Corporate Insolvency and Governance Act 2020

Corporate Insolvency and Governance Act 2020 received royal assent on 25 June 2020 and come into effect on 26 June 2020. The Act will give more time to Public limited companies (PLCs) and Societas Europaea (SEs) to comply with Companies House requirements.

Additionally, the Act also introduce a new moratorium to give breathing space to businesses struggling to survive during this COVID-19 outbreak.

Company accounts filing requirements

The Corporate Insolvency and Governance Act 2020 introduced changes to company accounts filing deadline for PLCs and SEs. Specifically for PLCs and SEs with a filing deadline between 26 March 2020 and 26 June 2020.

If your company account’s filing deadline falls between the two dates then you will get an automatic extension.

SituationOriginal filing deadlinePreviously extended?New filing deadline
1Between 26 March 2020 and 31 March 2020NOextend 12 months
2on or after 1 April 2020 and before 30 September 2020NOFiling deadline will move to 30 September 2020
3Filing deadline already extended prior to the Act coming into forceN/AFiling deadline will either be extended to 12 months from the year end or 30 September 2020 – whichever is earlier
4Filing deadline already extended to the maximum 12 monthsN/ANo further extension
Source: Guidance for public companies published on 26 June 2020

How these changes would help PLC and SE?

Usually, your company will receive an automatic late filing penalty when you delivered your company accounts late to Companies House. Companies House will review the late filing penalty issued if your company accounts filing deadline is between 26 March 2020 and 26 June 2020.

On the same note, extending the statutory filing deadline will make PLCs and SEs with accounting year-end dates between 26 March and 26 June 2020 no longer in default if they have not yet filed their company accounts.

Other help and support to businesses by Companies House

On 26 June 2020, Companies House also grants an automatic extension for the following filings:

  • Company accounts extension for private limited companies limited liability partnerships, Overseas Companies, PLCs and SEs.
  • Confirmation statement filing deadline extension to 42 days.
  • Events driven filings deadlines also extend to 42 days.
  • Mortgage charges registration has a further 10 days to submit the document with Companies House.

Read the full guidance here.

Appoint company secretary

Appoint UK company secretary for a public limited company is compulsory and it is optional for a private limited company.

A public limited company (PLC) must appoint a company secretary as required by the Companies Act. It is the duty of your company directors to take all reasonable steps to secure that your company secretary has the requisite knowledge, experience and qualifications. One of the reasons for such strict rules on appointment of secretary is that statutory filings for a PLC is stricter and more complex compared to a private company. Especially, a public limited company that have their shares quoted in the London Stock Exchange.

Skills and qualifications

Generally, your company secretary must have the following skills and qualifications detailed below. The person to hold the secretary position must be or have,

  • At least three of the five years immediately proceeding his appointment as your company secretary.
  • A barrister, advocate or solicitor called or admitted in any part of the United Kingdom.
  • Capable of discharging the functions of a company secretary.
  • Member of any of the professional bodies listed below.

Professional qualification

Additionally, the person to hold the company secretary position must be a member of at least one of the following professional bodies.

Exception

Whereas, there is an exception to the skills and qualifications required for the appointment of a company secretary for a private limited company.

If you wish to appoint a company secretary, the person does not need to have a professional qualification.

How to notify Companies House of your new company secretary

Use the form AP03 to notify Companies House for an appointment of your new company secretary. Subsequently, if you would like to change the details of your company secretary, please complete the form CH03 and deliver it to Companies House.

Thereafter, If you would like to remove your company secretary, please complete the form TM03.

Generally, Companies House requires every limited company to submit their confirmation statement once every 12 months. You would have the opportunity to update your company secretary’s information if there are any changes you have not yet notified Companies House.

Re-register from private limited company to public limited company

Re-register from a private limited company limited by shares to a public limited company (PLC) with Companies House. Before anything else, your company must pass a special resolution.

Desired name for PLC

Firstly, you must enter your existing company full name and registration number. Your company name and registration number must match your certificate of incorporation or certificate of change of company name. Subsequently, you enter your desired company full name of the re-registered company.

Companies House form RR01 and supporting documents

Your company must complete the Companies House form RR01 for your application to re-register your private limited company as a public limited company (PLC). Then, send your application form to Companies House.

The application must include the following legal documents.

  • A copy of the special resolution that the company should re-register as a public limited company.
  • A printed copy of the amended articles of association
  • The balance sheet
  • Your auditor’s written statement under section 92(1)(c) of the Companies Act 2006.
  • Your auditor’s unqualified report
  • Copy of the valuation report if recent allotment of shares for a non-cash consideration under Section 93(2) of the Companies Act 2006.
  • Statement of the proposed secretary to be included If your company do not have a secretary.
  • Your director or company secretary must sign the RR01 form.

Authorized minimum share capital

On one hand, your company must have an authorized and allotted share capital of £50,000 or more. With fully paid premium and a minimum of 25% paid-up nominal value for each share.

Company secretary

Generally, a public limited company must have a company secretary. Therefore, you must provide details of your company secretary in your RR01 form. Essentially, the person to hold the position as your company secretary must have the required skills and qualifications.

For example, the person to qualify as your company secretary must hold membership of one of the professional accountancy bodies i.e. The Association of Chartered Certified Accountant ACCA.

You company secretary can be an individual or a corporate body. You must enter your company secretary details in the form RR01.

Statutory fee

Lastly, don’t forget to include a cheque or postal order to pay the statutory fee to Companies House for your application to re-register. Otherwise, your application will not be processed without the fee. Write your cheque payable to Companies House.

Your PLC would continue to deliver its confirmation statement and company accounts to Companies House.

Difference between Public limited company and private limited company

Difference between public limited company (PLC) and a private limited company in of respect of compliance requirements under the Companies Act are discussed here.

Usually, businesses are set up as a private limited company. Some would upgrade its company status to a public limited company with the intent to have access to capital from the public through trading its shares at the stock exchange.

Generally, the compliance requirement for a PLC is stricter. PLC is a company limited by shares with its memorandum states that the company is to be a public limited company. To which the provisions of the Companies Act as to the registration or re-registration of the company as a public limited company have been complied with.

Any company which is not a public limited company is classified as a private limited company.

Company Name

The name of a public limited company must end with the words Public Limited Company or PLC. For Welsh companies, Cwmni Cyfyngedig Cyhoeddus or CCC. The company will be a Welsh company if its registered office is to be in Wales.

Company’s memorandum of Association

The memorandum which your company register with the Companies’ Registry must be in the form specified by the Companies Act 2006.

The main difference between the forms of memorandum specified for PLC and for a private limited company is that the form for PLC requires its memorandum to include an additional clause stating that the company is to be a public limited company.

The nominal value of the share capital

The nominal value of the public limited company’s allotted share capital must not be less than the authorised minimum. Currently, it is £50,000.

When a public limited company allots shares, it is under an obligation to ensure that at least 25% of the nominal value of the shares is paid on allotment. This includes the whole amount of any premium on the shares.

For a private company, it can issue shares without requiring any immediate payment for them. In other words, the share capital can be unpaid.

Number of members and officers

Public limited company, unlike a private limited company, must have at least two members. Formerly, they needed seven members. They must also have at least two directors whereas private limited company need have only one. Additionally, the company secretary of a public limited company must be the person with relevant knowledge and qualifications.

The issue of shares or debentures

The principal advantage which a PLC had over a private limited company is that public limited company could offer shares or debentures to the public for cash or other consideration. Additionally, to allot those shares or debentures with a view to them being offered for sale to the public.

Offers of shares to the public are governed by Part VI of the Financial Services and Markets Act 2000 and the Public Offers of Securities Regulations 1995 (SI 1995 No. 1537). These require the issue of a prospectus in any case where shares are to be offered to the public within the terms of the legislation. In other words, your PLC’s shares are publicly traded on the Stock Exchange.

Company registration

The procedure to follow and documents required to register a public limited company are the same as for a private limited company. Once the Companies House is satisfied that the documents comply with the company registration requirements, a certificate of incorporation will be issued.

Trading certificate

However, before ta PLC can do business or borrow money, you must obtain a further certificate called the trading certificate. Which Companies House will issue only if they are satisfied that the share capital is adequate. See Section 761 of Companies Act 2006 for further information.

For this purpose, your company director or company secretary must submit a declaration to Companies house. The declaration will state that the nominal value of your company’s allotted share capital is at least equal to the authorized minimum of £50,000. Furthermore, your company must also supply the following details.

(a) The amount paid up on the allotted share capital which must exceed the minimum of £50,000.

(c) Any amount of benefit paid to the company’s promoters,

(b) The amount of the preliminary expenses and details of who will meet them.

Last but not least, if you commenced trading without the trading certificate your PLC could face severe consequences. For instance, If the company entered into a transaction before obtaining the trading certificate, the directors will be jointly and severally liable to indemnify the other parties to the transaction for any loss. Furthermore, both the company and its officers will be liable to a fine.

above all, the court can also wind up PLC if fails to get the trading certificate within one year of incorporation. The law governs this event is S-122 Insolvency Act 1986.

Auditor

A Public limited company must submit audited company accounts with Companies House. For this reason, PLC must hire a qualified auditor to audit the company accounts. The role of an auditor to examine your company accounts and express their opinion if your accounts give a true and fair view.

On the other hand, if a private company is classified as a small company can opt to prepare audit exemption accounts. In other words, Companies House wold accept non-audited company accounts if they are a small company.

Confirmation statement

Both public and private limited companies must deliver their confirmation statement to Companies House at least once every 12 months. Failed to deliver this statement is a criminal offence. All the company’s officers may be prosecuted and subject to fines.

Summary

In summary, knowing the difference between public limited company and private limited company legal administration would help you to decide which type of incorporation is suitable for your business.

Concurrently, you access the cost and time involved in compliance administration. If you have no intention to raise capital from the public then a private company may suit your business. On the other hand, if your intention is to access public funding through shares trading then a PLC is the way forward.

Admission to Stock Exchange

Public limited company must comply with the Admission to Stock Exchange listing rules before they are allowed to trade their shares publicly.

Your public limited company must provide information which satisfies the listing requirements. In this case, the Financial Services Authority set the rules and also governs public companies in the United Kingdom.

The Financial Services Authority is acting as the United Kingdom Listing Authority or UKLA.

Overall, there are two types Stock Exchange markets in the United Kingdom. The Senior Equity Market and the Alternative Investment Market (AIM).

Senior Equity Market

The Senior Equity Market is for larger public companies. It is also known as the Official List.

Alternative Investment Market

The Alternative Investment Market is the secondary stock market. It is opened to smaller companies in the United Kingdom.

Ordinarily, your public limited company must meet the following criteria in order to be eligible for admission to stock exchange in London.

Firstly, your company must be registered as a public limited company. Secondly, it must intend to place on the market shares which are expected to have a market value of £700,000 or more.

3 years preceding company accounts

Your company must have filed 3 years company accounts previously with Companies House. In addition, your company accounts must be audited. Preferably with unqualified audit report attached.

To put it simply, your company will not be admitted to stock exchange if it has not filed accounts covering three years preceding to your application for listing in the Stock Exchange.

Approved Sponsors

Most importantly, your directors must consider that your company is financially viable. Furthermore, your company must have sufficient working capital.

This admission requirement is satisfied by your Approved Sponsor to the issue. Usually, a merchant bank or stockbroker with overall responsibility for arranging the issue. This includes sending a letter to the United Kingdom Listing Authority stating that your directors have made careful enquiries to satisfy themselves and the Approved Sponsor that the working capital is indeed adequate.

The final principal admission requirement is that your company intend that at least 25% of any class of shares will be in the hands of the public. This is a must and it is spelled out in The Listing Rules.

Prospectus

Thereafter, your company must also satisfy the listing particulars requirements. Subsequently, your company must prepare and publish a prospectus which complies with Chapter 5 and 6 of The Listing Rules.

Correspondingly, you company must publish the following information.

  • Information on the shares which are to be listed.
  • Your share or loan capital.
  • Principal activities.
  • Place of business and employees.
  • Company’s finances. In the form of balance sheet and profit and loss accounts for the last three years. Also, management and on trends in the company’s business.

On the other hand, your company need to include a statement in your prospectus that your company accounts have been audited for the last three financial years. Furthermore, the people responsible for the prospectus need to make a declaration. To the effect that to the best of their knowledge, the information given in that part of the prospectus for which they are responsible is in accordance with the facts and contains no admissions likely to affect the import of the prospect us.

Additionally, you must also disclose if there is changes in your auditors in the previous three years. In this case, the details of audit options, tax clearances, and the terms of the directors’ service contracts.

Above all, your information in the prospectus should not be misleading, false or deceptive. Otherwise, your public limited company will incur both civil and criminal liability under the Financial Services and Markets Act 2000 if evidence supporting materials errors on the prospectus is established. In other words, do not even try to mislead your potential investors and manipulate the information on your prospectus.

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