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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