Immediate Obligations and Practicalities
Statutory Books
These include the Register of Members, Register of Directors, Register of Company Secretaries, Register of Charges, and minutes of meetings and should be kept together in a coherent format. Most newly-formed companies come with a binder containing all the necessary registers. The books must be written up on incorporation and amended from time to time to reflect any changes – for example, any new issues of shares. If this is not done, then any director or other officer of the company in default may be liable to a fine. Please see paragraph 6 below and the document entitled “Directors” for further discussion in this area.
Bank Account
Although not a legal requirement, from a practical point of view this must be set up as soon as possible. Bank mandate forms will require the signatures of the directors, and instructions as to who can sign for cheques and whether there is any monetary limit. These decisions are commonly dealt with at the first board meeting (see paragraph 5.10 below).
Stationary
All stationary used by a company must bear its name, place of registration, registration number, address of the registered office, and either the names of all the directors, or the names of none of them. There is still no definitive authority as to whether e-mails are also caught within these requirements, and the cautious and safest route therefore is to assume that they are.
VAT registration
If the value of a company’s taxable supplies is expected to exceed £58,000 in the ensuing 30 days, then the company must register for VAT with H.M Customs and Excise. In any case, once turnover has reached £58,000 within a period not exceeding twelve months, registration for VAT becomes necessary. The company will be allocated a VAT number, and must make returns every three months.
Corporation Tax notification
When a company comes into charge to corporation tax it must notify the Inland Revenue within three months of the event. A company comes into charge to corporation tax when it commences a trade, or when it obtains its first source of income, for example cash in a bank account or acquires investments.
Licences required
Depending on the nature of the business, certain licences may need to be obtained. These can range from the more usual types (such as software licences), to more industry specific ones.
Data Protection
Although there is an exemption for companies which only process data for: staff administration; advertising, marketing and public relations; and accounts and records,: in reality, this exemption is difficult to meet. Therefore most companies who process personal data (including obtaining it, holding it and amending it) on living individuals will need to make a notification with the Data Protection Commissioner, and thereby be added to the data protection register. Failure to register when necessary is a criminal offence. Registration can be done fairly simply, either through the Internet, or by contacting the Information Commissioner’s office by telephone (on 01625 545700), and will last for one year, costing £35. For further information on this area please see the section on Intellectual Property.
Domain Name
A domain name is something which identifies the address of a website on the Internet. In today’s world, registration of a domain name is a vital first step, not only to facilitate access to the company’s website, but also in order to build up and protect the goodwill of a company and to prevent others from registering your name for themselves in order to divert traffic rightfully intended for your site. A search will need to be done to ensure the domain name’s availability, and it is worth registering similar names in order to protect goodwill.
Insurance
Insurance should be taken out in the company’s name, including employer’s liability insurance, insurance for vehicles, if relevant, and occupier’s liability insurance.
Employees
Both the local tax inspector and the DSS will need to be contacted, in order to arrange for the PAYE system and national insurance contribution payments to be put in place. Employment contracts (including the particulars of employment required by statute) should be entered into with all employment staff. Please see the document entitled “Statements of Employment Particulars” in the section on Dealing with Your Staff for further information in this area.
First Board Meeting
A board meeting will need to be held soon after incorporation to enable the directors to make the necessary decisions to take the business forward. These will include opening a bank account (see above), appointing an auditor (although technically this need not be done before the first annual general meeting), fixing an accounting reference date (directors have nine months to choose this date, in the absence of which the Registrar of Companies will allocate a date, which will be the last day of the month in which the company is incorporated), possibly appointing a new secretary and new directors, possibly appointing the Chairman of the board, using a business/trading name, and allotting shares.
Elective Regime
The elective regime is only really suitable for very small companies, which are owner-managed. The aim of the elective regime is to deregulate the company and lessen the formal requirements where they are not necessary. If the necessary elective resolutions are passed with the unanimous consent of all the shareholders, the following five requirements can be relaxed (and powers given): directors can be given the power to allot shares for a greater period than the usual five year maximum; accounts need no longer be laid before the shareholders in general meeting (although they must still be prepared); there would be no requirement to hold an annual general meeting each year; the auditor can be appointed for more than one year; and an extraordinary general meeting can be held on short notice with the consent of only 90% of the shareholders, rather than the more usual 95%.
NB: Many of the proposals from the DTI review (see paragraph 4 above) relate to simplification of the current regime for smaller and private companies, and one specific proposal is that the present “elective” regime, as outlined above, become the norm for private companies. The first White Paper which it has produced as a result of this process endorses the proposal that the elective regime become the norm. However, as discussed above at paragraph 4, no specific date has yet been set by the Government to introduce their proposal.