Company Terms Explained
There are so many terms flying around in the business world - from your ARD to AGM, from Incorporation to Service Address. Trying to get your head around all of them can be a bit of a minefield, so here's a handy guide to help you try and understand them.
ARD (Account Referencing Date): Your account referencing date is the date to which your annual accounts have to made up to. This is normally shown once your company has been incorporated.
How do I change my ARD?
Accounting Period: This is the period that your accounts are based on. When a newly incorporated company are filing their first years worth of accounts, the period will be a little bit longer to align them with the end of the month. If a company is incorporated on the 12th May for example, the first year will be 12th May to 31st May the following year, and then 1st June to 31st May thereafter.
AGM (Annual General Meeting): This is a meeting of the company's shareholders and directors. This is no longer a requirement since the Companies Act 2006, unless it's stated in the Articles of Association.
Articles of Association: A legal document sent to Companies House as part of your incorporation. It's an adoption of various rules, procedures and regulations that dictate how a company will be managed. Companies in the UK can adopt a set of Model Articles which are suited for most general commercial activities.
Corporation Tax: A tax on a company's trading profits. This is due 9 months and one day after the end of the company's accounting period. An accountant may be able to help offset losses against future profits.
Certificate of Incorporation: A certificate issued upon incorporation by Companies House. This includes the company name, number and date of incorporation.
Director: An officer of a limited company who has been appointed to the board of directors under the stipulations of the Articles of Association. Directors are responsible for the operations of a company on a day to day basis, and are to ensure the business remains in good standing and files all required documents on time.
Find out how to appoint and resign a director here.
Holding Company: A holding company is a company that holds more than 50% of the shares in one or more subsidiary companies. You can read the legal definition here.
Incorporation: This is the official process of registering a limited company with Companies House. Once complete, you will be supplied with a certification of incorporation, along with a company number.
Find out more about the process of incorporation here.
Limited Liability: A limited company comes with limited liability, which is granted to the shareholders of a company. This means that they do not carry any personal liability for the company, unless securities have been made in their name on behalf of the company, or if the director is involved in wrongful or fraudulent trading.
Officer: An officer is an appointed position within a company, such as a director or secretary. They normally attend to the general requirements of the company and its shareholders.
Learn more about directors, shareholders and secretaries here.
Service Address: This is the address that HMRC and Companies House would use to write to directors. This can be different from their residential address.
Read about the difference between registered address and service address here.
Shareholder: An individual who owns a minimum of one share in a private or public limited company. The voting power of the shareholder is determined by the number of shares they own. This also applies to the division of profit through dividends.
Subsidiary Company: A company controlled by another company through a parent-child relationship. A company is only classed as a subsidiary if the parent has a controlling interest (by owning over 50% of the issued shares).
We've covered the basics of the terms used - there are many more. But hopefully, this will at least give you a good position to be in to help run your business.
As always, if you're ever confused or need some help with incorporation or setting some of these up (such as shares, or defining directors), get in touch.
- 20 Apr 2017 - The Small Business, Enterprise and Employment Act
- 18 Apr 2017 - Common pitfalls to avoid when budgeting
- 07 Apr 2017 - Are apprenticeships the right fit for my business?
- 31 Mar 2017 - Why Should I become a limited company?
- 10 Mar 2017 - When is the right time to hire?