United Kingdom

Capital: London
Largest city: London
Official Language: English
Government: Unitary parliamentary constitutional monarchy
Area: 242,495 km2
Population: 67,886,004
Currency: Pound Sterling (GBP)
GDP total: GBP2.215 trillion (USD3.124 trillion)
GDP per capita: GBP33396.46 (USD47,089)
Time zone: UTC/ UTC +1
Calling code: +44
Internet TLD: .uk

[Source: Wikipedia]

No. of domestic companies: 4,662,431 as at 2020
No. of foreign companies: 12,241 as at 2019
[Source: https://www.gov.uk]

Principal Legislation governing Companies

  • Companies Act 2006
  • Small Business, Enterprise and Employment Act 2015
  • Company Directors’ Disqualification Act 1986
  • Insolvency Act 1986
  • Corporate Governance and Insolvency Act 2020
Q&A on Company Law
  1. What are the different kinds of legal entities available in England and Wales?
    In general, the following are available:

    • Private Limited Company (LTD) – either Limited by Guarantee or Limited by Shares
    • Public Limited Company (PLC)
    • Other company types – for example, Societas Europea
    • Limited Liability Partnership (LLP)
    • Partnerships
  2. What are the laws and regulations governing legal companies in England and Wales?
    The primary source for company regulation is the Companies Act 2006 which addresses most aspects of the public and private companies’ governance. There are certain other pieces of legislation addressing specific situations – for example the Insolvency Act 1986 and the Company Directors Disqualification Act 1986.
    Once incorporated, companies also have to operate in accordance with their individual constitutions known as the Articles of Association.
  3. What are the procedures and requirements for incorporating or registering a company in England and Wales?
    The process of incorporating a private limited company is generally straightforward and usually involves filing the necessary documents and paying the fee at UK Companies House. There are similar provisions for incorporating the LLP (albeit with different requirements as to the type of documents to be filed).
    This basic process of incorporation is similar for public companies but there are a number of additional requirements – for example it is compulsory to have a minimum of two directors and a company secretary. In addition, a public company is obliged to apply for a ‘trading certificate’ before it can start trading. In order to obtain the certificate, the allotted share capital must be no less than the prescribed ‘authorised minimum’ which is currently at £50,000.
  4. What are the reporting requirements for companies in England and Wales?
    The principal reporting requirements for a company include the filing of the annual confirmation statement and accounts, filing company tax returns and notifying the Companies House of any significant changes (for example, retirement or appointment of directors or changing the registered company address). Additionally, there is a requirement to file a register of persons with significant control (i.e. the majority shareholders).
    Public companies and those with a high turnover are also required to undergo an audit of their accounts.
  5. What are the procedures and requirements for foreigners and/or foreign companies to establish a company or business in England and Wales?
    There are no specific rules for non-residents in respect of starting a UK company, but they do have to comply with all the usual UK company procedural requirements.
  6. What are some of the challenges that foreign companies should take into consideration prior to entering the industry or market in England and Wales?
    Depending on the circumstances, if a foreign company wishes to operate a UK establishment, they are required to register it at the Companies House. Therefore, it is prudent to obtain advice from a UK-based accountant and/or solicitor prior to commencement of trading in the UK.
    The other important issue is regulation of certain industries. All financial services firms operating in the UK are subject to stringent controls by the Financial Conduct Authority (FCA).
    Other regulated industries include healthcare, utilities and advertising.
  7. What are the duties, responsibilities and liabilities of directors in England and Wales?
    The duties of directors are set out in detail in the Companies Act 2006 but the main duties can be summarised as follows:

    • To act within powers
    • To promote the success of the company
    • To exercise independent judgment
    • To exercise reasonable care, skill and diligence
    • To avoid conflicts of interest
    • Not to accept benefits from third parties
    • To declare an interest in a proposed transaction or arrangement

    Directors owe a duty to the company, and, in insolvency situations, to the company’s creditors.
    In certain circumstances the directors can be personally liable. These include making fraudulent/negligent misrepresentation or in cases of wrongful or fraudulent trading.

  8. What are the requirements or criteria to be satisfied for an individual to qualify as a director of a company?
    The general requirements are that a director must be over 16 years old and not be disqualified from being a director or be an undischarged bankrupt.
    A director can be a UK or overseas resident (but the company must have a UK registered address).
  9. What are the requirements or criteria to be satisfied for an individual or a legal entity to qualify and be a shareholder of a company in England and Wales?
    In general, there are few restrictions on share ownership in the UK. A company’s individual constitution (i.e. the articles of association) can impose restrictions or set out the criteria for becoming a member. Similarly, there are no restrictions on foreign ownership (again, subject to any restrictions in the company’s articles of association).
  10. How are shares in a company allotted and/or offered in England and Wales?
    This will depend on whether the company is private or publicly listed.
    In private companies, new shares can be issued to new or existing shareholders. After the company is incorporated, there is usually a number of shares issued, with the initial shareholders sometimes referred to as ‘subscribers’.
    The shares in public listed companies can be freely bought by the general public. This is usually done online, through a share dealing platform. There are a number of such websites for use by the general public.
  11. What are the corporate governance practices in England and Wales?
    There are 5 main sections to the UK Corporate Governance Code (UKCG Code), which cover the following:

    1. Leadership and company purpose – the board’s role in the long-term sustainable success of the company, purpose, strategy, values and culture of the company; shareholder and stakeholder engagement; and workforce policies, practices and concerns.
    2. Division of responsibilities – separation of duties within the board and between its various roles (chair, CEO, senior independent director and non-executive directors).
    3. Composition, succession and evaluation – board and committee composition, board appointments (including role of the nomination committee, annual re-election of directors, open advertising and external search consultancy), succession planning, tenure of the chair, board diversity and board evaluation.
    4. Audit, risk and internal control – policies and procedures for internal and external audit function, risk and internal control framework, principal risks and risk assessment and management, audit committee, directors’ responsibility statement, robust assessment of emerging and principal risks, monitoring of risk management and internal control systems, going concern statement and viability statement.
    5. Remuneration – remuneration polices and long-term sustainable success, director and senior management remuneration procedure, independent judgement and discretion on remuneration, the remuneration committee’s role and disclosures, long-term incentives and vesting periods, remuneration consultants, pensions and notice periods in directors’ contracts.

    As a method of monitoring businesses compliance, companies with a premium listing are required to include a statement of how they have applied the main principles of the UKCG Code within their annual report.
    Furthermore, the UK Stewardship Code sets out good practice for institutional investors when engaging with UK listed companies.

  12. Who are the regulators for corporate governance in England and Wales?
    The Financial Reporting Council issues and administers the UKCG Code and the UK Stewardship Code.
    The government has confirmed, however, that a new organisation known as the Audit, Reporting and Governance Authority (ARGA) will replace the FRC. ARGA will have a new mandate, powers and leadership.
  13. What are the taxes that apply to companies in England and Wales?
    UK companies are subject to UK corporation tax on their income profits and capital profits.
    The rate of Corporation Tax in the UK currently sits at 19%.
  14. Are companies in England and Wales subject to competition laws and regulations in England and Wales?
    Anti-competitive behaviour which may affect trade within the UK is prohibited by Chapters I and II of the Competition Act 1998. These provisions affect anti-competitive agreements and abuse of a dominant market position.
    The impact of breaches of provisions designed to combat anti-competitive agreements and abuse of dominant market positions mean that the perpetrating company may face fines of up to 10% of group global turnover, risk their agreements being deemed automatically void and unenforceable and find themselves exposed to actions for damages from consumers, customers and competitors who have been harmed by the anti-competitive behaviour.
    Directors of perpetrating companies risk potentially being disqualified from acting as company directors as well as risk prosecution under the criminal cartel offence.
  15. What are the data privacy laws in England and Wales that companies should be aware of?
    The Data Protection Act 2018 controls how organisations, businesses or the government use personal information and implanted the GDPR principles into English Law.
    Companies using personal data must make sure the information is:

    • used fairly, lawfully and transparently
    • used for specified, explicit purposes
    • used in a way that is adequate, relevant and limited to only what is necessary
    • accurate and, where necessary, kept up to date
    • kept for no longer than is necessary
    • handled in a way that ensures appropriate security, including protection against unlawful or unauthorised processing, access, loss, destruction or damage

    Stronger legal protection is provided in respect of “protected characteristics” such as:

    • race
    • ethnic background
    • political opinions
    • religious beliefs
    • trade union membership
    • genetics
    • biometrics (where used for identification)
    • health
    • sex life or orientation
  16. What are the company insolvency laws and regulations in England and Wales?
    The key corporate insolvency legislation in the UK is made up of the Insolvency Act 1986 (IA 1986), the Insolvency (England and Wales) Rules 2016 and the Practice Direction on insolvency proceedings.
  17. Have there been any recent reforms or regulatory changes pertaining to the company law in England and Wales?
    The Corporate Insolvency and Governance Act 2020 (CIGA 2020) took effect on 26 June 2020 (please see question 19).
    The Department for Business, Energy and Industrial Strategy (BEIS) have recently made proposals in a consultation paper “Restoring trust in audit and corporate governance” (published 18 March 2021). The paper contains recommendations on capital maintenance, payment practices, reporting on fraud measures, Audit committees and Investigation and enforcement powers against director wrongdoing.
    There is presently a deadline for responses to the paper by 8 July 2021.
  18. What are the main changes with company law in England and Wales that differ to company laws in other European countries?
    The Laws of England and Wales differ to some other European Countries as English company law does not distinguish between a management board and a supervisory board. All directors form one board and each has the same obligations and accountability to the company regardless of whether he or she is an executive (typically employees) or non-executive.
    In other European Countries such as the Netherlands, there exists the requirement of a two-tier board structure consisting of the management board and the supervisory board. In other European Countries such as Germany and France, there is an option of adopting either a one-tier or two-tier board structure.
  19. In light of the Covid-19 pandemic and various governmental movement control orders in England and Wales, has the government in England and Wales implemented changes or temporary orders to assist companies to cope with financial constraints?
    The Corporate Insolvency and Governance Act 2020 (CIGA 2020) took effect on 26 June 2020, with the aim of lifting some of the pressure on distressed businesses, specifically targeting those businesses where the cause of the struggle could be identified as the COVID pandemic. It is expected to remain in place until 30 June 2021.
    CIGA 2020 has introduced a new standalone moratorium option for companies in financial difficulty, giving a minimum of 20 days of protection from certain creditor actions, with an insolvency practitioner acting in the role of monitor.
    A new Part 26A restructuring plan has been introduced. This shows a closeness to a Part 26 Scheme of Arrangement in existing law, however differs in that the court can sanction a plan where not all classes of creditors have approved it, known as cross-class cram-down (in borrowing from US chapter 11).
    Suspension of wrongful trading measures was originally introduced and remained in place until 30 June 2021.
    CIGA 2020 also includes provisions preventing a supplier from terminating a contract of supply on the grounds that the customer has entered an insolvency process, unless a supplier falls within an exemption. Suppliers will also be banned from insisting on payment of sums falling due prior to the insolvency as a condition of continued supply. However, there are exclusions where these clauses form part of a financial services contract, and insurers, banks and investment firms are also excluded.
    Coronavirus Business Interruption Loans closed for new applications at the end of March 2021. However, on 6 April 2021 The Recovery Loan Scheme was launched which allowed businesses of any size to continue to access loans and other kinds of finance up to £10 million per business once the existing Covid-19 loan schemes closed.
ABOUT THE AUTHORS

Niten Chauhan
Partner, Dispute Resolution and Head of Insolvency & Restructuring, JPC

Niten trained in the City of London and qualified in 2006. Prior to becoming a solicitor he worked with a multinational firm of accountants and a global investment bank. This financial experience coupled with a strong legal acumen led him to a career in Commercial Litigation and Dispute Resolution with a particular specialism in Insolvency.

Niten is Head of the firm’s Insolvency and Restructuring department where his particular strengths lie in dealing with corporate insolvency matters from Liquidations to Administrations.

In addition, he is a Partner in the Dispute Resolution department in which he undertakes all aspects of litigious work and acts for a multitude of clients, both foreign and domestic with cases.

Niten also has an expertise in cases of civil fraud particularly involving properties and identity theft. He was the lead Partner in P&P Property Ltd v Owen White & Catlin LLP [2018] EWCA Civ 1082 (15 May 2018), a case of property fraud which was widely publicised after he achieved a successful outcome for his clients before the Court of Appeal in May 2018.

Furthermore, as the firm’s International Partner, Niten acts for clients globally in varying matters from high value contractual disputes to shipping arbitration cases.

Irina Apekisheva
Solicitor, Dispute Resolution, JPC

Irina is a solicitor in JPC’s Dispute Resolution Team, dealing with all aspects of commercial and property litigation, including contract claims, injunctions, intellectual property matters, construction disputes, professional negligence and landlord and tenant disputes.
Following her studies at the University of Law where she gained Distinction in her LPC, she completed her training contract at a top 100 London firm focussing on commercial litigation, property and private client work.

Examples of some of the cases Irina has been involved in are as follows:

  • Successfully defending a construction adjudication matter worth over £1.5m
  • Advising a prominent artist on his intellectual property rights claim
  • Advising a client in respect of a GDPR dispute with a British regulator, the parties reached settlement before trial.
  • Representing a client in respect of defending injunction proceedings, the matter was settled on the terms favourable to the client

Irina understands the importance of resolving clients’ disputes in the most cost-effective way possible and strives to understand their objective at an early stage. She is committed to providing high quality legal advice in a way that is easily understood.

ABOUT THE FIRM

Name: JPC
Address: North London office: Omni House, 252 Belsize Road, London NW6 4BT Central London office: 34 Sumner Place, London SW7 3NT
Telephone: +44 (0) 20 7625 4424
Email: enquiries@jpclaw.co.uk
Website address: https://www.jpclaw.co.uk/
Key contact: Niten Chauhan, Partner, nchauhan@jpclaw.co.uk
Established: 2007
Number of lawyers: 24
Languages: English, French, Gujurati, Russian, Turkish

Brief description:
JPC is a Legal 500 practice which covers the full spectrum of commercial law for businesses and individuals both in the UK and overseas and maintains strong professional relationships through its international networks and continues to develop the same as a result of its growing global presence.

Key practice areas:
Corporate, Dispute Resolution, Insolvency and Restructuring, Employment, Private Client, Real Estate

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