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By miguel-ingles
- In Uncategorized
For financial or legal reasons, it is possible that a business needs to modify the products and services it offers. Otherwise, its profitability would be reduced, and the company would head towards its conclusion. Due to this, I will explain how to change a company’s activity in the UK in this article.
Why Should a Company Change its Activity in the UK?
One of the reasons why an enterprise needs to change its business activity is the passing of new laws. These may hinder the profitability of a company, how the company performs the activity, or they may even illegalise it.
Another motive might be that the market does not need the products and services it offers. So, in order to keep the corporation afloat, you might need to change the business activity.
That being said, this new action, as the previous one, must comply with the requisites the Companies Act 2006 presents.
A New Activity or an Extension of the Previous One?
The first one refers to when a company starts to offer completely different services to those that it provided before. For example, a rain-fed crop plantation (wheat, barley, etc.) now manufactures cars. On the other hand, the second one is when the new activity is similar to the old one. For example, a rain-fed crop plantation now plants fruits and vegetables in greenhouses.
We have to keep in mind the distinction between a new activity and an extension of the previous one. This will determine the documents we will file to the different organizations.
Requisites to Change the Company's Activity in the UK
To change the business activity and, therefore, the object of the company, it is necessary to modify its Articles of Association. To do so, shareholders must vote about this modification.
The Companies House demands companies to communicate any change they make to its object or business activity. To this end, you will send CC04, CC05 or CC06 form, depending on the reasons of the modifications of the Articles of Association: whether they are a decision of the enterprise, an obligation because of new laws or due to a judge’s sentence. You will file the application alongside a copy of the resolution and another of the amended Articles of Association. You must complete the form with all the relevant data about the corporation and the signature of the business’ director.
Be careful, you must send the forms and the copies of the documents in less than 15 days after the company drafted them and/or became effective.
The Companies House will notify you when they receive the request and when they update the registers.
Finally, you might also need to inform His Majesty’s Revenue and Customs (HMRC) about these changes. This is because the taxes you pay might vary. In this article, you can find the different tax rates enterprises pay in the UK.
Steps to Change the Company's Activity in the UK
- For the previously mentioned reasons, a company might need to change its business activity. You will have to investigate other feasible markets (profitability, potential customers, the equipment you will need to perform the new action, etc.) and assess which option will be more beneficial for the business.
- Explain the changes you want to make to the object of the company that the Articles of Association gathers to the shareholders, at least 14 days before voting. It can be online or in an Extraordinary General Meeting. This last option is preferred, especially if the company has many partners or if the proposition requires debate and corrections.
- If the shareholders approve the changes, you will file the corresponding form alongside a copy of the resolution and the amended Articles of Association to the Companies House. You will find the Companies House’s contact details in this link.
- If all the data is correct and complies with the Companies Act 2006, the Companies House will update the register with the new object of the company and the renewed Articles of Association.
- Inform HMRC about these changes if necessary.