Statutory Framework United Kingdom

STATUTORY FRAMEWORK

The summary below does not relate to any specific jurisdiction but is modelled on the legal statutory framework provided in the United Kingdom.

Company Name

Before a company is incorporated it must choose a name and it would be normal for the name to describe, although it is not necessary, the activities of the company. A holding company may well include "holdings" in its name and a property company the word "property".

A company may not use a name which is too similar to a company already in existence. It is not allowed to use a name which may imply it is carrying out a licencable activity such as banking, insurance, portfolio management etc without obtaining the necessary licence to carry out such activity. Certain other names also may require the permission of a Government authority for example, the use of the word Pharmaceutical or University. Also names which indicate a connection with Royalty, Government or a local Government department would be refused.

Names which indicate a large scale of operation such as Continental, Europe, International, Global etc may depending on the territory require a larger paid up share capital ranging from between £50,000 to £100,000. Banks, Trust Companies and Insurance Companies usually have a much greater capital requirement.

Share Capital

A company's share capital is classified into authorised share capital and those which have been issued and fully paid.

Authorised and Issued Share Capital

The authorised share capital of a company is initially determined at the time of incorporation and relates to the maximum amount of shares which may be issued without further permission of the shareholders.

The issued share capital is the amount of share capital issued from that which is authorised. For example a company with an authorised share capital of £1,000 need at the beginning only issue £100. It continues to have the ability to issue a further £900 to its shareholders.

The purpose of having ability to issue further shares is to enable the company to raise further capital should this be required. The purpose of an initial ceiling on the authorised share capital is to prevent the dilution of voting power of existing shareholders should the company continue to issue shares.

Depending on the jurisdiction stamp duty may be payable at rates normally ranging between 0.5-1% on either the authorised share capital or on capital as it is issued.

Memorandum and Article of Association

These are the legal statutes of the company which are filed on incorporation and determine the company's name, activities, authorised share capital. They name the original shareholders (subscribers) and provide for the internal rules for carrying on the administration of the company. For example, procedures for directors meetings, quorums, payment of dividend, transfer of shares etc.

A model Memorandum and Articles of Association is provided for by legislation in each of the jurisdictions but is usually modified to provide greater flexibility. In particular the memorandum where required is usually modified to permit companies to carry on any lawful activity not requiring a special licence or controlled by regulations. Fiduciary have their own in-house standard Memorandum and Articles of Association for each jurisdiction but for an extra charge can tailor these to an individual client's requirements.

Registered Office

All companies must have a registered office and this is to where official documents are sent. Any change in registered office must be notified to the Companies Registry.

Directors

Whilst a company is a legal entity in its own right and may enter into contracts in its own name it can only carry out business through individuals. The ultimate responsibility for the management of the company rests with the board of directors. The directors have authority to bind the company and have a fiduciary duty to act in the best interest of the shareholders.

Apart from the important role the directors have to enable the company to function, the location of the directors also raises important tax issues.

Fiduciary can provide directors services using either an in house corporate director or employees of the company.

Company Secretary

It is usual in the Anglo Saxon based territories for companies to have a company secretary although this requirement is by no means universal throughout the offshore and onshore world. The company's Secretary is appointed by the directors and is the chief administrative officer responsible for making sure the company is kept in statutory order.

In some offshore territories such as the Isle of Man and Gibraltar it is a condition of achieving exempt status that a local resident secretary is appointed to this position.

Shareholders

The shareholders are the legal owners of the company although for anonymity the real owner need not be disclosed if the shares are held in a nominee name. Fiduciary provide nominee shareholders at no extra cost as this is included in our domiciliation fee. In this case it is our practice to issue a declaration of trust to the ultimate owner stating that whilst the shares are registered in our name we have no interest in the assets or income of the company and shall at all times act and vote in accordance with instructions of the owner