Forming a company

The basic method of forming a company under the Companies Act 2006 remains largely unchanged from the 1985 Act – however, there are a few fundamental changes, mainly intended to remove obstacles to electronic incorporation.
The process remains similar.  A company is formed by one or more persons subscribing their names to a memorandum of association, and registering the company in compliance with the requirements of the Act.
However, the memorandum of association is a very different document under the 2006 Act.  It will still state that the subscribers wish to form a company under the Act, that they agree to become members of the company and, in the case of a company that is to have a share capital, they also agree to take at least one share each.  As per the 1985 Act, the memorandum must also be in the prescribed form and must be authenticated by each subscriber.
Under the 2006 Act, though, the memorandum of association will be a purely historical document and will only contain details of the subscribers.  All other information presently contained in the memorandum will instead be captured through the application process.  It will not be possible to amend or update the memorandum after registration.  A company’s articles, therefore, become the main working constitutional document for a company.  While companies can, of course draft their own articles, but the Department of Trade and Industry (DTI) will also be providing model articles tailored to private and public companies, which can be used instead.  Draft model articles were published by the DTI in 2006, and can be found on its website.

Registration documents
The Act requires that a number of documents must be supplied to the relevant registrar of Companies for registration.  Prospective companies must, first and foremost, supply the memorandum of association.
Additionally, though, they must also supply an application for registration of the company, a statement of compliance and any supporting documents as required by Part 2, Section 2 of the Act.
The application for registration must state several details that were previously captured by the memorandum under the 1985 Act.  This includes: the company’s proposed name; the intended address of the company’s registered office and whether it will be situated in England and/or Wales, in Scotland or in Northern Ireland; whether the company is to be a private or a public company.
If the liability of the company members it to be limited, the statement of application must be accompanied by a statement of capital and initial shareholdings for companies that have share capital, or a statement of guarantee.
A statement of the company’s proposed officers must also be included with the application, which must contain details of the person or persons who will be the first director(s) of the company.  It must also contain details of the person or persons who is/are to be the first secretary or joint secretaries of the company.  This requirement, though, will only apply to a private company if they choose to appoint a company secretary.
The statement of proposed officers must also include details of the directors’ particulars as required by the register of directors and register of directors’ residential addresses (see Part 10, ss.162-166) and in the case of secretaries by the register of secretaries (see part 12, ss.277 to 279).  The Act also includes a provision for directors and secretaries to state a service address on the public register: for more details on which, see p.8.
The statement must also contain a consent by each of the persons named as director, as secretary or as one of joint secretaries, to act in the relevant capacity.  If all the partners in a firm are to be joint secretaries, consent may be given by one partner on behalf of them all.
Additionally, a copy of any proposed articles of association must be supplied to the Registrar upon application.  If proposed articles are not provided, or if they do not exclude or modify the relevant model articles then the model articles will form all or part of the company’s articles by default.
Finally, the prospective company must also provide a statement of compliance to the Registrar, which states that the requirements of the Act as to registration have been complied with.  The Registrar may accept this statement as sufficient evidence of compliance.
If the Registrar is satisfied that the requirements of the Act are complied with, the documents will be registered and the certificate of incorporation will be issued, either signed by the Registrar or authenticated by the Registrar’s official seal.  The certificate, as under the 1985 Act, acts as conclusive evidence that the registration requirements of the Act have been complied with, and that the company is duly registered.
One other fundamental change will also occur when the new act comes into force.  Under the 1985 Act, a single person can only for a private company – any other type of company must be formed with two or more people.  Under the forthcoming arrangements, though, a single person will be able to form any sort of company under the new Act.  How and when this will be taken advantage of, however, remains to be seen

Bridget Salaman, Head of Policy, Corporate, ICSA

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