If you set up a company, there is a lot of legislation involved including filing yearly accounts at Companies House on time, if you fail to file the company accounts on time the company director is personally fined, the later the accounts are filed the more you are fined. The fine is doubled if you are late two years in a row. Directors can take out director’s indemnity insurance.
Forming a company helps to lessen personal liability considerably more than the liability of a sole trader or partnership because a company’s liability will be limited to the company’s share capital, (save for director’s fines). This is because a company has its own legal personality separate to that of its members. However, the company veil can be lifted and directors and officers can be made liable if they are shown to have acted fraudulently in the name of the company. Businesses that give small companies credit sometimes require a personal guarantee from the directors of the company whereby the directors cannot avoid personal liability.
The main provisions of the new Companies Act 2006 are now in force one being that a small limited company is no longer legally compelled to retain a company secretary and execution of documents is easier than it was before.
There is now a new model set of Articles of Association. The new Articles contain no provisions relating to how private company meetings are to be called or conducted. The Act stipulates when a meeting is necessary (for example, the removal of a director from office). An AGM is no longer required to approve accounts and to appoint auditors unless these provisions are specifically adopted. The new Act abolishes the need for an objects clause in the Memorandum and Articles of Association and directors can use their business rather than their home address on the company register. However, any home addresses already on the register cannot be removed.
From 1 October 2008, with few exceptions, all companies will have to have at least one director who is at least 16 years old. If your company has an underage director at 1 October 2008, that directorship will cease. If these changes leave your company without a director you will need to appoint one immediately.
This guide is intended as general information only it does not seek to summarise the relevant legislation which is a complex and technical area of law. This guide should therefore not be relied upon and you should take specific professional legal advice relating to your personal circumstances prior to proceeding with any action.