Setting up a UK subsidiary company brings about some legal and regulatory requirements, and some of these requirements could general and some specific to the industry concerned. Since these rules vary within industries, the company’s directors should carefully consider issues such as data protection legislation compliance, e-commerce legislation and commercial contracting anti-bribery rules. A private limited company is the most used form for a UK subsidiary and the most significant paper for the incorporation is the articles of association which notes the correlation between the stockholders and the company.
The Article of Association (AOA) takes three main approach. That is:-
-The ‘Model Articles’
-A set of standard articles
-And a full bespoke set of articles.
However, to protect the company and the directors from fines, and even criminal proceedings some basic statutory requirements are needed and for UK subsidiary company, statutory compliance regime is relatively practical as compared to other regimes in Europe.
These statutory requirements include:
-Upholding the statutory registers of the company
-Compliance with the Companies Act 2006
-And related filings for Companies House.
With regards to the rules relating to conflicts of interest, all directors of a UK subsidiary company are required to act in the best interests of the UK Company and not just the group as a whole. Failure to do this, the directors would be in breach of their legal obligations by virtue of section 175 and 177 of Companies Act 2006.
Accounting records is a must requirement for every UK subsidiary company to keep. This is to show and explain their transactions, financial position of the company and to ensure they comply with the requirements of the 2006 Companies Act and must contain day to day running of all expenditures, assets and liabilities of the company. In UK, It is a criminal offence if any UK subsidiary company does not met this requirement by virtue of Section 386 Companies Act 2006.
Their Corporate tax solely depends on the tax residence of the company. That is if the directors are UK residents who make their decisions there, the company will pay UK tax. On the contrary, if decisions are taken by the parent overseas company, they would be taxed resident overseas. However, the UK Company is also required to register for value added tax which is currently at 20% although there may be some reductions and exceptions.
Finally, upon the employment of employees, the UK subsidiary company should prepare a contract of employment with each of its employees. The employer is also required to register with the HM Revenue & Customs who will manage the salaries and the employee’s payment of National Insurance and Income Tax either quarterly or on monthly basis.