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Registering a Charge

Many companies take loans or mortgages and find ways to borrow money which can result in the creation of a charge. Well, what’s a charge I hear you ask? A charge refers to the rights given to a lender in exchange for a loan and the rights given to the lender are a form of security given over the company’s assets.

Charges need to be registered at Companies House and it used to be a criminal offence to fail to do so. Although it is now no longer a criminal offence, neglecting to do so can be disastrous as it can void the security over the company’s assets. Therefore it is quite sensible to file the necessary form and accompanying documentation to register the charge otherwise it will be considered “unsecured.”

The company or a person interested in the charge can register it at Companies House. You normally have 21 days to register a charge with Companies House from the date the charge is created. The 21 day period can be extended, for example if you accidentally forgot to file the charge, by making an application to the Companies Court (now part of the Insolvency and Companies List, a specialist court within the Chancery Division of the High Court of Justice of England and Wales).

If you are intending to file within the 21 day deadline, you will need to complete an MR01 form (if you are filing for a private company) detailing useful information like the date the charge was created. You will also need to provide the name of the person/company entitled to the rights given over the company’s assets and a description of the charge as well. You need to obtain a certified copy of the document that was used to support the creation of the charge and this will need to be filed with the form.

A fee will be payable to Companies House and the amount will depend on whether you are filing electronically or paper filing. Once the form is accepted by Companies House they will issue a certificate noting that the charge has been registered. The charge will be allocated a special 12 digit code for reference and this will appear on the certificate. The certificate will need to be kept safe in the event that the charge is ever amended or the terms updated or if the charge is satisfied.

If you want help registering a charge or have any queries about registering a charge or need more information about registering charge then get in touch with M & N Group Limited.

 

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Considering a Share Buyback…

Why do companies buy their shares back? Well, one reason is that it provides a way for shareholders to dispose of their interests in a company for example if they pass away or want to retire. If a new shareholder cannot be found or the other shareholders do not want to buy the shares or if a person inheriting shares does not want them, then a buy back is a good option.

Public limited company’s often use share buybacks as they claim it is a more tax efficient way of returning surplus money to shareholders. Often companies do this to boost the value of their share price because the fewer shares there are on the market available for purchase, the higher the price will be when they become more scarcely available. Whatever the reason, it allows a company to take back a portion of shares held by existing shareholders.

A share buyback can be carried out on or off market. Public companies usually carry out market buybacks through a stock exchange. This article only focuses on the methods available to private limited companies. There are three ways to complete a share buyback for a private limited company;

  1. Purchase of own shares – when a private company purchases its own shares, the shares will either be cancelled immediately or held in treasury provided they have been purchased using distributable profits.
  2. Share redemption – share redemptions only apply to redeemable shares but the company must have another share class that is irredeemable in order to carry out the buyback by redemption, otherwise the company could be left with no shareholders!
  3. Share capital reduction – a share capital reduction can occur by various methods such as by cancelling shares, repaying share capital, reducing the nominal value of the share class, or reducing the number of unpaid shares.

Here are a few general things to consider when preparing. You will need to check whether the articles prohibit any of the above mentioned methods, if so a special resolution may be required to get around the articles. Also check that the shares being purchased are fully paid and ensure that at least one non-redeemable share remains in issue.

If you are planning a redemption, you will also need to review any shareholder agreements in place as well as the articles for any terms. The terms of a redemption usually include information about how to determine the redemption date and price or there might be a pre-determined date and instructions for how to calculate the price.

If you are planning a capital reduction remember that you will need to sign a solvency statement in support of the reduction. It is advisable that you seek financial guidance before commencing a buyback.

More generally, you will need to consider the process and what is required of you in terms of documentation and procedure before, during and after. Think about how the buyback will be funded and what the consequences will be when it has been completed. Conduct a review of the company’s financial status, current operations and future projections.

Remember than any share certificates for shares that have been bought back will need to be cancelled, your company’s register of members will need to be updated and you may need to issue a balance certificate if a shareholder has only sold a portion of their shares back to the company rather than all of them. Your accounting records will also need to be updated to reflect the changes you have made.

M & N can produce tailored board minutes and shareholder resolutions for a purchase of own shares, reduction of share capital and share redemption and we can talk you through the correct procedure. We also provide directors’ solvency and compliance statements and can complete and submit the relevant forms to Companies House. Please contact us so we can guide you through the process with minimum confusion and complete professionalism.

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Can Children Own Shares?

In the UK there is no statutory provision barring a child from owning shares so, yes they can. A child or minor is defined in England and Wales as being a person under the age of 18.

A lot of companies, especially public companies, often exclude children from owning shares by inserting specific provisions in their articles of association. This is because when there is a call on unpaid or partly paid shares, a child can renounce their obligation to pay by giving up their shares. For a company trying to raise capital this would certainly cause some problems. However in a family owned setting, children owning shares in a company could make sense.

Parents who own businesses often give their children shares to help build their savings from a young age. Different classes of shares with different rights can be established for children giving flexibility to directors as to how the company’s profits are distributed. It can also ensure that children do not have voting rights as they may not be able to make sensible and informed decisions in the company’s interest.

Great care must be taken to have the share classes set up properly and any schemes should be set up with advice from a tax professional.

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Informing HMRC Your Company is Dormant

You must notify HMRC when you incorporate a company and you intend to keep it dormant or if your existing trading company stops trading and becomes dormant.

If you are incorporating a company from scratch you can select a SIC (Standard Industrial Classification) code for the company that shows Companies House that it will be a dormant company.

Once the new company is formed, Companies House informs HMRC and then HMRC sends a letter to the new company’s registered office address. The letter provides important information to the company, such as:-

  • It’s Unique Taxpayer Reference number or UTR number;
  • What to do when the company starts trading; and
  • How to set up the Corporation Tax online service.

When you receive this letter you will need to send your own letter to HMRC explaining that your company is dormant and does not intend to trade. Your letter will need to include your UTR number so that HMRC can identify your company. If you do not respond to this letter, HMRC will expect a corporation tax return and there will be repercussions if this is not supplied within the requisite timeframe.

After you have sent your letter to HMRC they will acknowledge it in writing and confirm that you will not need to submit corporation tax returns for the company going forward. If they do not do this you will need to contact them again as they may not have received your letter. Once HMRC have acknowledged your company is dormant, you will still need to ensure all the basic compliance requirements are met.

You will need to maintain the statutory registers, file the confirmation statement, the dormant accounts and any changes to the company’s officers or registered office address or Single Alternative Inspection Location (SAIL) address will need to be reported. Contact M & N to see how we can help you write your letter to HMRC, file your dormant accounts, maintain your statutory registers and file your confirmation statement.

If you are taking a break and your company ceases trading for a time, but you intend to start trading again in the future and you do not want to dissolve the company, then making your company dormant for a while might be a good idea. Generally, dormant companies cannot have any transactions passing through them therefore all trading will need to be ceased and any loose ends tied up.

Before notifying HMRC of the company’s dormant status, you must pay all outstanding bills and VAT payments, ensure that you’ve received all expected payments from clients, pay wages and close the payroll, close the company’s bank accounts and cancel all contracts.

You can then contact HMRC to tell them that the company is now dormant and the date this happened. You will then receive a “notice to deliver company tax return” covering the time period before the company became dormant. Complete and return this with a payment for any outstanding tax. Provided that everything is in order, HMRC will write to you acknowledging your company’s dormant status.

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SIC Codes

The Standard Industrial Classification (SIC) is a system for classifying the economic activities of a company by a code. They help various government bodies including Companies House define what the company does. You can find a condensed list of SIC codes at http://resources.companieshouse.gov.uk/sic/

You need at least one SIC code when incorporating a new company, to describe the company’s planned business activity. Companies House will reject your request to form a new company unless a SIC code is included. A SIC code is also required when completing and filing the confirmation statement for your company.

When choosing your SIC code you will find that they are organised into sections which group together similar trade classifications. The “Information and Communication” section for example groups together 32 different SIC codes, and these range from “book publishing” all the way to “Computer facilities management activities” so you will need to review these and select a code carefully. The code chosen by a company is available for anyone to view on the public record once the company has been incorporated.

If your company’s activities are particularly complex and a single code doesn’t describe the full nature of the company’s business activities, you can choose to include more than one. Most companies opt for a single SIC code to expresses the nature of their business but you can choose up to four SIC codes.

You can amend your SIC code or add another if you feel the need to do so. If you find that the code you selected at incorporation does not reflect the company’s activities after the initial trading experience or you previously entered an incorrect code, it can be changed. All you need to do is change it the next time your confirmation statement is due or you can file an updated confirmation statement before the due date.

 

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Nominee Purchaser – Bespoke Articles For Your Limited Company

Collective enfranchisement is the right for owners of flats in a building to come together and buy the freehold of that building. This right to buy the freehold is subject to qualification and the process is quite complicated it is advisable that you contact a solicitor or surveyor when going through the process.

Generally, one of the first things you will need to do is check that there are enough qualifying tenants and that the building qualifies. Once you are clear on this and you are able to collectively buy the freehold you will, at quite an early stage, need to choose a nominee purchaser.

A nominee purchaser is the person who puts their name on the notice to the freeholder, conducts the later stages of the buying process and is responsible for managing the building upon completion. There are no laws governing how the nominee purchaser is selected but it is very common for a group of tenants to create a limited company for the purpose of being the nominee purchaser. The tenants usually become shareholders of the company and a few will also become directors of the company too.

The company must be fully established prior to being named in the notice. Part of being fully established means that the company will need to have its own set of articles of association. Every limited company will have a set of articles which set out the rules that must be followed by the officers and the articles also set out the rights of the shareholders.

Unfortunately when tenants come together to buy the freehold they often do not arrange for bespoke articles to be drafted for their new company. It is just not a priority because there is so much to discuss and organise. As a result these companies often end up with standard articles that do not contain any specific reference to the purpose of the company.

It is important therefore to have properly drafted articles because without them serious and costly problems can crop up later. Properly drafted articles designed for the management of your particular block are therefore essential.

Some of the important points to think about are:

  • Will the company be allowed to collect service charges and ground rents?
  • How will communal areas be managed and who will be responsible for this?
  • Will all the other members of the company need to be notified when one member decides to move away?
  • What is the process of transferring membership?
  • How will we appoint and remove directors?
  • Do we need to hold AGM’s and what is the procedure?

The most effective way of avoiding problems in the future is to make sure your company’s articles are drafted properly and that everyone involved is fully aware of the contents of the articles of association. If they are found to be lacking it is advisable that you take action to change them immediately.

Regardless of whether you are just in the early stages and are doing your research, or if your company is in the process of being set up or already exists, M & N Group will be able to advise you. We can help you to establish your company, draft bespoke articles of association and help you manage your annual compliance obligations after completion. We are specialists in the field and are here to assist you with our fast and efficient service.

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Your Private Limited Company’s Registers

Limited companies are legally required to maintain certain statutory registers:-

  • Register of applications and allotments
  • Register of directors and secretary
  • Register of charges
  • Register of members and share ledger
  • Register of transfers
  • PSC register

The registers need to be maintained and updated when any changes occur by a director or a company secretary. You can keep the registers at the company’s registered office address or if that is not convenient at a single alternative inspection location (SAIL). If you are not keeping you company’s registers at the registered office you will need to notify Companies House of the SAIL location. The SAIL location must be in the UK and you must specify which registers are held there.

The registers must be made available for inspection to members of the public upon request and adequate notice must be given to the company. The normal notice period is 10 days but can be 2 days in the case of a member requesting to inspect the registers during the notice period calling a general meeting. You can keep your registers in a paper based form, electronically or use both methods if it is preferred.

M & N Group have extensive experience of maintaining statutory registers and records for all types of companies. We also provide registered office facilities for companies looking for a registered office address, SAIL location or just need assistance with their company’s statutory registers.

 

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Corporate Governance Code 2018

The Financial Reporting Council (FRC) published the 2018 Corporate Governance Code (the “new Code”) on 16 July 2018 with the aim of improving the standard of reporting by companies and strengthen the integrity of UK business – a necessity after the recent collapse of Carillion and the BHS pension scandal.

The new Code encourages more meaningful reporting and focuses on board effectiveness, stakeholder engagement, purpose and culture. It applies only to those UK companies with a premium listing on the London Stock Exchange and these companies are expected to begin complying with the new Code on or after 1 January 2019. The new Code calls on boards to analyse their company’s culture from within and requires them to respond to any matters relating to corporate governance using the ‘comply or explain’ principle.

Under the new Code, a company’s board are required to engage more with their workforce to ensure that they share the same values and that practices are in line with the company’s long-term aims. The workforce should also be able raise any concerns they may have. No guidance is provided on how companies should go about this but a company could, for example, appoint a non-executive director from the workforce as a representative who could communicate any issues.

Another area of the Code to have been amended concerns the division of responsibility. The new Code now includes the requirement that the board receive accurate and timely information. Non-executive directors must also be given sufficient time to meet their board responsibilities.

An additional key feature of the new Code is that it now requires the board to annually evaluate its composition, diversity and how they all co-operate with one another. For example boards will be required to explain in cases where the chairperson’s tenure exceeds nine years.

Reporting on and structuring of remuneration policies has also changed. Policies should now be designed to support strategy and promote the long term success of the company, be more transparent and less performance focused.

The FRC does not currently have the power to penalise companies or board members who violate the Code. A government review of the FRC’s effectiveness will be published at the end of the year so watch this space. Hopefully these changes will motivate boards to engage more with their employees and shareholders, improve diversity and ultimately boost public confidence in UK businesses.

 

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Confirmation Statements

The confirmation statement, formally the annual return, was introduced from 30 June 2017 and is an annual filing obligation for UK companies and LLPs. The purpose of the confirmation statement is to ensure that the information held by Companies House about your company is up to date.

It is the company’s responsibility to ensure that the information held about it on the public record is correct. If you have not previously notified Companies House about any changes that have taken place during the year, the confirmation statement is the perfect opportunity to submit this information.

When you file your company’s confirmation statement, begin by checking what information was given in last year’s confirmation statement and also what is held at Companies House. This is a great opportunity for you to ensure that all the information held about your company is up to date.

Remember to check all the important details such as the registered office address, location of the statutory records if they are not held at the registered office, your company’s standard industrial classification codes, details for the directors and secretary and the share capital, shareholder information, any transfers that took place during the year and your Company’s PSC information.

You will need to be careful as some changes need to be reported alongside the confirmation statement. Other forms may need to be filed at the same time as the confirmation statement if some changes have not yet been reported to Companies House.

If you note any changes to your company’s share structure you will need to update the information contained in this year’s confirmation statement before submitting it to Companies House.

The confirmation date is the date at which the information contained in the confirmation statement is correct and the next confirmation date falls 12 months after the last confirmation. The confirmation can be delivered on paper or filed electronically upon payment of a fee.

For help with your company’s confirmation statement or queries about annual compliance, contact M & N Group so we can help you remain compliant with our fast and efficient service.

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You’ve got a business idea but what are the next steps?

  • Choose your company structure

With several types of companies to choose from, you will need to select the best suited for your business and review the information that must be lodged at Companies House.
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