Tuesday, 18 March 2008

There's more to it than you think...

Converting an existing business to a limited company may not be as simple as it sounds - that's the message from Stuart Haynes in our Commercial Team.

"There’s more to it than just adding the word ‘limited’ to your letterheads. Under The Companies Act 1985, every company must display its name outside any premises it trades from. And it must also have the full company name on all letterheads, notices, cheques and orders, together with its place of registration, its company registration number and its registered office.

"And new rules introduced in January 2007 mean this criteria now applies to websites, emails and promotional material too."

Stuart said it was vital for all limited companies to check their literature before using it, or face tough consequences.
"Not only is it a criminal offence to get the details wrong, and your directors could be fined, but if the limited company name is incorrect on cheques and company orders, the directors can also be held personally liable to honour them.

"As the limited company will be seen as a new organisation, you are also likely to need your landlord’s consent before you can continue operating from your existing premises and trade officially under the new name. This should be a formality, but you can’t ignore the rules, as you could otherwise be in breach of covenant and lose the lease altogether.

"And as it’s a new company (even though the business has been around for some time), the landlord will probably want your directors to personally guarantee the lease – he may even want a rent deposit paid in advance."

Stuart said suppliers and customers may well not even notice the difference in your status, but officially you need their consent for your new company to take over existing contracts.

"To solve this issue, send them a copy of an existing contract attached to an agreement that confirms the new company will take over the responsibility for any obligations featured in the original contract."