Company formation - Incorporation process and requirements

Learning Outcomes

This article details the process of incorporating a private limited company in the UK by registration under the Companies Act 2006. It outlines the essential documentation, key decisions required before application, and the significance of the Certificate of Incorporation. For the SQE1 assessments, you will need to understand the procedural steps, the roles of Companies House and the applicant, and the immediate legal effects of incorporation, enabling you to apply this knowledge to practical scenarios presented in MCQs. It also clarifies how information is captured in Form IN01 (including directors’ details, statements of capital or guarantee, and PSC disclosures), what happens to subscribers and proposed officers at the moment of registration, and how pre‑incorporation contracts are treated. The article distinguishes between adoption of Model Articles and bespoke or amended articles (including practical issues such as entrenchment), and highlights common post‑incorporation compliance actions (first board meeting, registers, accounts, and confirmation statements), linking these steps to statutory provisions to cement understanding.

SQE1 Syllabus

For SQE1, you are required to understand the practical steps involved in forming a registered company, including the necessary documentation, the information required by Companies House, and the consequences of incorporation, and to identify correct procedures or required information in client scenarios, with a focus on the following syllabus points:

• The distinction between incorporation by registration and other methods.
• The specific documents required for registration (Form IN01, Memorandum, Articles).
• The key information needed to complete the application form (Form IN01).
• The role and effect of the Certificate of Incorporation.
• The nature and purpose of the Articles of Association, including Model Articles.
• Basic post-incorporation compliance steps.
• How People with Significant Control (PSC) must be identified and notified, including the use of Relevant Legal Entities (RLEs).
• Practical decisions prior to filing: company name clearance and restrictions, registered office jurisdiction, initial share structure or guarantee, and director eligibility and addresses.
• The legal position on pre‑incorporation contracts and the need for novation after incorporation.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which document confirms a company legally exists and specifies its date of incorporation?
   1. Memorandum of Association
   2. Articles of Association
   3. Certificate of Incorporation
   4. Form IN01
2. Which ONE of the following MUST be filed at Companies House to incorporate a private company limited by shares choosing to adopt the Model Articles in full?
   1. Bespoke Articles of Association
   2. The Model Articles
   3. A Statement of Capital
   4. An application form (Form IN01) and Memorandum of Association

3. True or false? A private limited company must appoint a company secretary upon incorporation.

4. What is the minimum number of directors required for a private limited company?
   1. One, provided they are a natural person.
   2. Two natural persons.
   3. One, who can be a corporate body.
   4. Two, one of whom must be a natural person.

Introduction

Incorporation is the legal process by which a new company is formed and comes into existence as a distinct legal entity, separate from its owners (shareholders) and managers (directors). This process grants the company ‘separate legal personality’ and usually allows its shareholders the benefit of ‘limited liability’ (these concepts were introduced in the article on business mediums). While historically companies could be formed by Royal Charter or Act of Parliament, the overwhelming majority today are incorporated by registration under the Companies Act 2006 (CA 2006). This article focuses on this registration process for private limited companies.

Separate personality means the company itself owns assets, enters into contracts, and can sue or be sued; the members do not own the company’s assets, and their liability to contribute is limited to any unpaid amount on their shares (for companies limited by shares) or to their guarantee (for companies limited by guarantee). The significance of these principles was affirmed in Salomon v A Salomon & Co Ltd, and courts have consistently treated the company as distinct from its members. As a person at law, a company can employ directors, including a founder, and those relationships are real contracts between separate legal persons (as recognised in cases such as Lee v Lee’s Air Farming Ltd).

The Registration Process

Incorporation by registration involves submitting specific documents and information to the Registrar of Companies at Companies House. Once satisfied that the requirements of the CA 2006 have been met, the Registrar issues a certificate of incorporation, formally bringing the company into existence.

Section 7 CA 2006 permits one or more persons (including companies) to form a company. The procedural core is found in ss 9–16 CA 2006, which require delivery of an application (Form IN01), the memorandum of association, and a statement of compliance, together with the applicable fee. If articles are not delivered, the relevant Model Articles will apply by default. Upon successful processing, registration occurs and s 15 CA 2006 requires issue of the Certificate of Incorporation, which is conclusive evidence that all requirements of the Act have been met.

Key Term: Companies House
The UK government executive agency responsible for incorporating and dissolving companies, registering company information, and making it available to the public.

Key Term: Registrar of Companies
The official responsible for the registration process and maintenance of the company register at Companies House.

Methods of Application

Applications can be made electronically via the Companies House website, through approved third-party software (often used by company formation agents or solicitors), or by paper using the prescribed form. Electronic filing is generally faster and cheaper.

A same‑day incorporation service is available for an increased fee, subject to cut‑off times. Formation agents commonly use software filing to submit multiple applications efficiently. In time‑critical matters, some clients also consider acquiring an “off‑the‑peg” entity.

Key Term: Shelf Company
An already incorporated, non‑trading company (often owned by an agent) that can be purchased and quickly customised (change of name, officers, shareholders, and articles) for immediate use.

Key Documents

The core documents required for incorporating a private company limited by shares are:

1. Application for registration (Form IN01): This form contains the essential details about the proposed company.
2. Memorandum of Association: A statement by the subscribers confirming their intention to form a company and become members.
3. Articles of Association: The company's internal rulebook. These only need to be filed if the company is not adopting the standard Model Articles in their entirety.

The appropriate fee must also accompany the application.

Key Term: Memorandum of Association
A document required for incorporation under CA 2006, stating the subscribers' intention to form a company and take at least one share each. Its constitutional significance was greatly reduced by the CA 2006.

Key Term: Articles of Association
The primary constitutional document of a company, setting out the internal rules governing its management, decision-making processes, and the rights and duties of directors and shareholders. Often referred to as the 'articles'.

Key Term: Statement of Capital
The statement required if the company has a share capital. It sets out the total number of shares, aggregate nominal value, share classes and rights (the prescribed particulars), and amounts paid or unpaid on each share.

Key Term: Statement of Compliance
A statement delivered with the application confirming that the registration requirements of the CA 2006 have been met (s 13 CA 2006). It is usually signed by the presenter of the application.

Model Articles vs Bespoke Articles

Companies must have articles of association (s 18 CA 2006). Applicants can choose:

• Model Articles: Standard default articles provided by regulations (The Companies (Model Articles) Regulations 2008). If no articles are submitted, the relevant Model Articles apply automatically (s 20 CA 2006). There are different sets for private companies limited by shares, private companies limited by guarantee, and public companies.
• Amended Model Articles: Adopting the Model Articles but modifying or excluding certain provisions and potentially adding bespoke ones.
• Bespoke Articles: Drafting a completely unique set of articles tailored to the company's specific requirements.

If amended or bespoke articles are used, a copy must be filed with the application. If the Model Articles are adopted in full, they do not need to be filed.

Common article customisations include restrictions on share transfers, weighted voting rights, compulsory retirement provisions for directors, or specific quorum rules. Articles can include entrenched provisions that are harder to change than ordinary provisions, but entrenchment must be notified to the Registrar at registration or when later added (ss 22–24 CA 2006).

Companies incorporated before 1 October 2009 under earlier legislation can choose to replace or update their constitutions, including adopting the 2008 Model Articles.

Key Term: Model Articles
Standard default sets of articles of association provided under the CA 2006 regulations for different company types. The Model Articles for private companies limited by shares (MAs) are commonly used.

Information Required on Form IN01

Form IN01 requires detailed information about the proposed company:

• Company Name: Must be unique and end with "Limited" or "Ltd" (or Welsh equivalents). It cannot be offensive or include sensitive words without approval. A check should be made for existing names and potential trademark conflicts.

• Registered Office: A physical address in the relevant part of the UK (England and Wales, Wales, Scotland, or Northern Ireland) where official documents will be served. The registered office location fixes the company’s jurisdiction, and the address will be public.

Key Term: Registered Office
The official address for service of documents on the company. It must be in the jurisdiction stated on incorporation and be kept up‑to‑date with Companies House (changes filed on form AD01).

• Directors: Details of the first director(s), including name, date of birth, nationality, occupation, service address, and residential address. Private companies need at least one director, who must be a natural person aged 16 or over (ss 154, 155, 157 CA 2006). Corporate directors are currently permitted in law (provided at least one director is a natural person), but you should check for any commencement of restrictions before filing. Directors’ service addresses are public; residential addresses are held on a separate secure register.

• Company Secretary (optional for private companies): Details if one is appointed. Public companies must appoint a qualified secretary.

• Statement of Capital and Initial Shareholdings: Details the number and type of shares the subscribers will take on incorporation, their nominal value, and the rights attached to them (s 10 CA 2006). For each class, prescribed particulars must specify voting, dividend, and capital rights, and any redemption rights.

• Statement of Guarantee (if applicable): For companies limited by guarantee. Instead of share capital, the statement specifies each member’s undertaking to contribute a fixed amount to the company’s assets if it is wound up.

• People with Significant Control (PSC): Details of individuals or legal entities holding significant control (e.g., >25% shares or voting rights, right to appoint/remove majority of directors). Where a legal entity meets PSC conditions and is itself subject to disclosure requirements, it should be entered as a Relevant Legal Entity (RLE).

Key Term: People with Significant Control (PSC)
Individuals or relevant legal entities who meet specific conditions regarding ownership or control over a company, as defined in Part 21A CA 2006. Companies must maintain a PSC register.

Key Term: Relevant Legal Entity (RLE)
A legal entity that meets one or more PSC conditions and is itself subject to registrable disclosure requirements. Where applicable, the RLE can be recorded in place of listing the individuals behind it.

• Statement of Compliance: Confirmation that the CA 2006 registration requirements have been met (s 13 CA 2006).

The name chosen must comply with the Company, Limited Liability Partnership and Business Names (Sensitive Words and Expressions) Regulations 2014. Words implying national or local government, professional status, or regulated activities typically require supporting evidence or consent. Companies House will reject names that are the ‘same as’ existing names, deceptively similar, or include characters not permitted. If the business has a brand, it is prudent to search the UK Intellectual Property Office database to avoid infringing third‑party trade marks.

Key Term: Registered Office
The official address (within the chosen jurisdiction) for service and public disclosure. It can be changed later by filing form AD01.

The Certificate of Incorporation

Once the Registrar is satisfied, they issue the Certificate of Incorporation (s 15 CA 2006).

Key Term: Certificate of Incorporation
The official document issued by Companies House confirming the company's formation, its registration number, date of incorporation, and legal status. It is conclusive evidence of valid incorporation.

The certificate confirms:

• Company name and registered number.
• Date of incorporation (this is the date the company legally comes into existence).
• Whether limited or unlimited, and if limited, by shares or guarantee.
• Whether private or public.
• Jurisdiction of registered office.

From the date on the certificate, the company is a separate legal entity, the subscribers become members, and the proposed directors and secretary (if any) take office (s 16 CA 2006). The company can now trade, enter contracts, and own property. Two additional capacity points are helpful for practice:

• The validity of acts is not affected by lack of capacity based on the company’s constitution (s 39 CA 2006).
• In dealings with third parties acting in good faith, limitations on directors’ authority in the constitution cannot be relied upon to avoid transactions (s 40 CA 2006). This protects outsiders and reduces transactional uncertainty.

Pre-incorporation Contracts

Contracts made purportedly on behalf of a company before its incorporation cannot bind the company, as it did not legally exist. The person who made the contract (often the promoter) is generally personally liable under that contract, unless there is an agreement to the contrary (s 51 CA 2006). After incorporation, the company can enter into a fresh contract on the same terms, or the parties can novate the original contract so that the company replaces the promoter and the promoter is released.

Key Term: Pre-incorporation Contract
A contract entered into by a person (promoter) on behalf of a company before the company has been formally incorporated.

Worked Example 1.1

Joanne is setting up 'Innovate Solutions Ltd'. Before receiving the Certificate of Incorporation, she signs a 12-month lease for office space 'for and on behalf of Innovate Solutions Ltd'. The company is incorporated a week later. Who is liable under the lease?

Answer:
Joanne is personally liable under the lease. The contract was made before Innovate Solutions Ltd legally existed, so the company could not be a party to it. Under s 51 CA 2006, Joanne is personally bound unless the lease specifically excluded her personal liability (which is unlikely). The company could choose to enter into a new lease (novation) after incorporation to take over the liability.

Worked Example 1.2

A client wants to incorporate “National Health Consulting Limited”. What issues arise when checking the name, and what steps might be necessary to secure approval?

Answer:
The name includes a “sensitive” expression suggesting a connection with national government or a public service. Under the Sensitive Words and Expressions Regulations, evidence or consent (for example from the Department of Health and Social Care) may be required. Companies House will refuse the application if consent is absent. The client should provide supporting documentation demonstrating legitimacy and avoid misleading the public. A trade mark search should be performed to ensure no conflicts with NHS branding.

Worked Example 1.3

The founders intend that voting rights on new shares be restricted so that only existing investors can pass special resolutions. Can this be achieved on incorporation without bespoke articles?

Answer:
Not by adopting the Model Articles in full; those do not provide weighted or restricted voting beyond prescribed particulars for share classes. The founders should file amended articles with tailored share classes and prescribed particulars (on the Statement of Capital) that reflect the intended voting restrictions. If the restriction is fundamental, they may add an entrenched provision (ss 22–24 CA 2006) and notify entrenchment on registration.

Post-Incorporation Steps

Once incorporated, several practical and administrative steps are typically taken, often addressed at the first board meeting:

• Appoint Chairperson: Directors may appoint a chairperson for board meetings (MA 12).
• Adopt Company Seal (optional): A company may choose to have an official seal (MA 49).
• Appoint Bankers: Open a company bank account and agree mandates for operating it.
• Appoint Auditors (if required): Small companies are often exempt (s 477 CA 2006).
• Fix Accounting Reference Date (ARD): Decide the date to which annual accounts will be made up. If not chosen, it defaults to the end of the month of incorporation. Form AA01 is filed for changes.
• Directors' Service Contracts: Formalise employment contracts for executive directors. Contracts longer than two years require shareholder approval (s 188 CA 2006).
• Allot Shares: Issue initial shares to subscribers and potentially allot further shares.
• Tax Registrations: Register with HMRC for Corporation Tax, PAYE (for employees), and potentially VAT.
• Statutory Registers: Set up and maintain required registers (members, directors, PSCs, charges etc.) unless electing to keep them at Companies House.
• Publicise Company Name: Ensure the name is displayed correctly at the registered office and on communications.

Day‑to‑day compliance includes filing annual accounts (private companies generally must file within nine months of the ARD; failure can be a criminal offence), and filing a confirmation statement (form CS01) within 14 days of the anniversary of incorporation to confirm that information held by Companies House is up‑to‑date. If the company elects to keep certain registers on the central public register rather than at the registered office (an option introduced by the Small Business, Enterprise and Employment Act 2015), the decision and any updates must be notified to the Registrar.

In addition, companies should issue share certificates within two months of allotment (unless certificated form is not used), and promptly update the register of members and PSC register. Directors’ residential addresses must be maintained on the secure register, while service addresses are publicly visible.

Key Term: Certificate of Incorporation
Conclusive evidence of incorporation under s 15 CA 2006. From the date stated, officers take office and the subscribers become members (s 16 CA 2006).

Key Term: Registered Office
The address for service and inspection of certain records; ensure name and number are displayed on business letters, order forms, and the company’s website (see trading disclosures requirements).

Exam Warning

Remember the distinction between the Memorandum of Association pre- and post-CA 2006. Before 2006, it was a key constitutional document containing the objects clause. Now, it's merely a statement of intent by the subscribers. Restrictions on company objects, if any, must now be in the Articles.

Restrictions on capacity based on objects are generally ineffective against third parties due to s 39 CA 2006, and internal limitations on authority cannot be used against outsiders acting in good faith (s 40 CA 2006). The practical effect is that if you wish to constrain directors or define restricted purposes, you must use clear article drafting and internal governance procedures rather than relying on capacity arguments.

Revision Tip

Familiarise yourself with the structure and key information required on Form IN01. Understanding what details are needed helps solidify knowledge of the core elements defined at incorporation (directors, shareholders, capital, etc.). Check the Companies House website for the current form layout.

Practical preparation also includes:

• Running the proposed name through Companies House and trade mark searches.
• Drafting prescribed particulars for any bespoke share classes clearly (voting, dividend, capital, redemption rights).
• Collecting supporting evidence for any sensitive words or restricted activities.
• Preparing subscriber details and ensuring documents are signed and dated correctly.

Key Point Checklist

This article has covered the following key knowledge points:

• Incorporation by registration under the CA 2006 is the standard method for forming companies in the UK.
• Key documents required are the application form (IN01), Memorandum of Association, and potentially Articles of Association.
• Applicants must decide on the company name, registered office, first directors, initial share capital structure, and PSCs before applying.
• Companies can adopt Model Articles, amended Model Articles, or bespoke Articles; entrenchment is possible if notified.
• The Certificate of Incorporation legally establishes the company as a separate entity from its date of issue.
• Promoters are generally personally liable for pre-incorporation contracts under s 51 CA 2006, so novation or new contracts are needed after incorporation.
• Numerous administrative steps are required immediately post-incorporation, often addressed at the first board meeting (including registers, accounts, and confirmation statements).
• Capacity restrictions in the constitution do not affect the validity of acts (s 39), and third parties dealing in good faith are protected against internal limitations on directors’ authority (s 40).
• Companies must maintain PSC information and may record an RLE where applicable; sensitive or governmental names require evidence or consent.

Key Terms and Concepts

• Companies House
• Registrar of Companies
• Memorandum of Association
• Articles of Association
• Model Articles
• People with Significant Control (PSC)
• Relevant Legal Entity (RLE)
• Statement of Capital
• Statement of Compliance
• Registered Office
• Certificate of Incorporation
• Pre-incorporation Contract
• Shelf Company