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Formation of a Company
Registering a company and trading with limited liabilities has advantages & disadvantages. The most obvious advantage following company formation is that the liability of the directors is usually limited. In the event of a company becoming insolvent the personal assets of the directors are generally protected. Exceptions to these principles are where the director has acted fraudulently, is in breach of his or her duty to act in the best interests of the company, where there has not been compliance with the infrastructure of the company’s constitution or where there has been a breach of the Company Law Act. Taxation is also a large factor to consider when setting up a company as it might be more beneficial to trade as an individual or partnership.
Our specialist company solicitors can discuss with you some of the most obvious disadvantages in registering a company. For example company accounting rules must be strictly observed with accounts being audited annually by a qualified accountant. In most cases accounts prepared are then be filed at Companies House, the contents of which and the information contained therein becoming public property available for anyone to see.
You may buy an off the shelf company already formed which has not yet traded or you can set up your own company from scratch. The disadvantage of buying an off the shelf company is that the company’s articles of association are generally the standard Table A format. These will not suit all director/shareholder compositions. If this is the most cost effective way for you to purchase a company we would strongly suggest that you take advice on the parameters of the Articles so alterations can be made to them as necessary to reflect the likely needs of the business and its investors. You may also underpin the company by way of a shareholders agreement. A shareholders agreement should reflect solutions for when equal directors/shareholders hit deadlock within the decision making process of the business. If a personal guarantee is given would all the shareholders be equally liable despite the fact in real terms that only one of the shareholders is legally liable on the personal guarantee given?
Bespoke Company Formation
The disadvantage here is undoubtedly the cost, however the advantage of setting up a company from scratch means that all the needs for the administration, constitution and trading activity of the company can be dealt with on an exact tailored basis. Generally matters that in some instances could become issues of dispute down the line can be agreed upon and incorporated from the outset thereby eliminating the risks of problems later. Once all the documentation underpinning the company has been resolved between the shareholders the company’s formation can then take place on the same day and appear on the Companies Register within a few hours of your instruction for it to do so.
Talk to KJL Solicitors, Blofield Chambers, The Street, Blofield, Norwich, NR13 4AA and let one of our specialist company solicitors advise you on what may be best for your business formation needs.