ICAEW, CIMA, ACCA, ICAS, ICAI, CIPFA)
- A member of the Insitute of Chartered Secretaries and Administrators
- Someone who was a company secretary (or assistant of deputy) on 22 December 1980
- someone who has held the office of company secretary of a company (except a private company) for at least 3 out of the 5 years immediately before his or her appointment as secretary
- Is a barrister, advocate or solicitor
- someone who appears to the directors, to be capable of carrying out the duties (either because of experience or membership of another body)
Since the changes in law, private limited companies are not required to have a company secretary
Memorandum of Association
The purpose of the memorandum of association is to say what the company is and what it does.
It needs to state:
- the name of the company
- the registered office of the company
- the objects of the company (what the company will do – it’s purpose)
- a statement of the limited liability of members (shareholders)
- the authorised share capital
Articles of Association
The articles of association deal mainly with how the company is run. This includes the issue and transfer of shares, capital structure, general meetings, directors, dividends and accounts.
The majority of limited companies adopt a generic form commonly referred to as ‘Table A’. This Table is presented as a series of numbered paragraphs and determines such things as how resolutions are passed and the power of directors.
Single Alternative Inspection Addresses (or SAIL addresses) will enable the Company to provide an alternative address where people can inspect the Company’s statutory registers.
This may suit companies who operate from business premises but whose registered office is a residential address. In this instance, the Company may choose to record their business premises as the Company’s SAIL address.
Companies must notify Companies House when they first set up a SAIL address or if the SAIL address is changed.