Why Set Up a Joint Stock Company in the United Kingdom


The United Kingdom consists of England, Wales, Scotland and Northern Ireland. There are three separate legal jurisdictions: (i) England and Wales; (ii) Scotland; and (iii) Northern Ireland. The Republic of Ireland (Eire) is not a part of the UK.

The UK is governed by a parliamentary system with a central government based in London. The UK parliament consists of a lower house (the House of Commons, made up of elected Members of Parliament) and a higher appointed house (the House of Lords).

Company law in England and Wales is governed by the 2006 Act. This replaced and substantially amended the provisions of the Companies Act 1985.

The Public Limited Company offers easy access to capital, and the ability to sell shares advertised to the public. The PLC is the type of company most commonly used by larger companies and has a share capital which can be offered to the public.

Shareholders liability is limited to the value of their total contribution to the share capital. This liability extends to any unpaid amounts on their shares. The management also benefits from limited liability, although to a lesser extent than the shareholders.

A PLC cannot start the business until it has a Certificate, issued by Companies House, entitling it to do so. The main step to take in getting such a Certificate is to ensure that there is at least £50,000’s worth of shares in issue when the application is made, with at least 25% of each of the shares making that figure paid up in cash.

Benefits of a PLC:

  • Shares may be sold to the Public
  • Possibility to enter the Stock Market
  • Having its shares listed on the London Stock Exchange can attract larger investments from mutual funds, hedge funds, and institutional traders.
  • Permission to advertise the sale of shares publicly
  • Provides extra financial status
  • Access to capital faster than a private limited company.
  • Value of shares
  • Opportunity to more easily make acquisitions
  • To give a company a more prestigious profile

PLC requirements:

  • Totally Owned by Foreigners: PLC’s can be completely owned by foreigners.
  • Limited Liability: Shareholders liability is limited to the value of their contributions to the shares capital.
  • One Shareholder: Only one shareholder is required to form a PLC.
  • Two Directors: Every PLC must have at least two directors to manage the company. They can be natural persons over the age of 16. Or, one natural person and the rest can be companies.
  • Low Minimum Share Capital: Initially, only two shares are required.

Profits are typically distributed to the shareholders as dividends. However, PLC’s can retain a portion of the profits as its working capital.

PLC’s earning a profit (or taxable income) must file a tax return with the HM Revenue & Customs (HMRC) and pay a corporate tax. The current corporate tax rate is 19%.

The current “standard rate” of VAT is 20 %. A business is obliged to register for VAT, and then charge VAT on its sales, if the value of its taxable turnover in the last twelve months has exceeded the registration threshold, currently £73,000, or if the expected value of its VAT taxable turnover (this only includes the goods and services that are sold on which VAT is charged) in the subsequent 30 days will exceed such threshold . Businesses may register for VAT on a voluntary basis, if their turnover is below the threshold, and it may often be advantageous to do so.