According to recent statistics from Companies House, almost 10% of online incorporation applications – and around half of paper applications – are rejected. Many of the reasons for rejection are easily avoidable, and we will take a look at some of the key problem areas below.
There are a whole array of rules which must be followed when choosing a company name. Choosing the wrong name can lead to the application for incorporation being rejected automatically. Some of the naming issues include:
Sensitive and offensive words
Companies House maintains a list of ‘sensitive words’ which require the prior approval of the Secretary of State to use in a company name or business name. This is designed to ensure that a certain name does not mislead or harm the public, for example if it:
- suggests business pre-eminence, a particular status, or a specific function, e.g. names that include ‘British’, ‘Institute’ or ‘Tribunal’
- implies a connection with the UK government, a devolved administration or a local or specified public authority
- includes a word or words that represents a regulated activity
- includes a word or words which suggests criminal activity
Companies that wish to use a sensitive word in their name must provide information intended to support a proposed name, such as a letter or email of non-objection from a specified body, along with their registration. Reasons that an application may fail on grounds of sensitive name include:
- Not supplying a letter of non-objection or supporting evidence
- The sensitive word is concealed within a name (e.g. Kingsbury Limited or Wholesalenurse Ltd – where ‘king’ and ‘nurse’ are on the list) and supporting evidence/letter of non-objection has not been included in the application
- Letter of non-objection for use of the sensitive word use is not accurate, e.g. the non-objection evidence pertains to a (even slightly) different name, or it has been obtained from the wrong government department or body
- Where applicable, the company’s Articles of Association have not been changed to reflect the sensitive name requirements (e.g. to use the word ‘association’ the company should have a ‘one member one-vote’ clause and a non-profit distribution clause etc.)
- A word used in the name is offensive (e.g. it’s racist or discriminatory) or implies a criminal connection
Another important rule around naming companies is that limited private company names should generally end in either ‘Limited’ or ‘Ltd’ (the Welsh equivalents ‘Cyfyngedig’ and ‘Cyf’ can be used instead for companies registered in Wales). Companies can claim an exemption to this rule if they are a registered charity or limited by guarantee and their Articles of Association meet the requirements – see our separate blog for more information: Exemption from using the word ‘limited’ in a company name
‘Same as’ and ‘too like’ names
If a company registration uses a name which is identical to an existing company on the register, it will be automatically rejected.
But even if the name is slightly different, if it is deemed to be too similar to another name, it will still be rejected. Certain words such as “the” or “UK” are considered to be ‘invisible’ for purposes of similarity – so “The Green Hammock Company Ltd” and “Green Hammock Company UK Ltd” are considered to essentially be the same.
It is possible to claim an exemption in terms of using a ‘same as’ name, if the incumbent registered company provides a letter confirming that it has no objection.
Only characters specified by Schedule 1 to the Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015 may be used in company names. This excludes, for example, the heart symbol.
Directors and Company Secretaries
If a proposed director was previously disqualified, and the term of their disqualification has not come to an end, then the application will be rejected.
The Companies House database of disqualified directors can be searched here.
Full names of directors and company secretaries – including any middle names – should be used in the application. If initials (e.g. Johnny B. Goode) or abbreviated names are used, this could lead to the application being rejected.
If a commercial address (e.g. a business park or trading address) is put down as the home address of a company director, this will be rejected. This should be their residential address.
Note that form CH01 can be used to provide a service address for a director; this allows them to use an alternative address to their residential address – and their residential address will then not show up on the public register. Alternatively, they can seek an exemption through section 243 of the Companies Act 2006 (see below).
Furthermore, the residential address of company directors must match their entry for their country of residence.
Directors who do not wish to disclose their residential address (e.g. due to the risk of violence or intimidation etc.) can apply to Companies House to gain an exemption. But it is vital that any directors with section 243 exemption provide evidence of this in the application to register a company; otherwise it will be rejected.
For more information on section 243 and restriction of disclosure of information more generally, see GOV.UK.
All directors must be aged at least 16, in line with section 157 of the Companies Act 2006.
No natural directors
All companies must have at least one ‘natural’ director; this means a human as opposed to another legal entity such as another company (known as a ‘corporate’ director). If only corporate directors are appointed and no natural directors have been named, the application will be rejected.
It may seem obvious, but it’s crucial that all companies limited by shares have issued at least one share; if no shares have been issued in the application, it will be rejected.
Furthermore, all shares issued upon incorporation must be whole and cannot be split into percentages (e.g. in the case of three shareholders, at least one whole share should be issued to each shareholder; it is prohibited to just issue one share and split it in three).
Details regarding the registered company office must be accurate or the application may fail. For example, check if:
- The Registered Office is in a different jurisdiction to the jurisdiction stated on the application (e.g. company to be registered in England & Wales, but Registered Office listed as Scotland)
- The Registered Office is not in the UK
- The town/city field has been left out, or the country has been entered in town field
Mismatch between Prescribed Particulars and Articles of Association
Prescribed Particulars are the rights attached to each class of share in a company limited by shares. These are required as part of the Statement of Capital which must be included in the application to incorporate a company. The Prescribed Particulars are set out in s.3 of the Companies (Shares and Share Capital) Order 2009 as follows:
- particulars of any voting rights attached to the shares, including rights that arise only in certain circumstances;
- particulars of any rights attached to the shares, as respects dividends, to participate in a distribution;
- particulars of any rights attached to the shares, as respects capital, to participate in a distribution (including on winding up); and
- whether the shares are to be redeemed or are liable to be redeemed at the option of the company or the shareholder
It is vital that these Prescribed Particulars match the details provided in the company’s Articles of Association. Otherwise, the application to form a company may be rejected.
Furthermore, Companies House will reject Statements of Capital in instances where full information is not provided, or where reference is made to another document for the share rights information, e.g. using the following types of wording:
- ‘please see the Articles of Association for the rights’;
- ‘rights as set out in the Articles’;
- ‘share rights are the same as those already in issue’;
- ‘not applicable’;
- ‘pari passu’.
Other mistakes which can cause an application to be rejected include:
- Missing fields – if certain parts of the application form have been left blank, this can result in the application being rejected.
- Missing PSC – companies and LLPs must maintain a register of People with Significant Control (PSC register). Anyone is considered a Person with Significant Control (PSC) if they: have more than 25% of shares in the company; have more than 25% of voting rights in the company; or have the right to appoint or remove the majority of the board of directors. PSCs must be declared upon company formation – or else the application can be rejected.
- Repeated appointment – if someone appoints themselves twice unnecessarily in the applications (e.g. as both the director and the shareholder) this can result in a rejection.
Remember to check through your company incorporation application before submitting it to avoid the most common mistakes. Please note that there is no limit to the amount of times an application can be submitted – so do not worry if it is rejected at first.