The company formation UK - Limited Company

Company formation in the UK

A private limited company is a private organisation for small businesses. The owners are limited in a private limited company. Owners are responsible for the shares they own. A private limited company can only have 200 shareholders in total. A private limited company's shareholders are not allowed to sell their shares to the public.


1. A private limited company requires at least two members to start it and a maximum of 200 members.
2. A private limited company can exist with a minimum of two directors in place. You can add any number of directors after the company starts operating.
3. A private limited company can continue to run without its founder even if it passes away or quits the business.
4. Shareholders of a private limited company have limited liability. That means their assets cannot be interfered with if the company incurs losses.

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Limited liability:
The shareholders do not run the risk of losing their assets if the business experiences a loss.

Restriction of selling shares:
In a private limited company, shareholders are prohibited from selling their shares to the general public. The shares can only be owned by members of the private limited company. Shareholder can sell their shares to other members of the private limited company if they want to do so.

A private limited company has the benefit of continuing to exist even after the founder has passed away.

Separate legal entity:
This describes how the assets and liabilities of a private limited company are different from those of the shareholders. The shareholders' assets and liabilities won't be impacted by the use of a private limited company.

There is no minimum capital requirement. You can launch the company with whatever capital the business has.

Share transfers:
When a shareholder wants to transfer their shares to another person, this is known as a share transfer. Shares can be transferred to people within the business, but not to outside parties. When it comes to the transfer of shares, there are a few guidelines and limitations.

Also read: Is it difficult to open a UK offshore bank account?

Rules and Regulations on Share Transfers:

Get consent:

To transfer shares in a private limited company, the person who wants to do so must first obtain consent. A shareholder should get in touch with the private limited company's members and let them know he wants to transfer the shares. The shareholder can transfer the shares to other company members if the other members approve. A unanimous agreement is required from all the shareholders.

Pre-emption rights:

A shareholder may choose to sell their shares. The shareholders of the private limited company will be given priority in this situation when it comes to purchasing shares. Another option is to sell the shares outside of the company if the other shareholders do not want to purchase them.

Family shares:

A shareholder must get approval from other shareholders of the private limited company before transferring shares to family members. The pre-emption rights should be established first by the shareholder.
Some companies do not allow the transfer of shares to people who are not immediate family members. The transfer of shares to family members is prohibited by other companies as well. This is done to protect the shareholder's family ownership. Other companies only allow certain family members to receive shares from shareholders.

Death of a shareholder:

A shareholder who passes away stops being a part of a private limited company. Shares owned by the shareholder must be transferred. Most of the time, the shareholder's shares are transferred to the beneficiaries listed in his will. These individuals can be spouses, kids, or anyone else listed in the shareholder's will.
Pre-emption rights may also be established when transferring shares owned by a shareholder who has passed away. The right to purchase shares first may be granted to shareholders who are still alive.

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