Discuss the problem with your solicitor first. If it's a problem relating to the service you've received, discuss the problem with either the solicitor directly or, if that's awkward, the partner in their firm responsible for complaints. All solicitor firms must have their own complaints procedures. If the solicitor is a sole practitioner, then they may have an arrangement with another local firm or with the local Law Society to deal with complaints.
Now put your complaint in writing. Any complaint should eventually be recorded in writing. Your solicitor will then have a record of the details. You should keep a copy of your letter.
Next refer the case to the Legal Ombudsman. You should contact the Legal Ombudsman if:
It's important that you contact the Legal Ombudsman within six months of the matter you are complaining about. If you leave it any longer, it may decide not to investigate your complaint.
Solicitor jargon 'no win, no fee' means that solicitors are paid nothing for their work if they lose, but it also covers agreements whereby solicitors can charge more if they're successful. Put simply, there are two types of 'no win, no fee':
There are various methods of funding a legal case used by solicitors:
In principle, it’s illegal for a director to borrow money from their own company. Small expense sums are allowed to be borrowed in advance. If the loan hasn't been repaid nine months after the end of the company’s financial year, tax at the rate of 25 per cent has to be paid on the sum borrowed (this sum is repaid by HMRC when the loan is repaid). If no interest or a beneficial rate of interest is paid on the loan (unless the loan is for £5,000 or less), a benefit in kind arises on which the director must pay Income Tax and the company Class 1A National Insurance Contributions. The short answer to this question is ‘no’.
A firm or business partnership, unlike a company, is not a legal entity separate from its members. An individual business partner will therefore be personally liable:
Where the partners are defendants under (1) or (2) above they are sued in the name of the firm (i.e. the claimants are expressed to be ''Thompson, Thompson and Smythe', a firm'). Only those business partners who were business partners at the time of the act complained of will be held liable.
A limited company is a legal entity, separate from any individual involved. A limited company is run by individuals who have specific responsibilities but it owns its own assets; it's liable for its own debts and those who use and run limited companies must always remember that, for example, the money in a company’s bank account belongs to the limited company and not to the company directors, nor to the shareholders. Being a separate legal entity means that a limited company must be run according to set rules and the government department primarily responsible for ensuring that a limited company adheres to those rules is Companies House.
There are seven types of limited company:
In addition to the above there are also:
Chartered accountants H M Williams, authors of How to Run a Limited Company, advise that most people starting a business shouldn’t think of forming a limited company. Far too many limited companies are formed each year and either they are not even used and remain dormant, or those who run them find themselves in a jam (often of a tax nature) that would never have happened if they had traded as a sole trader or business partnership.
In principle, most people should start in business on their own as a sole trader or in business partnership with others. If the profits are small, they would pay less tax and enjoy less hassle and lower professional fees than if they trade through a limited company.
Again in principle, limited companies can be useful when profits approach £100,000 and especially when the proprietors don't wish to draw all of the profits out for their own personal use.
Another instance where incorporation might be sensible is if a number of individuals wish to go into business together and wish to take advantage of limited liability.
A further instance would be where someone wants to set up a business with a view to growing it and selling it. A limited company is easier to sell than, for example, a business partnership, because, with a limited liability company, the whole business comes as a complete package and the accounts are more reliable from the purchaser’s point of view.
To form, or incorporate, a limited company you need to send the following documents to Companies House:
You can submit these limited company forms either by post or electronically.
Form IN01, Memorandum of Association and Model Articles of Association are all included in Lawpack's Limited Company Formation Kit.
Limited company directors are the people charged with running the company. They are the company’s managers, if you like. It's on their shoulders that the responsibility for what the limited company does, rests. Directors may also be shareholders. Directors have specific responsibilities which may be summarised as follows:
The company secretary, where one has been appointed, is the individual charged with ensuring that the limited company fulfils all of its statutory duties. While it's not essential for a company secretary to be appointed, it's essential that the statutory duties are fulfilled so it's prudent to appoint someone specifically to attend to these matters. If this isn't done, there is a danger that some duties will not be done. In addition, if the company’s model Articles of Association provide for it to have a company secretary, then it must appoint one.
In essence, shares only exist as pieces of paper called share certificates and, as such, have no intrinsic value. What is important is what these pieces of paper represent, which is a share of the ownership of the limited company. In other words, they are legal documents that will show how much of (how many shares in) a limited company a particular shareholder owns. The total value of shares that have been issued is the ‘share capital’ of the company. Shares can be transferred or sold and, so long as the underlying company has a marketable worth, the share certificates are indeed items of value.
Shareholders are the owners of the shares in a limited company. They are sometimes called ‘members’. Shareholders share the ownership of the limited company and the proportion they own is reflected by the number of shares they hold; hence the term ‘shareholder’.
Shareholders don’t have any specific responsibilities or duties to perform but, if they fail to attend limited company meetings and the limited company fails, in part, even if not in law, it will be the shareholders’ fault for non-attendance and for showing no interest.
Wherever possible, shareholders should show an interest in what is going on in the limited company in which they hold shares and should play an appropriate part by attending meetings. There is no rule that says they have to do this, although there are certain matters that can only be decided by shareholders; for example, changing the limited company’s constitution, changing the share structure and deciding whether or not to wind up the limited company.
Shares are usually called £1 ordinary shares, or 50p ordinary shares, and the given descriptive figure is their ‘par value’. This sum does not necessarily reflect the sum paid for the shares and it's highly unlikely to be the same as their current value. You can give your shares any par value you choose, but £1 is the norm.
Stock is another type of share capital and, in nearly every respect, for ‘stock’ you can read ‘shares’. The reason why some companies issue stock is that stock can be divided into any amount you want. For example, while, if you own one share, you can only sell that one share (you cannot sell half of one share), if you own (say) £100 worth of stock you can, if you want, sell two-thirds of your holding or £66.67p worth. You can no longer convert shares into stock but you can convert stock into shares.
Authorised shares are no longer required, although many limited companies continue to use the term. What this term refers to is the number of shares that the limited company is entitled to issue, but it's not necessarily the same as the number of shares actually issued. For example, a limited company may have an authorised share capital of £1,000 but have only issued £100 shares. It would still be entitled to issue the remaining £900 if it wanted to without having to ask the members if they are happy.
With that term no longer in use, since the passing of the 2006 Companies Act, limited companies are now entitled to issue as many shares as they want.
Share certificates have a habit of getting lost and so it's not unheard of for the company secretary to be asked to keep them with the statutory books. If individual shareholders wish to keep them, they should be told to keep them securely and in a place of ready access if needed.
This can be a real nuisance, which is why we suggest that keeping the share certificates under the watchful eye of the limited company secretary might be a good idea. But, if a share certificate is genuinely lost, before a new share certificate can be issued, an indemnity must be given. Suggested wording for such an indemnity is available in our guide How to Run a Limited Company. Once this indemnity has been lodged with your company secretary or registered office then the replacement share certificate can be issued.
Shares held by trustees are issued in the normal manner but a declaration of trust should be completed and the shares entered in the register under the name of the first-named trustee.
A declaration of trust is a form that should be prepared when shares are held by nominees. Suggested wording for a declaration of trust is provided in our guide How to Run a Limited Company.
Where shares are registered in the names of more than one holder – for example, in the case of husband and wife, or when the shares are held by trustees – the maximum number of joint holders is likely to be set at four. Things to remember are:
The only people who may be approached in this connection are existing shareholders; offering additional new shares to an existing shareholder is called a rights issue. In other words, the existing shareholders have the right to buy new shares in the company. A suggested procedure of how to do this is provided in our guide How to Run a Limited Company.
If you want to introduce a new member and for them to invest money at a time when the other members are not expected to contribute, this should be done by means of a shareholders’ meeting at which they are all asked to approve the membership of this new investor, the number of shares they will buy, the price they will pay and whether or not their shares are to rank the same as the rest of the issued share capital. If the new shares are to be of a different class with different rights, then the shareholders will have to approve the whole new arrangement.
If a shareholder dies, you should do the following:
You don't have to register the shares in the married name of the shareholder but if a married woman asks for this to be done, she should be asked to produce her marriage certificate.
No, there is no minimum age. Infants can hold shares. Such shares should be registered in the name of a parent with the child’s initials alongside. When the child reaches 18 the shares can be transferred into the child’s own name.
When a shareholder is made bankrupt, a note should be made in the register and the name of the trustee in bankruptcy noted as well.
Stamp Duty is only paid on the transfer of shares, not when they are issued. Our Stock Transfer Form lists the transfers that are exempt from Stamp Duty. Generally, one-off transactions under £1,000 are exempt.
This is allowed but it's subject to tax law and so professional advice should be sought. It can be useful when the limited company has the money to pay for the shares that a shareholder wishes to sell but no other shareholder has the funds available. In the same way a limited company can give financial assistance to another party wishing to buy shares in the limited company but again, professional advice must be sought.
A bonus issue is where the limited company directors decide to convert some of the undistributed reserves into share capital. When this happens the shareholders don't pay for their new shares. A suggested procedure is provided in our guide How to Run a Limited Company.
There are two ways in which shareholders can take decisions:
Special notice is 28 days and is now the time or warning that must be given to shareholders if any of the following six matters are to be decided at a shareholders’ meeting:
The above are usually decided by ordinary resolution, requiring 51 per cent majority.
Suggested wording for special notice is provided in our guide How to Run a Limited Company.
The special notice must contain all of the following:
A sample notice is provided in our guide How to Run a Limited Company, as well as suggested wording for sending out documents to shareholders.
It makes sense to send out the accounts with notices of any forthcoming shareholders meetings and other relevant papers at the same time. Suggested wording for this letter is provided in our guide How to Run a Limited Company.
Do remember that the accounts you will be sending out will be the final accounts and as such, they might as well be sent to Companies House at the same time. If you don't do this at this stage, there is a danger that the matter may get overlooked with the result that, if the accounts are late, there will be a penalty to pay for late submission and the penalties are now pretty severe.
Specimen company minutes for an Annual General Meeting must be written up and filed in the appropriate section of the statutory books. Remember to send details of the relevant company resolutions that have been passed to Companies House.
Company resolutions are the decisions that shareholders make and can be divided mainly into ordinary resolutions and special resolutions.
A quorum, subject to anything said elsewhere in the company’s Articles, will be two. There doesn't need to be a quorum present throughout the meeting but it does need to be maintained when voting takes place. If the company has just one member, then a quorum is obviously one.
You will need to appoint someone to chair a shareholders’ meeting and the rules for his/her behaviour are covered in both Table A and Model Articles. The directors will normally appoint one of their number to be the chairman and his/her job is to:
Voting is normally done on a show of hands with each member having one vote, no matter how many shares s/he holds. Proxies are now allowed to vote on a show of hands. If a poll is required, this means that members vote on slips of paper and under these circumstances the numbers of shares of members is taken into account.
Two or more members or members holding at least 10 per cent of the voting share capital may demand a poll. A poll may follow after a show of hands and may reverse the earlier decision.
A proxy is both a person and a piece of paper. A proxy (person) is someone appointed by a shareholder to attend the shareholders’ meeting and vote on his/her behalf.
A proxy (piece of paper) is the form that authorises a proxy to take action (a specimen proxy is provided in our guide How to Run a Limited Company). Where these are completed, they must be handed to the company secretary 48 hours before the meeting, excluding weekends and bank holidays. A proxy doesn't have to be a member.
A proxy may speak at meetings and might even chair a meeting.
If one of the shareholders is itself a company, then that company should appoint someone to represent its interests at the meeting. That company should pass a board resolution appointing the chosen person or corporate representative to attend the shareholders' meeting. The representative doesn't have to complete a proxy form because s/he is not, strictly speaking, a proxy.
A limited company should hold regular board meetings if it's to prove that it's being properly managed. Board meetings should be summoned with proper notice being given and an agenda prepared. Board meetings shouldn't be held on a whim. The company minutes of board meetings should be written up and retained for ten years.
Directors will normally have just one vote each and the chairman may have a casting vote. Where a casting vote is used, it should always be used to promote the success of the limited company, which, in the event of indecision, should be used to preserve the status quo. Written company resolutions may be used by directors.
The current small company audit exemption limits are:
If a limited company breaks just one of the above limits, then it must have an audit. However, even if it passes both of the above tests, if a company is part of a group, is a Public Limited company or is subject to a statute-based regime (e.g. the Financial Services Authority) then it may not be able to claim exemption from having an audit.
A limited company can also not claim exemption if 10 per cent of the shareholders have vetoed the exemption; if 10 per cent ask for an audit, one must be undertaken.
If a company is able to take advantage of an audit exemption, the director must state this in the company accounts.
The persons who should sign the relevant reports are:
There are generally two different types of statutory limited company accounts that can be submitted to Companies House:
Please be aware that the point of whether a limited company is ‘small’ or ‘medium-sized’ for this purpose is not to do with whether it needs an audit or not, but whether it's entitled to submit company accounts to Companies House which contain less information.
These are the thresholds:
|Annual turnover||£6.5 million||£25.9 million|
|Balance sheet total||£3.26 million||£12.9 million|
|Average number of employees||50||250|
If a limited company breaks two or more of the above thresholds, then it will not qualify as a small or medium-sized company.
Again, there are limited companies which cannot claim this exemption, such as public companies, those that are part of an ineligible group and those which are subject to a statute-based regime.
Auditors can be appointed by the board of directors for a term of office, usually until the completion of the audit of the upcoming or current set of accounts. An auditor is entitled to receive notice of all shareholders’ meetings and indeed to attend them. The auditor may even speak at general meetings on issues that concerns them. Auditors can even insist on calling a general meeting when they resign, and if there are circumstances that should be brought to the attention of the members or creditors.
An auditor can be removed before the expiry of their term of office by ordinary resolution of which special notice must have been given. Notice of such a company resolution being passed must be submitted to Companies House on form AA03.
Special notice must be given to the auditor who is being removed and they must give written representation to the company explaining any circumstances which they feel should be brought to the members’ attention. If there are no circumstances, this must also be stated and this statement should be sent to the limited company within 14 days of the auditor receiving notice that it's intended to remove them.
The auditor must send a copy of this statement to the Registrar of Companies within 28 days of depositing it with the limited company.
A company resolution appointing someone other than the existing auditor also requires special notice.
An auditor may resign at any time but, if they do, the auditor must send their resignation in writing to the registered office giving details of any circumstances in connection with their resignation. If there are no reasons, the auditor should say so. The limited company should send a copy of this notice to Companies House within 14 days of receiving it.
A dividend is a proportion of the distributable profits which the limited company pays to its shareholders. A limited company may not distribute more than its distributable profits.
The company directors declare any interim dividend paid during the year but, historically, the shareholders have declared, or confirmed, the amount of the final dividend after the end of the year once the figure of distributable profits is known. Under Model Articles it's now the company directors that declare all dividends.
The shareholders cannot insist on being paid a dividend.
The usual precaution when declaring a dividend is not to distribute more than two-thirds of the profits after tax has been deducted.
The procedure for declaring a dividend, plus the suggested layout for a dividend voucher and bank mandate for paying dividends is provided in our guide How to Run a Limited Company.
Scrip dividends are where, instead of cash being paid to shareholders, they are given more shares in proportion to the number already held. The money still comes from distributable reserves and professional advice should be sought. They are sometimes called ‘bonus issues’.
The main functions of Companies House are:
Yes a company director may but, if they are the sole company director they may not also be company secretary. That said it is no longer a limited company requirement to appoint a company secretary.
Every limited company must have at least one natural (i.e. human) director. What this means is that a limited company may not have a sole corporate director.
Limited company law says that you should have at least one company director but, if your limited company operated under Table A (and many did and still do) that says that there should be a minimum of two company directors. If your limited company was formed before 1 October 2009 and if you want to have just one company director, then you must change your Articles.
Yes, the minimum age for a limited company director is 16. Anyone under 16 who is holding office after 1 October 2008 will automatically cease to hold office.
The first limited company directors are appointed on form IN01 (included in our Limited Company Formation Kit).
The board may appoint additional company directors and their details must be submitted to Companies House on form AP01 within 14 days of the appointment. Such additional appointments must also be written up in the register of directors.
In the past, limited company directors were normally appointed for three-year periods and at both the next Annual General Meeting (AGM) after their appointment and at the end of each successive third year of service they had to offer themselves for re-election at the following Annual General Meeting. This limited company requirement has now been dispensed with.
However, if you continue to hold Annual General Meetings, you may need to check with your Articles whether the retirement is still required under the limited company’s own internal rules. It's no longer a requirement of limited company law.
As an employee a limited company director must be given an employment contract, along with all other employees. However, if they need a separate employment contract drawn up, this will be called a director’s service contract.
A company director may resign by notifying the limited company in writing or orally. To do so, they should write to the board. A template letter is provided in our guide How to Run a Limited Company.
A limited company director may be removed from office by ordinary resolution of the shareholders passed at a general meeting. Special notice must be given and the director has the right to make representations at the meeting. The director can also make written representations before the meeting which must either be circulated to all members before the meeting or read out at the meeting.
In addition, a director can be resigned from office if they have been absent without permission from all directors’ meetings for six months.
Both of these methods should be used as a last resort because less blood tends to be spilt if a director can be persuaded to resign; and do bear in mind that a director is entitled to sue for breach of contract.
Also, please remember to file form TM01 (available in our guide How to Run a Limited Company) within 14 days of the termination.
Compensation for a limited company director's loss of office may only be paid if it's approved by an ordinary company resolution passed by members at a General Meeting, or if it's authorised in the director’s service contract.
Yes. They can be disqualified from being a limited company director and from acting as one for up to five years if they fail to deliver the required Companies Act forms and other statutory documents on time.
Yes, under certain circumstances, such as the members approving the arrangements by ordinary company resolution.
Approval by the board is not required for personal purposes up to £10,000, nor for limited company directors’ expenses up to £50,000, nor for legitimate legal fees and also not if the limited company’s normal business is that of money lending. Please be aware that there are likely to be adverse tax consequences if money is lent to a limited company director. Also, it must be properly and fully disclosed in the accounts.
If you decide to appoint a company secretary when the company is incorporated, the company secretary's details are included on form IN01 (this form is included in our Limited Company Formation Kit) and is appointed this way. If you wish to appoint a company secretary subsequent to incorporation, then you will need to submit form AP03.
It's common for a limited company to appoint one of its directors, or a senior employee, as company secretary but to get the firm’s accountants to actually do the work. If this happens, then, while the company secretary must be very diligent if this is all they do, all the company secretary would then have to do is ‘sign on the dotted line’ those forms, etc. which the professionals have prepared. However, while private companies don't have to appoint a qualified company secretary, because such people will always be in danger of being regarded as directors or shadow directors, we suggest the following people are not appointed as company secretary:
The limited company’s auditor may not be appointed company secretary.
A company secretary can be removed by a company resolution of the limited company directors. A company secretary can be disciplined, dismissed or resign in the same manner as any other employee subject to the terms of their employment contract.
If you employ someone outside the company to be the company secretary, their removal, etc. will be subject to any relevant employment contract or agreement.
A company secretary may resign by submitting their resignation in writing to the board of the limited company, who may or may not decide to replace them. If the company secretary is not replaced, then form TM02 should be filed. If the company secretary is replaced, then form AP03 will also have to be submitted.
A company secretary’s status is not precisely defined in limited company law. A company secretary used to be a servant of the limited company but is now considered to be its chief administrative officer. The company secretary therefore has implied authority and they could well be regarded as acting as a company director, even though they haven't been formally appointed as such.
Forfeit shares are extremely rare nowadays and relate to shares where the shareholder has only partly paid for them and then fails to pay the balance due.
Where this happens, the board has to decide if such shares should be forfeit or cancelled with any or no refund due as a result of the shares not being taken up.
The shareholder must be warned that their shares might be forfeit. Suggested wording for this letter is provided in our guide How to Run a Limited Company.
Once it has been established that the shares will not be paid for in full, the board should resolve to forfeit the shares – again a suggested wording for this forfeiture is provided in our guide How to Run a Limited Company.
The shareholder should then be sent a letter informing them of the forfeiture and the relevant notes made in the registers concerned.