Section 97 through 101 of the Companies Act 2006 allows for companies to change their legal status from a UK public limited company (PLC) to a private limited company (LTD) in one of three ways:
- Passing a special resolution of the shareholders
- Obtaining a court order to reduce the capital of your company
- Or following a cancellation or re-denomination of shares resulting in a reduction of issued share capital below the minimum for a PLC.
These processes are collectively known as ‘re-registration’. In all cases, the normal value of your company’s share capital must be below the minimum for a PLC – currently, this is £50,000, or the equivalent in Euros.
Re-registering a PLC as a private limited company can offer a number of administrative and financial advantages if PLC status no longer provides your business with any significant benefit. It is far more time-consuming and costly to maintain a PLC than a private company.
Financial accounts must be audited on an annual basis, and the cost of hiring auditors and accountants can be astronomical. As a private limited company, you may be able to apply for audit exception and your administrative requirements will be much less, thus saving you valuable time and money.
1. Special resolution of the shareholders
Sections 97-101 of the Companies Act 2006 allows a PLC to re-register as a private limited company by passing a special resolution of the shareholders at a general meeting or in writing. This type of resolution requires a 75% majority vote in favour of the change.
A company director will then be required to complete an application on Form RR02 – ‘Application by a public company for re-registration as a private limited company’ – and deliver it to Companies House with a copy of the special resolution, a printed copy of the articles of association as proposed to be amended or the new articles to be adopted in place of the existing articles, and the required £20 processing fee charged by Companies House.
Companies House form RR02 should contain the following information:
- Company registration number (CRN)
- Full name of PLC
- Full proposed name of re-registered private company (including the suffix ‘Ltd’ or ‘Limited)
- Statement of compliance – signature of company director, secretary or other authorised person
If Companies House is satisfied that the PLC is entitled to be re-registered as a private company limited by shares or guarantee, the company will be re-registered accordingly and a certificate of incorporation will be issued.
The certificate will state that it is issued on re-registration, the new company name (if applicable) and the date on which the certificate is issued. On this date, the company will officially become a private company limited by shares or guarantee, and the public register will be altered to reflect the changes and show the new articles of association adopted by the company.
Objection to re-registration
It is possible for shareholders to object to the re-registration of a plc after the resolution has been passed. In order to do so, an application to cancel the resolution must be made to the court within 28 days of the resolution being passed. You must use Companies House form RR03 ‘Give notice of application to court: cancellation of resolution for re-registration should be used to object to re-registration’.
The application should be made by members who collectively hold at least 5% of the company’s nominal issued share capital, or a minimum of 50 shareholders. Members who voted in favour of the resolution are not permitted to object to the re-registration application – only those members who were not in favour may voice their objections to the court.
2. Court Order to reduce capital
Section 651 of the Companies Act 2006 provides that, following a court order to reduce a public company’s share capital (thereby bringing it below the £50,000 or euro equivalent, threshold), the Company can apply to be re-registered as a private company without the usual requirement of passing a special resolution.
With the court order provided, you’ll need to file Companies House form RR08. The details that you must include on this form are are follows:
- PLC name
- PLC company registration number (CRN)
- Proposed name for private limited company upon re-registration, incl. the appropriate name ending (Ltd/Limited)
- Director’s signature
You must include a copy of the court order, a printed copy of the articles as altered by the court order, and the required £20 processing fee charged by Companies House.
We strongly advise consulting a solicitor to assist with the court order and re-registration application.
3. Following a reduction of capital due to cancellation of shares
If the issued share capital of your public limited company falls below £50,000 or the Euro equivalent as a result of a cancellation of shares, you must re-register your PLC as a private company.
The company directors should pass a resolution and file Companies House form RR09 – ‘Re-register a public company as a private company following a cancellation of shares’ with Companies House, along with a copy of the director’s resolution and a printed copy of the articles of association, as amended.
Similar provisions are in place in instances where the share capital falls below the £50,000 (or Euro equivalent) threshold as a result of a redenomination of shares.