Formations Direct, like many other businesses, has implemented processes for our staff to Work from Home. We will endeavour to continue to provide the range of services that you are accustomed to, but some services have become unavailable or limited due to COVID-19. Please read on for Companies House, Foreign and Commonwealth Office, and our own office updates:

Companies House Update

Companies House has also implemented Work from Home measures and we can still form companies as per usual, with the exception of the same day service, which is unavailable until further notice.

Companies House have also just announced that as of 25th March 2020, businesses will be able to apply for a 3-month extension on filing their accounts. All companies who apply for an extension as a result of COVID-19 will automatically be granted the extension without needing to provide evidence. Further information can be found here.

Apostille & Legalisation Services

We are currently unable to provide Apostille and Legalisation services as the Foreign and Commonwealth Office has stopped legalising documents as from the Prime Minister’s speech of the 23^rd March 2020.

Formations Formations Direct Service Update

We will continue to provide our company services as per usual however we ask for your understanding and support with the following.

• Hard copy documents may take longer than usual to be received in the post; please make us aware at the time of placing an order if anything is particularly urgent, or if you would like digital copies.
• Please email queries, rather than phone, to the relevant department where possible, and your contact will respond as soon as possible.

We will continue to update you should any of our services change, in particular where we are dependent on Companies House.

Please do not hesitate to get in touch if you need advice on any of our services.

We sincerely hope you are keeping well in this disquieting time.

Kind Regards

Marc Labelda
Divisional Managing Director

Are your clients preparing to file their annual accounts to HMRC and Companies House before the end of the financial year?

If yes, your clients’ might be considering paying dividends to shareholders i.e. employees or family members to reward this group of shareholders. To accomplish this your clients will need to have implemented alphabet shares within their articles of association.

Alphabet Shares

One way to do this is with alphabet shares, which allow your clients to allocate shares with different classes to shareholders which are recognisable by a specific letter e.g. A Ordinary share, B Ordinary share etc. These shares are most commonly used to pay different amounts of dividends to shareholders.

However, clients who want to pay dividends to shareholders with Alphabet shares will need to ensure their articles of association contain the correct provisions which identify the rights attached to each different class of share. If the correct provisions are not in place in your client’s articles each different class of share will be ranked equally.

This is where Formations Direct company secretarial team can help amend and redraft your client’s company articles of association.

With a wealth of experience spanning over 40 years and working with not only accounting firms but law firms, you can trust in our expertise and competitive pricing to provide your clients with the best bespoke company secretarial service on the market.

If you or your clients have any questions about paying dividends to shareholders or amending articles of association contact our qualified company secretarial team and a member of our talented team will be on hand to guarantee you have all the support you require to satisfy your client’s needs.

Contact our secretarial team today on 0800 085 45 05 or email our team here.

Technology is now a widely discussed topic in the accounting industry. However, most technology is still only predominantly focusing on helping accountants streamline their accounting processes and helping the industry move towards a Cloud based system. What seems to have been overlooked is the archaic way that accounting professionals tend to move job?

Most accounting professionals tend to be reliant on recruiters to move job, as the lesser evil when compared to the laborious process of sifting through and applying to jobs on job boards. As a result of this dynamic, employers are more reliant on recruiters than they would like to be.

Recruitment Technology

In all industries, recruitment technology solutions are becoming an integral part of a recruiting strategy. We are in the age of proliferation of the ‘matching’ network. Each one promising to turn the agency model on its head. The model is usually to cut out the middle man (the expensive agency recruiter). But can this model really be effective in the white-collar professional arena?

For most time-strapped companies, recruiters are considered a necessary evil in finding the right person quickly.

Let’s not forget that there is real value in recruitment, if done well. The problem is too many don’t do it well enough to justify the fees. Furthermore, most use LinkedIn as a primary sourcing tool. Any in-house HR manager can now do the same, and the agency fees do not reflect this shifting market.

So, what if an online platform wasn’t just about recruitment? And it could provide an online platform for employers to network with active and passive candidates? ProCircle makes the recruitment process all a bit more natural.

Networking

A survey carried out in 2016, in conjunction with LinkedIn, suggests that 85% of people now find their job through networking. The accounting industry is nowhere near that figure.

Both sides of the table are more likely to find a place where they fit in, if they meet through networking. Chances are if you enjoy talking to someone and share their values, you are more likely to enjoy working together. Which means that you are more likely to find someone who will be employed for the longer term.

Unfortunately, the reality is networking is time consuming. Great advice, in theory, to network more but the reality is that most of us don’t do anywhere near as much networking as we should. We often end up talking to the wrong people when we do network. I’m sure we’d all do more of it, if we were talking to the ‘right’ people.

Finding the time is challenging. It’s much easier to pick up the phone to a recruiter.

That’s why a platform like LinkedIn is great. You can connect with a whole host of professionals online. The great thing about LinkedIn is there are millions of people on it (500M+). And the bad thing? There are millions of people on it.

If you’re looking for a particular type of professional, a specific community of people, it’s better to go to a niche platform.

What About Personality?

Recruitment is a people profession.

It’s not just about a list of skills and qualifications – it’s about personality and whether someone will fit in with a corporate culture.

£4.1bn a year is wasted in the UK on bad hires and 48% of those people will leave within a year of joining. So, where a great recruiter adds real value is also in assessing a person’s ‘fit’ with an organisation.

It can be hard to really automate the recruitment process without factoring in this ‘fit’. ProCircle’s algorithm factors in skills, qualifications and personality, bringing the focus back to quality, not quantity – better to have 3 great matches, then 20 average ones.

The system automates the matching process for you, effectively allowing an in-house resourcer or small company to be their own recruiter with ease.

The Future

Technology is likely to revolutionise recruitment, just as it is revolutionising the way our accounting processes work.

That is where companies like ProCircle come in. Their vision is to build the leading online community for accounting, audit, finance and tax professionals to develop their career. Where accounting professionals can go for all their professional needs. And where employers can go to find them.

Jumping on the bandwagon early is likely to give companies a competitive advantage.

Formations Direct has an exclusive offer just for you, £50 employer access to ProCircle for a month which includes a dedicated team to assist you during your onboarding and no restrictions to the number of times you can use ProCircle. Happy Hiring!

For more information and to benefit from this exclusive offer click Signup Now below or call the support team on 020 7101 3339 or email support team and a member of staff will be on hand to help you join ProCircle and guide you through the onboarding process.

Don’t forget to mention Formations Direct to claim your £50 offer.

Signup Now

The PSC register and its intricate web of rules for who actually are the Person(s) of Significant Control for some companies can be confusing. A lot of time can be wasted information gathering between our team, our clients and their clients as we try and drill down the correct information to be registered. We have spent many hours poring over the 117-page guidance notes from Companies House to better advice our clients right from the start of a company formation process.

One particular rule that is worth addressing and alerting you too when gathering information is the correct PSC to register when an offshore company meet one of the PSC criteria;

• It holds over 25% of the share capital
• It has voting rights for the company
• It has the right to appoint and remove directors (ordinarily anyone holding over 50% of the share capital)

If the offshore company is deemed a PSC by meeting at least one of the aforementioned conditions it needs to consider a different PSC reporting than for a UK company.

We would recommend that a further check should be done to see if the offshore company itself has any individuals or companies have a majority stake in the company, as they are required to be registered as the PSC NOT the offshore company itself. We have outlined below Companies House guidance on this rule.

Guidance from Companies House – Indirect Ownership

The shares and rights in a company might be held indirectly when someone has a majority stake in the legal entity that meets the PSC criteria.

For companies registered in the UK (including LLP’s and Scottish partnerships and SE’s) that person is not required to be entered on the PSC register unless the legal entity they hold their interest through is not a RLE. This is the case for the following:

A legal entity might not be an RLE because:

1. It is a UK legal entity which is not a company, LLP, eligible Scottish partnership or SE; or
2. It is a non-UK company

Instead, you must look at the ownership and control of that legal entity to identify any individuals or RLEs who have a majority stake in that legal entity. Someone will hold a majority stake if:

• They hold a majority of the voting rights in the legal entity > 50%
• They are a member of the legal entity and have the right to appoint or remove a majority of its board of directors;
• They are a member of the legal entity and control a majority of the voting rights by agreement with other shareholders or members

See the chart to compare the PSC for each company A, B, and C when companies are UK companies compared to the final diagram when there are overseas companies in the ownership structure.

Figure: the correct PSC for Company A, B and C with UK companies compared to overseas companies

Paragraph 18 of Part 3 (of Schedule 1A of the Companies Act 2006) sets out the rules for interpreting how someone ‘indirectly’ holds shares or voting rights under PSC conditions 1 (share capital) and 2 (voting rights).

Additionally, paragraphs 7.4.5 to 7.4.9 inclusive and Figure 7 (pages 36 and 37) of Companies House guidance sets this out. To download the full 117-page guidance notes click here.

Community Interest Companies (CICs) were introduced in 2005 in the UK to provide a flexible corporate structure for social enterprises, which are increasingly playing an empowering role for local communities and disadvantaged areas. Like a charity a CIC must be primarily aimed at benefiting the community rather than the members or employees, however, unlike charities, it is able to deliver returns to shareholders in the form of dividends albeit subject to certain restrictions.

The nature of those CICs in existence varies widely as social enterprises tackle a wide range of social and environmental issues and there are very few restrictions on the purpose a CIC can have. We have formed CICs with a wide range of purposes, for example, community arts projects, pre-schools, inspiring women in society, helping the homeless, community cafes, rehabilitation of offenders, environmental improvement, fair trade etc.

Incorporating a CIC

A CIC has the same characteristics as a standard limited company i.e. legal personality, can be limited by either shares or guarantee, directors can be paid or unpaid and members are governed in the same manner. The main difference is that the CIC and its officers are under a stronger obligation to think more specifically about the community it serves and include any stakeholders in its activities.

The formation procedure for a CIC takes slightly longer than normal because papers have to be submitted to Companies House who then pass them to the Regulator of CICs for approval and a Community Interest Statement must be prepared giving a clear outline of the company’s purpose and proposed activities.

The Asset Lock

In order to retain the assets, CICs are subject to an ‘asset lock’, which means that assets must be retained by the CIC and used in support of its activities or in any other manner which may benefit the community. CICs are not able to transfer assets at less than market value unless the transfer meets set criteria and the payment of dividends, subject to its articles, is capped limiting the amount payable.

Converting a limited company to a CIC

Limited companies may convert to a CIC in accordance with the Companies (Audit, Investigations and Community Enterprise) Act 2004 and the Community Interest Company Regulations 2005.

Resolutions effecting the alterations to the company’s current Articles of Association must be passed and filed with the Regulator together with a Community Interest Statement and declarations that the company will not be an excluded company or a charity. The Regulator has set out various draft constitutions which may be adopted. Alternatively modifications can be made to the Company’s current constitution.

The Community Interest Company will exist from the date of the certificate issued by the Registrar of Companies. Conversion to CIC status does not affect the made up date of the annual return or accounts. A CIC Annual Report will be required for the accounting period in which conversion is made.

Do you need help incorporating or converting your existing company to CIC status?

Formations Direct has over 10 years’ experience in dealing with CICs and we can assist with the preparation and filling of all documents with the Registrar to ensure a speedy and hassle-free end result.

If you would like more information about CICs and to contact us, please click here.