structuring advice to an indian entrepreneur

This article on structuring advice to an Indian entrepreneur who wants to expand to UK is written by Noel Satish Konwar.

First of all, we must understand that an overseas company is carrying on business in the UK does not automatically mean that it has to register with Companies House. Registration of an overseas company is required when it has some degree of physical presence in the UK through which it carries on business.

What is UK establishment?

The term U.K establishment is the phrase used in the Overseas Companies Regulation 2009 which refers to a place of business or branch of an overseas company in the UK. The use of UK establishment in the law has ended the different registration and disclosure regimes for places of business and branches that were in place before 1 October 2009.All places of business and branches registered before 1 October 2009 has become UK establishment and given a ‘BR’ prefix to their registered number.If you hold a branch or place of business before 1 October 2009 you may need to file a Transitional Return( form OS TN01) to ensure companies households the correct establishment for your UK establishment.

Different types of business structure in the UK-
1) Sole trader
2) Partnership
3) Limited Company

Determining the suitability of the Limited company whether Private Limited Company or Public Limited Company-

A limited company is that in which the liability of the investors in that company is limited to the sum of investments made. A Public Limited company allows investments from the members of the public in form of selling its shares etc while a private limited company allows investments from individuals the founding members personally choose as investors.

ESTABLISHING BUSINESS IN UK-

Registering the branch of the company-
Within a time of one month of opening a UK establishment, an overseas company must submit to Companies House the completed registration application along with the standard registration fees of
£20 After determining the type of company one wants to establish and understand the legal terms involved, The next step in the company establishment is registering a suitable name of the branch. The registration involves: stating the name of the company which must end with ‘LTD’ for a limited company.One may register an overseas company using its corporate name, or an alternative name under which it proposes to carry on business in the UK. If an alternative name is registered it is treated for UK legal purposes as a company’s corporate name and must be used on any forms that ask for the ‘company name’.

There are number of controls and restrictions in regard to company name –
Restrictions include:
 Strictly no in the use of certain words or sentences that are offensive or the use of which would constitute an offence.
 Mandatory for prior approval for names that include certain sensitive words or suggest a connection to Her Majesty’s Government or certain other public bodies.
 A strict check of names being registered that are the same as those already on the Companies House index of company names.
 The requirement to use only permitted characters, signs, symbols and punctuation within a name.

The next process involves submitting the details of one of the firm’s senior directors, owners .details of the international registered address of the parent company and other items that can serve as a means of identifying the co-owners.

All the mentioned documents should also be accompanied by a memorandum stating the share capital, the shareholders and what amount they hold, initial founders of the company with addresses and the goals, goods or services the company wishes to provide to the public.

The rules of conduct for the company and its staff coupled with a statement of compliance should also be provided to show how the organization can be managed. If all the above documents are found to be correct, the registrar of companies would issue a certificate of incorporation confirming the companies’ formation and their existence.

These details are to be sent directly from your company’s base to the registrar of companies UK and all information should be provided on an A4 sheet. Charges also apply and without issuing payment to the relevant organizations, your proposal would be overlooked.

A second method can be applied for those who feel they need a physical presence to help them with the delivery and quick processing of their company formation details and this requirement can be fulfilled by outsourcing the job to online companies that specialize in helping foreigners open offices in the UK. These agencies could provide you with branch offices, subsidiary companies run by their staff but report directly to your parent company or a temporary branch in the UK. The documents these agencies would require have been stated above.

Disclosure Requirements-

An overseas co. that carries on business in the UK should display a sign with its co. name ( the name registered at companies house) and the country in which it is incorporated at :
a. Every location in the UK at which it carries on business.
b. The service address of every person resident in the U.K authorized to accept service of the document on behalf of the Company.
c. In characters that can be read with the naked eye.
d. In such a way easily visible by visitors of the office, location.
e. Visibility must be continuous, but if the location is shared by other companies too then each such company is required to display its registered name at least fifteen continuous seconds at least once in every three minutes.
Company’s name and registered no. should be carried on all forms of business correspondence and documentation. Along with it should also state the following information –

1)The company’s country of incorporation, 2) The identity of the registry if any, in which the company is registered in its country of incorporation, 3)The location of its head office, 4)The legal form of the company, 5) Whether the liability of the members of the company is limited, whether the company is limited, 6) If applicable ,whether the company is being wound up or is subject to other insolvency proceedings, 7) If there is a reference to the amount of share capital on business letters, order forms or websites, the reference must be shown as paid up share capital. If a Company decides to include the name of a director or directors on the business letter it must disclose the names of all the directors. In the case of body corporate or legal.

In the case of body corporate or legal person, it must disclose its corporate or firm name, the disclosure must be visible with naked eye.
In a situation of winding up, closure or insolvency-
In case of closure of UK establishment registered at company’s house ,it must file a notice of ‘ Notice of closure of UK establishment of an overseas company‘ using the (form OS DS01), once the document has been registered by company’s house, the company is no longer obliged to deliver documents in respect to that UK establishment.
In case of insolvency other than winding up, It must send a notice by an overseas company which becomes subject to proceedings relating to insolvency’ ( form OS LQ02) to companies house .If the insolvency proceedings began before the company opened a UK establishment, it must deliver the form no later then one month after the company first opened the establishment .If the company had UK establishment, the company has fourteen days after the date it becomes subject to the insolvency proceedings to deliver the form.
When a company ceases to be subject to insolvency proceedings, it must file a ‘Notice by an overseas company on cessation of proceedings relating to insolvency’ ( form OS LQ04)stating when the company ceased to be subject to proceedings .It must deliver the form no later than 14 days from the date it ceases to be subject to the proceedings .
If and overseas company is subject to insolvency proceedings it must file a ‘Notice of winding up of an overseas company in( form OS LQ03) with companies house. If the winding up began before the company a UK establishment, it must deliver the form no later than one month after the company first opened the establishment .Otherwise the company has fourteen days after the date on which the winding up begins to deliver the form. Depending on the nature of the winding up or other insolvency proceedings there are further notification requirements to company’s house. These are detailed below- An overseas company can wound up under the provisions of UK law, but such circumstances are outside the scope of this guidance.

Conclusion-

While expanding the business into U.K might not be hassle if everything is followed according to the rules of company’s house .It still requires a lot of understanding in regard to the particular forms and documentation as per the business structure that prevail in the country .At the same time a thorough understanding of company’s law of that country allows one to grasp the best business structure that would be compatible with the existing business structure in India.

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