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Annual General Meetings during this unprecedented time when it is not possible for people to meet up

How do we deal AGMs in light of the current restrictions on movement and gatherings introduced by the Government to battle COVID-19?

On 28 March 2020, the Government issued a press release confirming measures aimed at supporting business, which included the introduction of legislation to enable companies to hold AGMs in a way which is consistent with the ban on public gatherings.

The Chartered Governance Institute in conjunction with other professional bodies have published information to guide companies through this difficult time. The latest guidance includes the following best practice advice:

  • Attendance: shareholders will not be able to attend AGMs while the stay at home measures are in force as attendance (other than as required to form a valid quorum) is unlikely to fall within the “essential for work purposes” exception to the restrictions. Companies should make clear in their notice of meeting, or by RIS announcement and updating the information on their website where the notice has been published, that shareholders may not attend in person, will be refused entry and should vote by proxy. The company can prevent shareholders and proxies from attending under the chair’s common law powers, likely to be backed up in the company’s articles of association.
  • Communication: when sending out notices, shareholders should be encouraged to continue to check the company’s website for updates to AGM arrangements as changes may well be required to comply with new guidance and/or Government measures. Information should also be offered about how they can remain engaged through voting and ask questions of directors – this can include providing a mechanism for shareholders to pose questions prior to the meeting which can be answered at the AGM and included in subsequent publications on the website.
  • Quorum: the quorum should be able to be satisfied by two director and/or employee shareholders attending (where appropriate), with resolutions passed by proxy votes (or by appointing one of those employees as a corporate representative) and the votes of those in attendance. If the physical presence of more than two is required, the number should be kept to the minimum.
  • Chair: the proxy form should appoint the chair of the meeting (not the chair of the board or a specific director who may be unable to attend) as proxy. Where shareholders have already appointed someone other than the chair of the meeting, they should be encouraged to submit a new proxy form.
  • Venue: if a meeting has already been convened for a venue that has become unavailable, and the articles allow the board to postpone the meeting or move it, directors should consider moving it to a more controlled venue. Companies that do not have such articles should adjourn the meeting to an alternative venue, which could be achieved by the employees/others who plan to form a quorum (as outlined above) attending the planned venue and adjourning to another venue.

Adopting an approach consistent with this guidance seems the simplest solution to allow compliant meetings to take place. An alternative, if permitted by a company’s articles of association, might be to hold an AGM exclusively online – although it should be noted that in normal circumstances these have not previously been endorsed by various investment/shareholder representative bodies. Practical and logistical challenges may lessen the adoption of virtual AGMs for the 2020 season – particularly choosing the right technology/communication forum, establishing rules and practices for virtual meetings and ensuring everyone has access by providing clear joining instructions. If not done before, holding a virtual AGM would mean adapting AGM documentation, incurring additional cost and taking up greater management time.

Companies planning to hold their AGM in the next few months will need to stay up to date with changes in legislation and guidance – both of which can change quickly. During this time, more companies are likely to consider making changes to their articles of association to permit virtual or meetings as a means of dealing with some of the practical issues currently arising from the need to hold a purely physical AGM.

Please contact us if you need help or advice regarding the holding of your AGM.


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What is a General Partnership?

A general partnership is an easy way for two or more people to work together. They each invest their skills, time and money in the business and trade with a view to a profit. A general partnership is similar to the way in which one person can operate a business as a sole trader. This sort of set up does not have separate legal identity distinct from the partners and does not need to be registered at Companies House. Any profit is split between the partners regardless of who earns more or whether they focus on separate areas of the business. The partners are simply taxed on their share of the profit.

Usually, general partnerships are operated by doctors, dentists, accountants and solicitors but it can also be a useful way to run a business for a husband and wife team or a group of tradesmen. Each partner has wide-ranging power as a representative of the general partnership. When one of the partners’ acts on behalf of the business, the business is bound by the contracts that partner has entered into, even if the other partners have not agreed to enter those contracts.

Each partner, simultaneously under common law, has to act in the best interest of their fellow partners. They are expected to disclose any appropriate information to the other partners and to act for the benefit of the partnership as a whole. It is important to note that partners in a general partnership can be individuals but can also be limited companies and limited liability partnerships. Each individual is considered self-employed. They can also work for other partnerships or companies and be employed at the same time.

To start a general partnership one partner needs to be assigned the role of nominated partner. The business needs a name, permission from relevant local authorities, regulators or professional bodies. It must be registered with HMRC and each individual must be registered as self-employed for tax purposes.

Financial record keeping and banking arrangements must be established. If the business turns over a significant sum that exceeds the mandatory registration threshold then it will need to be VAT registered. If there are employees, consider putting employment contracts in place and registering a payroll scheme. The partners will also need to consider what insurances need to be put in place.

Decisions in a partnership are usually taken on the basis of a simple majority but things that fundamentally affect the partnership will need to be decided upon unanimously. The nominated partner will be responsible for all the record keeping of decisions and financial records for the partnership. They will need to look carefully at partnership expenditure and income, record how profits are shared and losses attributed to each partner. If there are staff members then payroll records will need to be maintained too.

The nominated partner will also be responsible for any returns to be submitted to HMRC such a VAT returns, on a regular basis. Any changes to the partnership such as a change in nominated partner will need to be reported as they happen. If the general partnership is VAT registered then details of new partners joining the partnership will also need to be reported. Partnerships normally dissolve upon the death or resignation of a partner but this depends on whether there is a partnership agreement in place. Its contents should determine what should happen on the death or resignation of a partner.

Next time we will look at limited liability partnerships and discuss the pros and cons of such a set up. If you need help and advice on the best type of company for your business then come and talk to M & N Group. We can also help with filing VAT returns and financial record keeping including records of banking transactions and we can help you run your monthly payroll.

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Shareholders’ Agreements – Why Are They so Important?

You never expect anything to go wrong when you enter into business dealings with relatives and friends. You might even imagine that they will be fair to you should you have a disagreement. Unfortunately, fairness isn’t always at the forefront of a business partner’s mind when something goes wrong with a partnership. It is much better to be prepared for the worst case scenario to ensure that nobody ends up feeling like they’ve been left worse off than the other party or have been taken advantage of.

We all hope that nothing will go wrong but it often does which is why having a shareholder agreement in place is essential. It might feel that asking for a shareholders’ agreement makes you look distrustful and disrespectful but if the day comes that you need it you will be relieved that you put it in place. Remember, if things are split fairly, you have a better chance of recovering you relationship should a disagreement come between you for a time!

You are right in thinking that the company’s articles of association and the Companies Act 2006 with provide you with some guidelines and protection but nothing will protect you as much as an iron clad agreement signed by both parties as it will safeguard both your investment in the company and the business itself if you wish to sell your share or the whole thing at some future point in time.

A well drafted agreement should:

  • Provide protection for minority shareholders i.e. someone who owns less than 50% of the shares
  • Describe how to run the company i.e. that certain decisions, like appointing new directors, are made by all shareholders so that minority shareholders can participate and are not outnumbered by shareholders with a bigger majority
  • Set out rights and obligations of both majority and minority shareholders
  • Regulate the sale of the shares and issue of new shares and transfer of shares, paying dividends

It is vital for a minority shareholder to have protection in place because they will not get a say in how the business is run even if their rights are protected under the company’s articles. Don’t forget that articles can be amended by a special resolution where 75% of voting shareholders are required to vote in order to effect a change. Another great aspect of a shareholders’ agreement is that benefits minority shareholders is that when an existing majority shareholder wants to sell their shares, they have to offer them on the same terms to all of the shareholders. This ensures that minority shareholders receive the same return on their investment as the other shareholders.

Majority shareholders rights are also protected under a shareholders’ agreement. They can prevent the minority shareholder from setting up a rival business or from selling confidential information to a rival and prevent them from selling their shares to anyone such as a competitor. If a majority shareholder wants to sell their shares but a minority shareholder doesn’t agree they can be forced to do so by provisions in a shareholder agreement. The majority shareholder can then realise their investment at a time and price that suits them. The equal splitting of fees can also be enforced in an agreement.

If the company is split 50/50 then provision for dispute resolution can be included to help resolve any disagreements thus making court proceedings a final option instead of the only option. If you have to take your business partner to court to solve any disagreements that come up, you may find that it is a long and costly process and could potentially have to be repeated.

We recommend that a shareholders’ agreement be drafted up at incorporation to avoid any hassle and strain on your relationships later on. You may have a myriad of other things going on when you are starting out so consider outsourcing the responsibility to M & N Group Limited otherwise you may never get it in place.

It is also worth noting that this document is not open to public inspection, it can be negotiated and drafted in complete privacy and only viewed by the parties involved. We are specialists in the field and are waiting to advise you on your shareholders’ agreement.

We are competitively priced compared with our rivals who are solicitors and accountancy firms. You can be assured that bespoke drafting is not a challenge for us and we are looking forward to drafting your agreement in a matter of hours. Please get in touch!

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What are the advantages of a private limited company?

The most obvious advantage that comes to mind is the fact that once you are registered with Companies House, no one else can have your company’s name as it will be protected! Companies can survive for a very long time as their existence only terminates when they are dissolved through formal processes so the name can be protected for a very long time. Another reason to opt for a private limited company is that it can inspire confidence in potential customers and suppliers – it can open up more opportunities as other businesses will recognise the professional nature of your company and may be more likely to work with you, or chose your products and services over other providers. One of the greatest things about incorporating a private limited company is that a company has a separate legal identity so whenever contractual agreements are entered into, the company can enter them rather than the directors or shareholders in their individual capacity. This then leads to separate legal identity which provides security to the shareholder as their liability is limited to the amount they paid for their shares. Limited liability can also extend to unsecured loans if any have been taken on this basis but does not apply in all circumstances. Also, this limited liability is not available to sole traders or partnerships so is it is worth exploring a limited liability company as a potential option for this reason. Having a private limited company can make raising capital a lot easier too especially compared with other types of companies where you would have to raise money using your own personal resources. All you need to do is issue new shares which can be issued to new or existing shareholders depending on what your articles of association allow – we can help you interpret them if necessary. In some cases where the company borrows money from the bank it can do so without the directors having to give personal guarantees over their homes and assets. A private limited company does not need to trade immediately either. It might be that you have an idea for a name but don’t have the time or are working on other things before you get started. If this is the case, you could set up the company and keep it dormant until you start trading. If you’ve been trading for a while and find that your company is thriving but you want to retire or try something new then you can always sell your business if you don’t want to dissolve it. This will give you a nice clean break and some funds to go and do something different. Whatever you chose to do, it is a personal choice but we at M & N Group Limited can advise you on the process for setting up your company. It can all be done online making it extremely quick and easy provided that you have thought about what you want and gathered all the necessary information. The whole process should be completed within a day or so. We can provide you with guidance on the legal, financial and annual filing requirements that you need to comply with and we can even manage this for you. Please get in touch with us today to find out how we can help you succeed!

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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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