Jurisdiction of the month: United Kingdom

2014 05 30 | Category: News

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Geography, Population, Languages

The British Isles is the name for a collection of about 4000 islands, including Great Britain and Ireland. The United Kingdom of Great Britain and Northern Ireland (the UK), which consists of England, Scotland, Wales and Northern Ireland, lies off the west coast of Europe. It has an area of some 244,100 square kilometres (94,250 sq. miles) with an estimated population in excess of 60 million.

History, Political Structure and Law

The United Kingdom is a constitutional hereditary monarchy, and the head of state is Queen Elizabeth II, who ascended the throne on 6th February 1952. The legislature (British Parliament) consists of two houses or chambers, the upper house being the House of Lords, and the lower house the House of Commons. The House of Commons consists of Members of Parliament or MPs. Voters elect each MP in their constituency (electoral district). There are 651 MPs, or seats, in the House of Commons (524 for England, 72 for Scotland, 38 for Wales and 17 for Northern Ireland). The 1203 members of the House of Lords are not elected. The head of both Houses is the Queen, but her powers are very limited. She is the head of state, the judiciary and the Church of England, as well as Commander-in-Chief of the armed forces, but her role is mainly symbolic. True power lies in the hands of the Prime Minister and the Cabinet.

The main political parties are the Labour Party (centre left), Conservative Party (right wing), and Liberal Democrats (centre).

Elections are held every 5 years. Those over the age of 18 vote for the candidate of their choice in their constituency. The winner becomes the MP for that constituency and sits in the House of Commons even if he/she receives only one vote more than the second candidate (the “first past the post” electoral system). The party with the most MPs forms the Government. The leader of the winning party becomes the Prime Minister, who appoints the Cabinet. The Prime Minister is the most important person in the Parliament. The party that comes second forms the Opposition and appoints its own Shadow Cabinet.

The type of law is Common Law.

Economy and Infrastructure

The United Kingdom is one of the world’s great trading powers and financial centres, and its economy ranks among the four largest in Western Europe. Heavy industry, including steel manufacture and shipbuilding, has been replaced in recent years by high-tech manufacturing industries such as aircraft engine manufacture, car manufacture, electronics and pharmaceuticals. Agriculture is intensive, highly mechanised and efficient by European standards, producing 60% of food needs with only 1% of the labour force.

The United Kingdom has large coal, natural gas and oil reserves; primary energy production accounts for 12% of GDP, one of the highest for an industrialised nation. Service industries, particularly banking, insurance and other financial services, account for the largest proportion of GDP.

London is one of the world’s leading centres for banking, insurance and other financial services. Lying between New York and Tokyo, it is the third limb of the world’s capital markets.

The UK is strategically located off the north-west coast of continental Europe and has excellent communications. It has three major international airports at Heathrow, Gatwick and Manchester, with extensive world-wide connections. Recently the UK was physically joined to mainland Europe by the opening of the Channel rail tunnel link, which boasts frequent train services for passengers and vehicles to Paris and Brussels.

The official currency of the United Kingdom is the UK Pound. There are no exchange controls.

Company Incorporation

The Principal Corporate Legislation is Companies Act 1985 (amended), and the Income and Corporation Taxes Act 1988. English is the language of legislation and corporate documents.

The types of company used for international trade and investment are Private or Public Limited Companies. A company incorporated in the United Kingdom has the same powers as a natural person. There are no specific laws relating to the unauthorised disclosure of information about a UK company, its directors or owners, but UK law recognises the common law duty that professionals have towards their clients to keep their affairs confidential.

There are restrictions on trading and business activities: specified types of service, including for example banking, insurance, financial services, consumer credit-related services and employment agencies, are not permitted.

Incorporation procedure requires the submission of the Memorandum and Articles of Association, Declaration of Compliance and Statement by the First Directors and Secretary, notification of the location of the Registered Office and payment of the requisite fee to Companies House. A registered office must be maintained in the United Kingdom. For the purposes of this information sheet a UK company is incorporated in England or Wales and registered in Cardiff, Wales. Details on incorporating a company in Edinburgh, Scotland or Belfast, Northern Ireland are available on request. Off-the-shelf companies are available.

London Registration: Many international clients and UK businesses prefer to have their UK company incorporated in London. The UK Registrar of Companies levies a nominal additional fee for this service, and clients often take advantage of this exclusive facility. However, less than 1% of all companies incorporated in England and Wales are today incorporated in London. Over a decade ago the government moved the principal Companies’ Registry for England and Wales from London to Cardiff in Wales.

Another distinct advantage of incorporation in London is the availability of a same-day incorporation service.

Clients who decide not to incorporate in London will have their company registered at the principal Companies Registry for England and Wales in Cardiff.

In addition to the Cardiff Registry, which covers England and Wales, there are also company registries in Edinburgh for Scotland and Belfast for Northern Ireland.

Company names are subject to the following requirements and restrictions:

• Although the name of company can be in any language, documentation must be in English. Any name in a language other than English must be accompanied by a translation to ensure that the name is not restricted. However, if the company is incorporated in Wales there is a proviso that documentation in Welsh will be accepted.
• Any name that is identical or similar to that of an existing company is not acceptable.
• Any name considered being offensive or suggesting criminal activity is not acceptable.
• Any name that suggests the patronage of the Royal Family or the Government of the United Kingdom is not acceptable.
• Restricted names include Assurance, Bank, Benevolent, Building Society, Chamber of Commerce, Fund Management, Insurance, Investment Fund, Loans, Municipal, Reassurance, Reinsurance, Savings, Trust, Trustees, University or their foreign language equivalents.
• Any company name implying financial service activities such as banking and insurance require consent or licence.
• Limited (Ltd) and Public Limited Company (PLC) are the required suffixes to denote limited liability.

A Private Company must have at least one director, and a Public Company must have a minimum of two directors. At least one of the directors must be a natural person. They may be of any nationality and need not reside in the UK. If there is more than one director, one of them can also be company secretary, but as UK Company Law is complex, it is recommended that a professional secretary with relevant experience be appointed. Details of the directors appear on the public file, but privacy can be maintained by the use of third party professionals.

There is no legal requirement to appoint a company secretary. However, it is advisable to appoint a company secretary so as to maintain the statutory records of the company. The company secretary may be a natural person or a body corporate. They can be of any nationality and need not reside in the United Kingdom.

For Private Companies the minimum number of shareholders is one, for Public Companies the minimum number is two. A shareholder may be a corporate body or an individual. Details of shareholders appear on public record but privacy may be retained by the use of nominee shareholders or holding companies.

Requirements relating to authorised and issued share capital depend on the type of Company:

• Private Company: the minimum issued capital is one share, but further capital is usually issued to reflect the stability and strength of the company. A private company is normally incorporated with an authorised share capital of £1,000.
• Public Company: the minimum authorized share capital for a public company is £50,000, of which
£12,500 must be paid up (in case of liquidation the full £50,000 must be paid). The minimum issued capital is two shares.

The following classes of shares are permitted: ordinary shares, preference shares, deferred shares, and redeemable shares and shares with or without voting rights. Bearer shares are not permitted.

Annual Taxation and Fees

Tax is paid by companies in the UK based on audited accounts submitted to the Inland Revenue at the end of the company’s financial year. International tax planners are able to utilise UK structures to minimise taxation for international business. The United Kingdom is party to more double tax agreements than any other sovereign state. The UK has signed double taxation agreements with 100 countries and thus enjoys the most extensive double taxation agreement network in the world. There are no licence fees.

It is important to emphasise that corporation tax rates are the lowest in the European Union. Corporation Tax is levied from 20% on a small profit UK company that has net profits under £300,000, and the main rate is 28%. Government is also planning further cuts in the main rate in future years.

Requirements for Financial Statements are as follows:

All UK Companies must file accounts with the Registrar of Companies. To determine whether a company needs an audit or not, they are divided into two categories: small or medium-size. The following conditions must be met:

To be a small company (no audit is required only a set of accounts is required)

• annual turnover must be £6.5 million or less;
• the balance sheet total must be no more than £3.26 million;
• the average number of employees must be no more than 50.

To be a medium-sized company, at least two of the following conditions must be met:

• annual turnover must be £25.9 million or less;
• the balance sheet total must be no more than £12.9 million;
• the average number of employees must be no more than 250.

EditorJurisdiction of the month: United Kingdom