So, a British company is cheap to register and is lightly regulated and therein lies the attraction. Almost anyone is allowed to register a company in the UK, and that includes people of any nationality even if they live on the other side of the globe. And the company does not even need to trade. British company law allows for the existence of ‘dormant’ companies that year-after-year file accounts at Companies House showing that the company has spent and earned absolutely nothing and has assets of zero value. Many UK companies are registered merely to prevent someone else from owning a particular company name. Nobody objects – provided that the company faithfully submits an annual return and that a set of accounts (even if filled with zeroes) is filed there each year.
The company secretary is a peculiarly British feature. The holder of this office does not need to be on the board of directors, does not need to own shares and may not even work for the business. What he or she must do, however, is to maintain the company’s “statutory register” and keep filing forms and reports at Companies House. The minimum quota of appointments that every company must have is one director and one shareholder, there is no longer a legal requirement to have a company secretary, though many companies find it useful to appoint one anyway.
In fact, the company officers need not be people at all. The post of director, shareholder or company secretary may be filled by a corporate body – in other words, another company. For companies owned by non-UK residents it is quite common to appoint a company to the role of company secretary. By engaging the services of a specialist company they keep their costs low and ensure that the company never falls foul of compliance regulations by failing to submit forms correctly or on time.
Despite the advantages of cost and light regulation, the British “limited” would never have gained this international popularity without the European Union. The economic freedom of the single market determines that a British company may trade anywhere in Europe. On that basis it is not surprising that many businesses from France, Germany and other EU countries have chosen to register companies in Britain. Nor should we be surprised that many businesses from elsewhere in the world have chosen UK company registration as a gateway to the European market.
But nothing is quite that simple; European law allows freedom of movement and trade, but there is no single market for taxation. If a company’s activities and earnings are in one particular country of the Union, that is where it will be taxed (wherever the company may be registered). The solution for many businesses is to form a British company and then register a trading branch in their country of residence (or operation). It is not quite as simple as just registering a UK “limited” but it is a relatively low-cost option.
The crucial thing in all this is to take time, to take advice, and to think. A fashion item may be bought on impulse or as a gift – but a company is not just for Christmas.