Forming a company

The factors covered are:

• Overview

• Definition of a UK registered company

• Setting up a UK registered company

• Alternative business structures for foreign investors

• Choosing a company name

• Further information

1. Overview

The UK has an open, transparent and business-friendly system to encourage the formation of new businesses. There are more than 2.7 million registered companies in the UK, with over 370,000 new registrations each year. No permission is required to establish a business presence in the UK, although there are regulations on the use of business names and certain business sectors which may require licences or authorisation (such as finance, defence and oil exploration).

Companies House is the key government organisation that co-ordinates the administration of businesses in the UK (Companies Registry in Northern Ireland). Detailed guidance on the requirements for forming a company in the UK is available at: www.companieshouse.gov.uk (for England, Scotland and Wales) or: www.detini.co.uk/cgi-bin/get_builder_page?page=3980&site=7 (for Northern Ireland).

Independent professional advice on forming a company in the UK can also be obtained from accountants, solicitors and company formation agents (see Appendix A for further information).

2. Definition of a UK registered company

The majority of foreign investors will establish a “Registered Company” when setting up in the UK. There are four different types of UK registered company:

• Private company limited by shares (“Ltd”) – the members’ liability is limited to the amount unpaid on shares they hold.

• Private company limited by guarantee – the members’ liability is limited to the amount they have agreed to contribute to the company’s assets if it is wound up.

• Private unlimited company – there is no limit to the members’ liability.

• Public company limited by shares (“plc”) – the company’s shares are offered for sale to the general public through a stock exchange and the members’ liability is limited to the amount unpaid on shares held by them.

The vast majority of foreign businesses are established as a company limited by shares, either as a private limited company or as a public limited company. Most foreign companies set up a private limited company that is a subsidiary of the overseas company (for a formal definition of a subsidiary, please see: www.clickdocs.co.uk/glossary/subsidiary-company.htm).