Glossary

Glossary of Terms and Definitions

Company: A legal business entity having members who own it, usually as shareholders, and people who run it, directors. Shareholders can be directors and directors can be shareholders but the important point is that the company is a distinct entity, much like a person.

A company, itself, can:

own property.

employ people.

act as director or secretary of another company.

enter into contracts.

sue in the courts.

be sued in the courts.

Company Accounts: The accounts and reports prepared for the members of a company must include:

a director's report.
a profit and loss account (or an income and expenditure account if the company is not trading for a profit).
a balance sheet.

The accounts submitted to Companies House for a small company may consist of an abbreviated balance sheet only.

Company Authentication Code: This is a unique alphanumeric code given to each company when incorporated allowing online filing to take place. To use the service this code will be paired with the individual filing officer (Personal Authentication) code.

Company Formation: The act of making an official application to Companies House to create a company.

Companies House: A government body charged with registering trading companies within the United Kingdom. The departments are sub-divided for registrations in England & Wales and Scotland.

Company Incorporation: Formalising the formation of a company by placing the full company name, the officers of the company and the principal address of the company on the register of companies held at Companies House.

Company Number: Every U.K. registered company must have a unique company number, which is supplied by Companies House upon incorporation. This number remains for the life of the company, irrespective of any subsequent changes of name.

Company Secretary: is an officer of the company and may also, but not necessarily, be a director. The Secretary as an officer of the company is responsible for its actions including the keeping and presentation of company books and filing at Companies House in good order. The requirement to appoint a Secretary was removed for "small companies" under the 2006 Companies Act

Directors: run the company and although they may be limited in what they can do by the Articles of Association they can generally do anything that the company can do. Whilst directors wield great power their responsibilities can be onerous. They must always act in the best interests of the company and within the law. Best interests of the company, which means the shareholders as a whole, may not always be the same as those of customers, employees, individual shareholders or even the directors themselves. Directors act collectively as a Board of Management in all company decisions unless powers are specifically delegated to a committee of directors or a managing or executive director. Anyone can become a company director except:

A person who is currently disqualified by a court of law.
An un-discharged bankrupt (except with leave of the court).
In Scotland, anbody under the age of 16.
For a PLC, anybody over the age of 70 unless specifically approved by a general meeting of the company after a special notice of the relevant resolution.

Dissolution and Striking-off: any company that either fails to furnish company accounts annually with the Registrar or passes a shareholder resolution to dissolve will be struck from the Register of Companies and cease to exist. The name of dissolved companies can then be re-registered and a new number and incorporation date created by Companies House. Care must be taken in dissolving a company to distribute any remaining assets to the shareholders as once the company is dissolved or struck off any remaining assets pass to the Treasury.

Incorporation Date: This is the date that the company is entered on the Register of Companies by the Registrar. Any subsequent name changes will be noted and dated in the Register of Companies but the original incorporation date will, like the company number, remain for the life of the company.

Limited Company: a Private company may be limited by shares or guarantee. The former limits liability of the company to the amount of paid-up share capital whilst the latter is a commitment to contribute a given sum if the company is wound up. Some companies limited by guarantee and not run for the financial benefit of members may claim the benefit of omitting 'Limited' or 'Ltd' from their trading name. (Section 30, Companies Act 1985)

Memorandum & Articles of Association: The two parts form the company's constitution. The Memorandum of Association determines the company's name, country location of Registered Office and what the company may do (objects clause). The Articles set out the rules for the operation of the company and holding of shares. Any subsequent changes must be voted by the shareholders according to the Memorandum & Articles of Association and revision notified to Companies House.

Personal Authentication Code: Each officer of a company will be allocated an alphanumeric code to be used for online filing operations.

Private Company: Shares are held privately by one or more individuals and are not traded in the open market. There is no minimum or maximum capital value and whilst there need be no more than one member with only one share there must be at least two individuls involved in running the company (a director and secretary). The secretary can be an employee.

Public Company (PLC) : Shares may be offered for sale to the general public. It may be quoted on the Stock Exchange or Alternative Investment Market but not necessarily so. It is interesting to note that out of 13,000 public companies registered in the U.K. only 2,100 are quoted on the London Stock Exchange.
Before a PLC can start trading or borrow money it must satisfy Companies House that at least £50,000 worth of shares have been issued and that each share must have been paid up to at least 25% of its face value. It must have at least two directors and a qualified secretary.

Reference Date: or Accounting Reference Date is the last day of the month in which the first and subsequent anniversaries of the company's incorporation fall. This date will become the date by which the filing of all company accounts falls due. This date may be varied once to a date more suited to the company's accounting year by filing Form225.

Registered Office: is the address of a company filed at Companies House as being the administrative base for company operations, where documents such as registers of directors and shareholders reside and where legal documents may be served and public access obtained. Note that any company formed in England & Wales must have its Registered Office located in the same country, similarly a Scottish registered company must have its Registered Office located in Scotland. A company does not have to physically trade from its Registered Office.

Shareholder: A person or company who owns at least one share of the equity of a company.

Subscriber: When a company is first formed the individual or individuals who physically form the company and "subscribe" to its Memorandum & Articles of Association are referred to as the Subscribers and are detailed within the document along with the share of the company taken. Usually the establishing or First Director(s) also act as Subscriber(s) and take a Subscriber Share. In effect the total number of the subscriber shares taken represents 100% of the value of the company. Percentage ownership can thus be determined by the number of shares each subscriber takes. It is important to note that a Director does not necessarily have to be a Subscriber and vice versa.

The Registrar of Companies: The principal officer of Companies House responsible for maintaining the register of United Kingdom based companies.

This Glossary is intended as a guide only and should not be relied upon as definitive point of law in relation to The Companies Act 1985-2006. Exchequer Business Services (Northern) Ltd does not accept any liability for loss to any person from acting or refraining from acting in reliance of any material in the above definitions.

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