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Setting up a Business in England and Wales for Overseas Businesses the United Kingdom Remains a Hub for Trade and Commerce Around the World

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Setting up a Business in England and Wales for Overseas Businesses the United Kingdom Remains a Hub for Trade and Commerce Around the World Setting Up a Business in England and Wales For Overseas Businesses The United Kingdom remains a hub for trade and commerce around the world. Many overseas companies choose to set up in business here to take advantage of the UK market as the world’s fifth largest economy, with a respected and accessible legal and regulatory system, and (generally) no restrictions on foreign ownership of companies and property. Within the UK, there are separate legal jurisdictions for England & Wales, Scotland and Northern Ireland. Devolved government in Scotland and Wales has increasing powers in relation to public services and taxation, which overseas companies also need to be aware of. David Emanuel If you are looking to set up a business in England and Wales from overseas, it is Partner important to choose the right structure to suit your operations and the relationship +44 (0)20 7665 0848 with any offshore owner. This includes considering the size of your business and its [email protected] potential for growth, the liabilities of those owning and managing the business, the tax consequences of different structures and the regulatory frameworks applicable to the business. This guide will help you: • choose the right structure for your business • consider the key issues before setting up your business • understand the process for setting up a company in England and Wales Overall communication vwv.co.uk was great. General pro-active“ “approach and willingness to go the ‘extra mile’ was greatly appreciated. Infrastructure Design Solutions Ltd 2 What Structure Should I Choose? Sole Trader Branch of an Overseas Entity This is one of the simplest forms of business structure. • A branch or place of business is set up under the Overseas Companies Regulations 2009. • The business is operated by an individual without a separate legal entity (i.e. a company). • This approach does not involve incorporating a separate company in England and Wales, but the overseas entity must register the branch and deliver annual • All the assets and profits of the business belong to the individual and income tax is accounts to Companies House (in effect for the branch and the entity in its home charged on those profits. jurisdiction). • The individual is personally liable for all the debts and liabilities of the business, subject to any available insurance cover. Private Limited Company General Partnership • A company is a separate legal entity arrangements to the registrar (see to those who own and manage it. pX) • The business is operated wholly by It is advisable to enter into a partnership - submit accounts, subject to • Two-tier governance structure: the the partners who equally own all the agreement setting out the partners’ turnover qualifications which give shareholders who own the company assets and profits, unless they agree a rights and obligations - otherwise default exemptions to smaller companies and the directors who manage its different split. provisions in the 1890 Partnership Act day to day activity. • Two main types: apply. • Each partner pays income tax on the • The company holds assets in its own - Company Limited by Shares profits they receive. The partnership agreement is a private name and generates its own income. The shareholders’ liability is limited to document. The partnership itself will be tax • The partners are generally jointly and It is responsible for all its debts and the nominal value of their shares. transparent and partners will be liable for severally liable for all the debts and liabilities, meaning it income and capital gains tax on profits and can sue and be This guide focuses on setting up a liabilities of the business. sued, which reduces the exposure disposals. private company limited by shares. of the individuals who own and - Company Limited by Guarantee manage the business. The owners (or members) do not • A company is subject to greater usually hold shares but contribute a Limited Liability Partnership regulation and transparency. It set figure towards the liabilities of the must: company (typically £1 only). This is a - be registered at Companies House common structure for charitable and • The partnership has its own legal Most UK professional firms are now - submit annual returns on non-profit companies. identity, including registration at incorporated as LLPs, mainly because of its governance and business Companies House. the advantage of limiting personal liability. However, because of their tax transparency, • The LLP contracts with third parties and combined with limitation of members’ is responsible for its assets and liabilities. Private Limited Companies are the most It is also easier to manage in a group of liability, they are highly flexible structures common structure when setting up a companies and can be established as • The members of the LLP are generally for investment, in the right circumstances. business in England & Wales, as their a subsidiary of an overseas company. not liable for the obligations of the LLP. separate legal status (limited liability) There are generally no restrictions on • The LLP must submit annual returns offers the owners and managers foreign ownership of shares. and accounts (subject to turnover protection from third party claims. qualifications). 3 Private Company Limited by Shares Overseas businesses looking to set up in England & Wales usually incorporate as a company limited by shares. When first setting up a company, basic questions you Registered Office will need to address are: A company which is incorporated in England and Wales • What will be its name? must have a registered office located in either England • Where will its registered office be? or Wales. • Who will be the directors, company secretary (if The registered office is the location where any official any), and shareholders? correspondence from third parties can be delivered to, including letters from Companies House and the • How many shares will be issued and what will be service of court documents. their value? Company Name Secretary Private companies can choose to appoint a Company When you have chosen a name you will need to ensure Secretary, but it is not an obligatory requirement. that: A Company Secretary will typically manage anything • it is not already in use or similar to another name which is given, sent to or served on the company itself registered at Companies House (eg official correspondence sent to the registered office • approval from the Secretary of State is obtained as explained above). beforehand if it includes sensitive words. For Other responsibilities of the Company Secretary include: examples, ‘royal’ or ‘British’ are considered sensitive words. If a business is operating in a regulated area, • submitting documents to Companies House such as healthcare, there are many other potential • maintaining the company’s statutory registers (see restrictions to be aware of. below) • it is not offensive • providing administrative support to the directors • it does not give the impression that it is linked to and shareholders (eg calling meetings) the government or a local authority 4 Shareholders and Directors There are two levels of governance in a private company limited by shares: • the shareholders, who own the company, are entitled to dividends (when the company has distributable reserves), decide on constitutional matters and the composition of the board • the directors, who carry out the day to day management of the company and determine the overall business strategy Shareholders The liability of a shareholder is limited to company is incorporated. This can be a nominal the value of the shares which they hold. amount of one share valued at £1 each, or If the company were to be wound up, the whatever amount may be appropriate for the shareholders would not be liable for any sum companies capitalisation requirement. over the unpaid nominal value of their shares. The number and value of the shares is not fixed The number of shares and their individual and can be amended after incorporation by the value needs to be determined before the directors and shareholders. Directors Directors owe statutory and common law • to exercise independent judgement It is important that directors understand the Did You Know? duties to the companies they manage. The Directors should not be influenced by role and duties they are taking on. The breach purpose of these duties is to ensure that external factors and must make their of any of these duties can result in civil and directors act in a way that is in the best own decisions based on the information even criminal actions being brought against Directors need to take special care if interest of the company. available to them. a director. the company is in danger of insolvency. In these circumstances, their duties The key duties of directors are set out in • to exercise reasonable care, skill and The directors should therefore be chosen to creditors can override duties to sections 171 to 177 of the Companies Act 2006, carefully with the individuals having a full diligence shareholders. and include duties: understanding of what their role will entail and • to avoid conflicts of interest the legal framework governing their actions. Although directors are not generally • to act within their powers Where an individual is a director of multiple Whilst the company is operational and solvent, The purpose of the company and the companies, they must not allow their liable for the debts of a company, they directors will always have to act in the best powers of the directors will be set out in responsibilities to each organisation to can become personally liable to make interests of the company. its articles of association (the company’s conflict, and where it does, they must contributions to assets in circumstances constitution). disclose such conflicts. In group company arrangements, it is common where they fail to take appropriate for a director of a holding company to also be steps to protect creditors.
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