06 February 2024
Did you know that the Economic Crime (Transparency and Enforcement) Act 2022 requires that any overseas entities (an ‘OE’: an incorporated entity registered outside England, Scotland, Wales, or Northern Ireland) who want to buy, sell, or transfer property or land in the UK must now be registered with Companies House on the Register of Overseas Entities.
Any such OE must register with Companies House and tell them who their registrable beneficial owners or managing officers are (and/or provide details of any trust in which the entity is involved).
The identity of the beneficial owners must be verified by an agent which is registered for anti money laundering purposes in the UK, and the entity must file an annual statement once per year and file details of any changes to its particulars.
No application may now be made to the Land Registry to register an OE as the proprietor of land unless that entity has been registered as an OE.
If you/your clients have an OE which hasn't owned any property at all (so you haven't yet registered it as an OE) but which is now intending to acquire property then you will need to register it as an OE before it can acquire the property.
If you have clients who are in this situation, or if you would like to discuss the options available, or if we can be of any assistance to you in a situation like this or in any other matter, then please do not hesitate to contact us here at Bourse.
06 February 2024
Companies must have Articles of Association, the constitution or rules which govern how that company is run.
As I’m sure you know, if the company has not adopted bespoke Articles then the Model Articles (prescribed by the Companies (Model Articles) Regulations 2008) will apply.
The Articles will usually include provisions about the minimum and maximum numbers of directors allowed, and the quorum for any meeting of those directors (that is, the number of directors who must be present for the meeting to be considered valid).
It is very common for private limited companies to have a sole director, who may or may not also be the company’s sole shareholder.
However, did you hear about a recent High Court ruling, in the matter of Hashmi v Lorimer-Wing [2022] EWHC 191 (Ch)?
The Model Articles allow a minimum of one director but then state that the quorum for director’s meetings is two directors (unless otherwise fixed by resolution). The ruling suggested that this amounts to a requirement that there must never be less than two directors of a company incorporated under the unamended Model Articles, and that decisions taken by sole directors of such companies may be invalid and could be open to challenge.
There are a couple of ways around this: either your client appoints a second director and then both directors unanimously approve all future (and previous!) decisions made by the company. Or, alternatively, you could replace the Model Articles with our own draft Articles, which specifically allow a sole director to make all decisions for the company, and then the director retrospectively ratifies all his actions.
The court’s decision means that you should ensure that if any of your clients’ companies were incorporated with the unamended Model Articles then they check whether some or all of the previous decisions of that sole director need to be ratified and whether they need to replace the Model Articles.
If you have clients who are in this situation, or if we can be of any assistance to you in a situation like this or in any other matter, then please do not hesitate to contact us here at Bourse.
17 March 2015
We were approached by one of our Accountant clients, who had a small company they looked after, which had been in existence as a family company for many years, and was bringing a new Director on board.
The Board wished to issue shares to this person: they wanted to be able to pay them dividend, but did not wish to relinquish control of the company.
We suggested having different classes of shares: if a company has different classes of shares in issue then different rights can be ascribed to those different classes as regards payment of dividends, voting rights, even procedures such as issuing new shares or transferring shares.
After they had spoken to their Accountants, the company decided to re-designate their existing issued shares as ‘A’ Ordinary Shares, and that they wanted to be able to issue new shares called ‘B’ Ordinary Shares to the new Director.
We suggested that they also take this opportunity to update their constitution – the company had been incorporated in the 1970s, and had since that time made various changes by resolution. We suggested that now would probably be a good time to adopt Articles of Association which were drawn clearly under the Companies Act 2006, including the historic changes if required, so that the company had a ‘clean’ set of Articles, going forward.
The ‘B’ shares would have a right to dividend (the Board would be able to decide to pay one amount on the ‘A’ shares and a different, or no, amount on the ‘B’ shares).
The ‘B’ shares would not have a right to share in any surplus left after repayment of the shareholders in the event of the company being wound up or sold (it is always surprising how few companies will address the “worst case scenario”).
If the holder of ‘B’ shares left the company’s employ (as an employee and/or as a Director) then they would be required to offer their shares up for sale, with any such transfer being at the Board’s discretion. Furthermore, if they failed to do so within one month of ceasing to be an employee then the company is granted powers to effect the transfer on their behalf (this is called a “deemed transfer provision”, and ensures that shares do not pass outside the company’s circle without the approval of the Board and/or the other shareholders).
If you have clients who are in this situation, or if you would like to discuss the options available, or if we can be of any assistance to you in a situation like this or in any other matter, then please do not hesitate to contact us here at Bourse.
17 March 2015
We regularly have professional clients approaching us, because their client has gone ahead and incorporated a new company themselves, to act as a flat/property management company, and then realised all the problems that this can create!
If a company is acting as a flat management company, so that (for example) the owners of the flats within a building are jointly responsible for the building and its freehold, then it usually necessary to have appropriate Articles in place.
However, many people (especially people who are not themselves professionals; they have been told by their professional advisor that they need a company and are just looking for the cheapest way of getting the company set up) will go to an agent or to Companies House itself and will incorporate a company using just the Model Articles.
A company incorporated using just the Model Articles will be able to act as a flat management company, but it is in no way ideal: the company's activities are completely unrestricted and it can carry on any lawful activity that the directors want it to. Furthermore, subject to the discretion of the directors, there are no restrictions on who may be a shareholder (or a director).
This can cause serious problems, with shareholders still owning shares but who no longer own flats in the property, or with the directors issuing new shares instead of arranging for the transfer of existing shares, and some time down the line someone realises that the company has drifted a long way from what it was supposed to be.
A client recently approached us in this exact situation. His clients’ company had just the Model Articles for a private company limited by shares and there were more shares in issue than there were flats within the building (but not the same number of shares per flat, oddly).
Now, what we at Bourse would consider to be a "flat management type" company should probably have the following:
Specific defined Objects, to restrict its activities to the ownership and management of a specific named property;
It should require that directors must be members/shareholders, and that one must own a flat or dwelling within the named property in order to qualify to be a member/shareholder;
That there should be one share held by each flat (and if the flat is jointly owned by one or more persons then those people would jointly hold the share, and be treated as jointly being a single shareholder); and
Finally, that if one sells one's dwelling, then one can no longer be a member (or a director) - one resigns one's appointment, and transfers one's share to the purchaser of the dwelling.
We recommended to our client that the company adopted new bespoke Articles. The new Articles provided for a 'block' of shares per flat (that is, for several shares per flat which may only be transferred as a group). The company then issued new shares to each flat so that everybody had the same number of shares per flat. The client was able to get all of the flat owners together in a room to vote on it and the matter was successfully resolved. Going forward, he assures us that he will keep an eye on them and make sure that they keep everything done ‘by the book’…
If you have clients who are in this situation, or if you would like to discuss the options available, or if we can be of any assistance to you in a situation like this or in any other matter, then please do not hesitate to contact us here at Bourse.
17 March 2015
A client had been advised to just let his company be struck off by the Registrar, as he didn’t need it for trading any more and he didn’t want to go to the trouble of applying for it to be struck off.
He ignored the letters from the Registrar, and didn’t file his annual return or his accounts.
Unfortunately, he had not considered the £20,000 or so that was in a company-owned bank account. He had thought that the money was “his” money and that it wouldn’t matter that the company had been struck off (as far we could tell, nobody had explained that even though he was the sole shareholder in the company, the contents of a company bank account belong to the company, and pass bona vacantia when the company is dissolved).
If a company is struck off by the Registrar of Companies (that is, for non-compliance with the Companies Acts) then there is an option of Administrative Restoration available.
Rather than the complicated and expensive procedure of applying for a court order (where the courts request the Registrar to restore the company), any person who was an officer of or a member/shareholder in the company at the time it was struck off may, within six years of it’s being struck off, apply to the Registrar to have it restored to the register of live companies. Once so restored, the company is deemed to have continued in existence as if it had never been dissolved.
The application must be accompanied by all of the documents required to bring its record up to date (annual returns and/or company accounts), by a waiver letter from the Treasury Solicitor (which handles the Crown Estates in most of England), and by any late filing penalties which were due to the Registrar at the time the company was dissolved.
In this instance, our client was able to prepare an annual return and a set of accounts, we obtained the appropriate waiver letter from the Treasury Solicitor, and we helped him in making the application to restore his company. Once the company had been successfully restored to the register of live companies, we understand that he dashed off to the bank!
Finally, you should consider that administrative restoration is only available within six years of dissolution and where the company was ‘simply’ struck off by the Registrar for non-compliance with the Act. If your client applies to have his company voluntarily struck off, or if the company was wound-up and dissolved (liquidation), then this option is not available and you will need to make an application through the courts.
If you have clients who are in this situation, or if you would like to discuss the options available, or if we can be of any assistance to you in a situation like this or in any other matter, then please do not hesitate to contact us here at Bourse.