Company Formations Rejected: Uncovering the Reasons

When entrepreneurs incorporate their company, not many think that the end result will be a rejection notification from Companies House. Almost 10% of online incorporation applications and more than 50% of company formation applications are rejected by Companies House.

The cause of UK limited company formation rejection is always simple mistakes that can be avoided during the application process.

Below, we outline reasons why company formations are rejected.

1. Incorrect company name

For UK limited company formation, there are rules and restrictions that directors or company owners must adhere to when it comes to choosing a name.

For limited companies

All limited companies’ names must end with either ‘limited’ or ‘Ltd’ unless they qualify for exemption. A company can be exempted from using limited from their names if:

•         The company is a registered charity.
•         Cannot pay its shareholders through dividends
•         Promotes or regulates commerce, education, science, art, and religion
•         Requires each shareholder to contribute to company assets within a year of them stopping being a shareholder.
•         Must spend its income on promoting its objects

A trading name must not include the following words or abbreviations:

•         Limited
•         Ltd
•         Public Limited Company (PLC)
•         Limited Liability Partnership (LLC)

Use of sensitive words

Certain words or expressions can’t be used in a company name without supporting documentation. For instance,

•         Words suggesting business pre-eminence, specific status, or functions (e.g., ‘British,’ ‘Institute,’ or ‘Tribunal’).
•         Implying a connection with the UK government, devolved administrations, or specified public authorities.
•         Using words representing regulated activities.
•         Including words that could be an offense.

Any business that wants to use the sensitive word in their company name must provide information intended to support the proposed name. The company can issue a letter or email of non-objection or supporting evidence from the specific body.

The company name is too similar to another company

Companies House does not allow duplicate or too similar names unless the new company is part of the same group as the original company

The application will be rejected if Companies House considers a company name to be the ‘Same as’ or ‘Too like’ of an original company. For example:

•         If the original company name is ‘Servy Ltd’, Companies House will not accept an application of a company with the name ‘Servy UK Ltd’. These are considered as ‘Same as’ names.
•         Additionally, if the original name of a company is ‘Biometrics Technologies Ltd’ Companies House will not accept an application of a company name ‘Bio Tech Ltd’. These will be considered as ‘too like’ names.

2. Wrong addresses

Incorrect registered office or director addresses can result in rejection. A registered office address must be in the same UK jurisdiction where the company is registered (England and Wales, Wales only, Scotland, or Northern Ireland).

This, however, does not mean that the business needs to be physically located in the same country where the business trades.

Your company formation application may be rejected when you provide a registered office address outside the UK and do not complete the city or town field.

Also, directors and shareholders cannot use business addresses as their residential address. Directors and shareholders must submit their appropriate residential address. Unlike registered office address and correspondence address residential addresses are not made publicly available on Companies House website.

3. Underage company directors

Directors must meet legal age requirements. If a minor is listed as a director, the application may be declined. Under section 157 of the Companies Act 2006, directors must be at least 16 years old.

4. Company officers’ details

During the application process, full names of directors and company secretaries’ details should be used. If you use abbreviations in their names, your application may be rejected.

Additionally, you must provide the correct address of the director. The director’s residential address must match their country of residence.

5. Company shares

A limited company that is limited by shares must issue at least one share. During the incorporation process, all shares must not be split into percentages or shared between more than one person. If you do not issue at least one person the whole share, your application will be rejected.

6. A PO box address is used as the registered office

Companies House will reject any company formation application that includes a P.O. Box address as their registered address. The registered office address must be a physical location where official company documents can be delivered.

7. Adding your company as a shareholder

Companies House rejects applications where a company chooses to add itself as a shareholder. Regardless of how many shares they allocate themselves, the application will still be rejected. Companies can’t issue shares to themselves but they can hold shares in other companies.

8. Incorrect articles of association

Articles of association is a written document that highlights rules about how a private limited company will be operated and it is agreed upon by the shareholders or guarantors, directors, and the company secretary.

Article of association is a complex document that many company owners may often make mistakes if not guided leading to the formation being rejected. With the help of a company formation agent, business owners can use the correct document and be guided through the process.

Some business owners choose to register using their own bespoke articles of association. Because it is a complex document, this often results in mistakes being made and the formation being declined.

9. Missing People with Significant Control (PSC)

A PSC is anyone who has the right to appoint and dismiss the majority of the board directors, has more than 25% of shares in the company, and has more than 25% of voting rights in the company. Companies and LLPs must declare PSCs during the company formation process.

10. Missing data

It is much easier to make mistakes such as forgetting to fill in certain important data. However, this may mostly happen to postal applications rather than an online application. You cannot progress through the online form unless you complete each required section fully.

These simple mistakes and oversights can easily be avoided with early preparations and attention to detail. Using a reputable and experienced cheap company formation agent the risk of rejection is significantly lower.

To know that your company formation has been rejected, you will receive a notification in your email if you used an online application and by post if you used the postal incorporation process.

It is best to rely on professionals for important registrations like company formation to ensure smooth and hassle free completion. BusinAssist offers excellent company formation services at an affordable rate to ensure your company is incorporated successfully and without any errors.

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