News and Insights

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Does My Company Need a Company Secretary?

Public companies are required to have a company secretary under the Companies Act 2006 but it is a different story for private limited companies registered in the UK where it is entirely optional. Some private companies opt to have a company secretary whilst others do not.

A company secretary takes the burden of responsibility for administrative, regulatory and governance matters. This leaves the directors free to manage other aspects of their business such as networking, marketing, financing, recruiting, operations and sales.

Although you do not need to be qualified for the role within a private company setting, qualifications can be obtained from the Institute of Chartered Secretaries. The qualifications are essential if you are planning to work in this role for a public company. Often, companies outsource the role to secretarial firms such as M & N Group Limited.

The company secretary’s role is not documented in legislation but generally includes the following:-

  • File confirmation statements and accounts on time;
  • Maintain the statutory books of the company and keep the company’s documents and records safe and secure;
  • Arrange general meetings and manage communications with shareholders;
  • Maintain the company’s registered office address on all stationery and online and update Companies House if it changes;
  • Ensure accurate legal procedures are followed during transactions that effect the company and ensure all legal documents are signed correctly;
  • Provide advice on the Companies Act 2006 and ensure compliance with all statutory requirements and applicable codes and regulations;
  • Ensure that the decisions of the board are implemented and support is provided to all the different board committees;
  • Provide training to new directors about their duties and responsibilities and ongoing training to directors when legislative or regulatory changes occur; and
  • Support the chairman to ensure the board functions effectively.

This list is not exhaustive as company secretaries can also often be responsible for insurance renewals, the management of rental agreements and facilities, payroll and pensions amongst other things. It can be a full on role and can often take more time than expected. A sign that this role is still important is the fact that Companies House need to be notified when a person is appointed to the position or when they resign and that is regardless of whether the role is in a private or public company.

Whether you are planning to take on the role yourself or appoint a company secretary, talk to M & N Group Limited. We have assisted hundreds of clients with their company secretarial enquiries. We can offer support and advice to your organisation wherever it is needed or act as company secretary to your company so please get in touch.

 

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What is the Point of a Service Address for a Director?

There are usually four types of address that need to be supplied to Companies House when setting up a company; residential addresses for the company’s officers, service addresses for the officers, a registered office address for the company and a Single Alternative Inspection Location (SAIL) address if the statutory books of the company are not held at the company’s registered office address.

A residential address is required to be given to Companies House when a person is being appointed as either a director or secretary of a company. Companies House and other government bodies will not correspond with an officer using their residential address as they will use the service address instead. The residential address is not visible to the public and is only utilised by government bodies when they cannot make contact with an officer using their service address or the company’s registered office address.

The company’s registered office address is where correspondence is sent when it relates to the company rather than its individual officers. If post to the registered office is returned undelivered then Companies House may contact each individual director at their service address or residential address.

A service address enables the following to receive post and official notices from various government bodies:-

  • A director;
  • Secretary;
  • LLP members;
  • Person with significant control; or
  • A corporate entity fulfilling one of the above roles.

Service addresses go on public record and are available for anyone to see when they access information about a company and its officers at Companies House. Sometimes directors submit their residential address as their service address thus making it accessible to the public. Using a residential address as your service address can be dangerous due to susceptibility to fraud. Therefore, getting a service address that is different to a residential address is highly recommended.

A service address can be anywhere in the world and can be either commercial or residential. An officer does not need to visit the address or operate a business from it in order to use it. It can be changed at any time with Companies House needing to be notified within 14 days of the change. It can be the same as the company’s registered office address. If a director holds multiple positions and has the same service address for each, the address will need to be updated for each company separately at Companies House.

If you are in need of a service address then contact M & N Group Limited as we can assist you. We provide registered office address, service address and a host of other services to hundreds of clients.

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Dividends: Interim and Final

Dividends are how a company shares its profits during and at the end of the year and they provide a way for shareholders to extract value from a company.

When deciding to declare a dividend, directors have to be certain there are enough distributable profits or reserves to make the payment. Directors also need to consider their duties to the company ensuring that their actions are promoting the success of the company. If it is not done and recorded correctly the directors could potentially face an investigation by a liquidator in the event that their company becomes insolvent. Dividend payments are often the first thing to be questioned during such a scenario so it must be done right.

An interim dividend can be paid at any time by a decision of the directors – shareholder approval is not required for interim dividends. It is imperative that you consult your company’s articles of association to ascertain who can declare an interim dividend before you get started.

Final dividends are paid once a year following the annual accounts and are subject to the articles of association. Directors need to make a recommendation about the amount of final dividend to the shareholders and they can then approve it or increase or decrease the amount. The final dividend needs to be approved by an ordinary resolution passed by a simple majority.

Directors cannot draw money from a company then define it as a dividend after the event has taken place. The dividend must be declared before it is paid therefore drafting the correct paperwork and obtaining the correct approvals is essential. You will need minutes of a meeting of the board of directors or a resolution of the sole director for both interim and final dividends. If you are recommending a final dividend then you will also need to pass a shareholder resolution by way of written resolution or general meeting depending on the number of shareholders and the logistical issues that come with that.

Please contact M & N Group Limited if you need advice about the process for paying a dividend or help drafting the necessary paperwork. We pride ourselves on our great customer service and competitive pricing.

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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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