Forming a new company in the UK comes with many new terms and phrases that can be deeply confusing to the uninitiated. To make the process as smooth and easy as possible, we have put together an A to Z company formation glossary that breaks down the most common terms you are likely to come across when forming a limited company, filing documents, or managing corporate compliance. We hope that this demystifies company formation in the UK and helps you along the way.
A
Accounting reference date (ARD): The accounting reference date (ARD) is the end of your company’s financial year. Your first accounting reference date is the last day in the month of the first anniversary of your incorporation. For subsequent years, the ARD will be 12 months later, unless you change it, for example:
| Company Incorporated | First Accounting Reference Date | Second Accounting Reference Date | Third Accounting Reference Date |
|---|---|---|---|
| 12th February 2024 | 28th February 2025 | 28th February 2026 | 28th February 2027 |
| 5th August 2024 | 31st August 2025 | 31st August 2026 | 31st August 2027 |
| 20th October 2024 | 31st October 2025 | 31st October 2026 | 31st October 2027 |
Allotment of shares: The method by which shares are issued to existing or new shareholders (e.g. board meeting, offer shares, allot shares, and issue share certificates). It is important to ensure that new allotments of shares are reported to Companies House within one month.
Annual accounts: A company’s annual accounts are a summary of its financial performance over the past year. These must be filed with Companies House annually.
Articles of association: A company’s Articles of Association (Articles) are a fundamental constitutional document that form the basis of the statutory contract between the members as a group and between individual members and the company. It sets out key rules including:
- The company’s purpose and structure
- Rights attached to different classes of shares
- Appointment and powers of directors
- How meetings and decision-making work
- Rules for share transfers and dividends
- How shareholders vote and make resolutions
- Administrative details for winding up and dissolving the company
Authentication code: An authentication code is a six-digit code issued by Companies House that is necessary when filing documents online for your company.
B
Beneficial owner: A beneficial owner is a person who enjoys the benefits of ownership of a company even if the legal title is in the name of another person.
Business bank account: A business bank account is a separate account used to manage your company’s finances. Having a bank account that is separate from your personal finances ensures that your finances are kept separate, you remain legally compliant, and makes it easier to create annual accounts and manage money. Whether you are UK-based or overseas, we have a number of business banking partners we can introduce you to, including Barclays, HSBC UK, Revolut, Natwest, Zempler, Tide and Anna.
C
Certificate of incorporation: A certificate of incorporation is an official document issued by Companies House confirming that your company has been legally formed and is on the register of companies. There is no legal requirement to display it at your business premises, but it should always be held at your registered office address (or a Single Alternative Inspection Location—SAIL address, if you have one)
Companies House: Companies House is the official registrar of companies in England, Wales, Scotland, and Northern Ireland. They maintain a public register containing key details of all UK-registered companies, including company name, registration number, directors, shareholders, and financial statements.
Confirmation statement: Companies House require all companies to file a confirmation statement each year. It contains key details about you, such as addresses, industry codes, trading status, shareholdings, and persons with significant control. It ensures that Companies House are kept up to date with any changes to this information that occur during the year.
Company secretary: A company secretary is an optional company officer in private companies (mandatory in public companies), responsible for compliance and governance.
D
Director: A director (i.e. company director) is someone who is legally responsible for running a company and making operational decisions. Directors must understand and adhere to their statutory duties.
Director’s duties:
| Directors’ Duty | Description |
|---|---|
| Duty to act within powers | Directors must act in accordance with the company’s constitution and only exercise powers for their proper purpose. |
| Duty to promote the success of the company | Directors must act in good faith to benefit the company, considering factors such as employees, suppliers, the community, and the environment. |
| Duty to exercise independent judgment | Directors must not allow others to unduly influence their decisions and must think for themselves. |
| Duty to exercise reasonable care, skill and diligence | Directors must perform their role to the standard expected of someone with their knowledge and experience. |
| Duty to avoid conflicts of interest | Directors must avoid situations where they have (or could have) a direct or indirect conflict with the company’s interests. |
| Duty not to accept benefits from third parties | Directors must not accept any personal benefit that could give rise to a conflict of interest. |
| Duty to declare interest in a proposed transaction or arrangement | Directors must disclose to the board any personal interest they have in a proposed company transaction. |
Dormant company: A dormant company is one that is registered with Companies House but is not actively trading (i.e. it has no significant accounting transactions during the financial year). Dormant companies must still file dormant company accounts each year in addition to a confirmation statement.
E
Electronic filing: Electronic filing refers to the process of submitting forms and documents to Companies House online (i.e. digitally) rather than on paper. Most company formation documents are now filed this way, saving time and money.
Employers’ liability insurance: If you hire staff, you must take out employers’ liability insurance. This type of insurance policy provides protection for employers by covering compensation and legal costs if a member of staff is injured or becomes ill as a direct result of their work.
Equity: Equity refers to the ownership stake held by a person in a company, usually expressed in the form of shares.
F
Filing deadline: Your company’s filing deadline is the latest date by which your accounts and confirmation statements must be filed. It is important to meet your filing deadlines in order to avoid financial penalties.
- Annual accounts must be filed within 9 months after the company’s financial year end.
- A confirmation statement must be filed at least once every 12 months. It must be submitted within 14 days after the end of your review period (i.e. the anniversary of incorporation or the previous statement date).
- Corporation tax return must be filed with HMRC, no later than 12 months after the end of your accounting period.
H
Holding company: A company that is set up primarily to own shares in other companies, rather than to trade goods or services.
I
Incorporation: The process of legally forming a company and registering it with Companies House. Company formation can be completed on your behalf by a company formation agent or through Companies House.
Issued share capital: Refers to the total value of shares issued to shareholders.
L
Limited by shares: A company limited by shares is one where the liability of its members is limited to the amount unpaid on their shares. This is the most common structure for UK businesses.
Limited liability company (Ltd): Limited liability is one of the main benefits of setting up a limited company in the UK. It means that your personal finances are protected if the company incurs debts or legal claims.
Limited liability partnership (LLP): An LLP is a business model that combines features of partnerships and limited companies. Partners are legally separate from the business and enjoy limited liability.
M
Memorandum of association: A memorandum of association (not to be confused with articles of association) is an official legal statement required at incorporation that is signed by all initial shareholders or guarantors agreeing to form the company.
Model articles: Model articles are standard templates of articles of association provided by Companies House and can be used as they are or adapted to meet the needs of the new company. Alternatively, you can have your own articles of association drafted to meet the unique needs of your company.
N
Nominee director: A person who acts in the role of a director on behalf of another, often to conceal the real controlling individual. Nominee directors are still required to adhere to the legal duties of a director.
O
Officer: A company officer is someone who is in a formal position within a company, e.g. director or company secretary.
Ordinary shares: Ordinary shares are the most common type of shares issued by a company to shareholders. In most cases, each ordinary share carries one vote and a right to dividends.
P
Partnership: A partnership is a business arrangement where two or more individuals share responsibility for running a business. It is not a separate legal entity like a limited company or an LLP.
Person with significant control (PSC): A PSC is someone who owns more than 25% of shares or voting rights, or who otherwise has control over the company. Changes to PSCs must be reflected in the internal PSC register within 14 days of the change. Then, within the next 14 days, the company must notify Companies House of the PSC change.
Public limited company (PLC): A PLC is a company that offers shares to the public. PLCs need a minimum share capital of £50,000 and must appoint a qualified company secretary.
R
Registered office address: A registered office address is the official address of a company as listed at Companies House. It must be a real, physical location in the UK where the company is registered and is used for receiving all official government and legal documents.
Resolution: A resolution is a formal decision made by a company’s directors or shareholders. A resolution vote can be ordinary (i.e. a simple majority) or special (i.e. with 75% approval).
S
Shareholder: A shareholder is a person (or other entity) that owns shares in a company. Shareholders can receive dividends and vote on key company matters.
SIC code: In the UK, a standard industry classification (SIC) code refers to a five-digit code used to classify the business activities of your company. These are used by Companies House and HMRC.
Statement of capital: A statement of capital is a summary of your company’s share structure showing:
- How many shares have been issued
- The value of shares issued
- Who holds shares
Subscriber: A company subscriber is a founding member who signs the memorandum of association during the incorporation process and becomes the first shareholder.
T
Trading address: The location where a business operates from. It can differ from the registered office address.
Trademark: A trademark is a legal mark or symbol that distinguishes your goods or services from others. Registering a trademark gives legal protection against imitation.
U
Umbrella company: An umbrella company is one that employs agency workers and contractors on behalf of recruitment agencies.
Unissued shares: Unissued shares are those that have been authorised but not yet issued to shareholders. These can be issued at a later date as needed.
UTR (Unique Taxpayer Reference): A UTR is a 10-digit number issued by HMRC when a company registers for Corporation Tax. It is used for HMRC tax-related communications.
V
Voting rights: The rights attached to shares allow shareholders to vote on key company decisions.
Final words
We hope you find this company formation glossary useful throughout your business journey in the UK. Understanding some of the main terms can make the process much easier and less confusing.
