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Company Formation

Tuesday, 10 July 2012

It is essential for those starting a new company to understand the basic requirements and implications of setting up a company. Whether you choose to create your company on-line using a company formation agent or through the more traditional route of a lawyer or accountant, there are various issues that you should be aware of.


Incorporation is the process by which a business forms itself as a company by registration at Companies House under the Companies Act 2006. In most cases companies are registered as either public limited companies or private limited companies which afford their members (shareholders) limited liability.
This means that liability is limited to the amount of capital, if any, that remains unpaid on their shares.

Companies Act 2006

The governing legislation for company formation is the Companies Act 2006 which provides as follows:

  • Companies may only be formed for lawful purposes
  • Companies must be formed by one or more persons
  • The founding members must subscribe their names to the memorandum of association
  • The registration requirements of the Companies Act 2006 must be met

Registration Requirements The registration requirements of the Companies Act 2006 require delivery of the memorandum of association to the registrar with an application for registration stating:

  • Proposed company name
  • Proposed registered office
  • Whether the company is limited liability
  • Whether the company is public or private
  • Initial shareholdings
  • Company officers

Effects of Incorporation

Once a company has been accepted by the registrar and incorporated, the registrar will issue a certificate of incorporation setting out the details of the company. At this point the company is considered registered, the subscribers become members and the proposed officers are appointed as directors of the company.

The company now exists as a separate legal entity to its members and the company assumes certain responsibilities which must be carried out by its officers. These include:

  • Keeping the registrar informed of the company’s registered office
  • Maintaining shareholder registers and other documents that are required by the Companies Act available for inspection
  • Issuing share certificates
  • Submitting annual returns
  • Maintaining proper accounting records

Thanks to the Internet the formation of companies has become streamlined and inexpensive. In many cases pre-formed companies (shelf companies) are simply transferred to a business that wishes to incorporate and the relevant changes submitted to Companies House for registration. Complications can arise however and we would recommend that legal advice is sought if you are unsure about your obligations.

If you need assistance at any stage of company formation Rollingsons has experienced lawyers who can assist you; for more information please contact James Crighton via e-mail or by telephone on 0207 611 4848.