Company Formation Common Terms

When you’re forming a company, it can appear as though the terms are written in a different language. So let’s take a look at some of the common terms used and what they mean for you as a company owner.

Accounting period

The period of time covered in a Company Tax Return. Corporation Tax must be paid on all income within this period.

Normally the accounting period starts and ends on the accounting reference date.

Accounting reference date

The date of the end of the financial year, and is the date the annual accounts must be made up to. The accounts will need to be delivered to Companies House within 9 months of this date.

Allotment

The way shares are issued by a company. To allot further shares, the forms SH01 will need to be completed and sent to Companies House.

Articles of Association

An internal document that sets out the procedures and regulations for how the company should be run. The Articles are sent to Companies House and may be adjusted by Special Resolution.

Charge

Usually used to mean a secured loan (e.g. a mortgage), the debt is typically secured against an object, such as a property.

Confirmation date

This is the date Companies House requires all the information covered in the Confirmation Statement to be confirmed. It falls exactly 12 months after the previous year’s statement.

Confirmation statement

All companies and LLPs must send a confirmation statement to Companies House at least once every 112 months to verify its registered details and update Companies House for any changes.

Dividend

The part of a company’s profit that can be paid to the shareholders.

Dormant company

A company that is not trading or receiving any other kind of income.

Gazette

The official publication of the Crown in which formal announcements concerning companies are made. For example, when a winding-up order is made, it will need to be published in the Gazette.

Liquidation

The process of winding up a company (bringing it to a close).

Memorandum

The constitutional document for the company. This document is sent to Companies House on incorporation of the company.

Nominal value

Relates to company shares, this is the amount a shareholder has paid for each share taken from the company. This is not the same as the market value of the share. Typically shares have a nominal value of £1.

Ordinary resolution

A resolution that is passed by a majority vote of the members (e.g. shareholders) in a general meeting.

People with Significant Control (PSCs)

All companies must keep a register of all the people with significant control in the business. This is anyone with a degree of influence in the way the company is run.

Resolutions

A decision or agreement reached by a majority vote of the directors or shareholders. All resolutions are legally binding, and a copy must be filed with Companies House with copies kept at the registered office or SAIL address.

SAIL address

Single Alternative Inspection Location (SAIL) address is an alternative to the registered office. Companies can keep some or all of its statutory registers and records here.

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