Setting up and being involved in a company in the UK—whether as a founder, investor, or director—comes with a range of legal responsibilities and procedural considerations. This guide outlines the basic framework of UK company governance: how companies are formed, who manages them, how decisions are made, and the legal formalities that need to be followed.
Setting Up a UK Company
Most UK companies are incorporated as private limited companies (Ltd). To form one: a company name, a registered office address in the UK, at least one director, at least one shareholder (this can be the same person) and an internal set of rules (known as the memorandum and articles of association) are needed.
Incorporation is done online through Companies House, the UK’s official company registrar. Once formed, the company becomes a separate legal entity, responsible for its own legal liabilities.
Directors: Role and Appointment
Every UK private limited company must have at least one director. A director is legally responsible for running the company and ensuring it complies with legal obligations – such as filing annual accounts and paying taxes.
Anyone over 16 can be a director, regardless of nationality or residence, as long as they’re not disqualified or bankrupt. Appointments are made on formation or later by shareholders or the board. There’s no fixed term unless the company’s Articles specify one. Having a UK-based director can help with banks and tax authorities, though it’s not a legal requirement.
A company may also appoint non-executive directors, who are not involved in day-to-day operations but still carry legal responsibility.
Shareholders: Role and Powers
Shareholders are the company’s owners. While directors handle daily operations, shareholders make key decisions, such as:
- Changing the company name or articles of association
- Issuing new shares
- Declaring dividends
- Selling the company or closing it down
- Appointing or removing directors
Decisions require a simple majority of 50%+, or for special matters, 75% approval. Most votes can be taken in writing.
Meeting Requirements
UK companies are not required to hold annual general meetings (AGMs), but formal decisions must be recorded as follows:
- Board resolutions: Made by directors, often at a meeting or in writing
- Shareholder resolutions: Made by vote or written consent
Share Capital and Transfers
Shares can be issued for cash or assets, with shareholder approval. Shareholders typically have pre-emption rights unless waived or excluded in the Articles. Transfers require a Stock Transfer Form and board consent. While no formal agreement is needed, it’s often used. Transfers must be recorded in the company’s internal register.
Dividends and Buybacks
Dividends can only be paid from distributable profits and require board proposal and shareholder approval. Companies can also buy back shares (with 75% shareholder approval) if they meet legal and reporting requirements.
Winding Up a UK Company
The winding up procedures differ whether the company is solvent or insolvent.
There are two main ways to close a solvent UK company. These are: a Voluntary Strike-Off: If the company is no longer trading and has no debts, or a Members’ Voluntary Liquidation (MVL): If the company is solvent and shareholders want to formally liquidate it.
However, insolvent companies (those that cannot pay debts) must go through a Creditors’ Voluntary Liquidation (CVL) or other insolvency procedures.
Reporting and Filing Requirements: Companies House Filings
All UK companies must file information with Companies House, in order to ensure legal compliance and public transparency. These include: Changes in directors or shareholders, share issues or transfers, updates to the registered office and amendments to company rules.
If you’re considering setting up a UK company or need help navigating your responsibilities as a director or shareholder, it’s important to stay informed and compliant. Should you require further guidance or support, please do not hesitate to contact us for professional assistance.