Abbreviated Accounts

Small or medium sized companies are entitled to submit abbreviated accounts to the Companies House. This is a shortened version of accounts containing less information than full accounts, e.g. the full profit & loss account.


A person who is trained and qualified to keep financial and accounting records for individuals and businesses. Accountants can offer an extensive range of services, from straight-forward book-keeping to auditing and management consulting.

Accounting Period

This is a period with reference to which United Kingdom corporation tax is charged. The period runs from one accounting reference date to the next. It can not be less than 6 months or more than 18 months. The Provisions for governing the accounting period are contained in section 224 and Part VII of the Companies Act 1985.

Accounting Reference Date

The accounting reference date is the date to which the company’s accounts will be drawn up each year – the company’s financial year end. See s 224 of the Companies Act 1985.

Alternate Director

An alternate director is a person who is appointed to attend a board meeting on behalf of the director of a company where the principle director would be otherwise unable to attend. An alternate director can vote at board meetings and carry out the same functions as his appointing director in his absence. The alternate carries full legal responsibility and liability as a director. Sometimes alternates may only be appointed from other members of the board to avoid the introduction of outsiders.

Annual Accounts

This is a financial summary of the state of affairs of a company over the course of a year. It includes a profit and loss account, a balance sheet and a statement of cash flows (see also “Abbreviated accounts”). All limited and public limited companies must send their accounts to the Registrar. Annual accounts must also be submitted to Revenue and Customs for tax calculation $purposes. There are strict deadlines for filing annual accounts and fines can be imposed for late filing.

Annual General Meeting (AGM)

An AGM is a regular meeting of the company’s members held once in each calendar year under the Companies Act 1985. At the AGM members usually deal with matters such as the ratification of the previous year's accounts (also called financial statements), the Annual Report, appointment or termination of directors and the appointment of auditors and generally discussing previous and future activities of the company.

Annual Report

A document which a company (the company’s directors) present at its Annual General Meeting for approval by its shareholders. The report is made up of reports and of financial statements, sometimes including the auditors’ report, the directors’ report, a mission statement, the balance sheet, etc.

Annual Return

The annual return (Forms 363a or 363s) is a documents that a company must deliver every year to Companies House. An annual return is a snapshot of general information about a company's directors and secretary, registered office address, shareholders and share capital. If you file the annual return late, or not at all, the company and its director(s) and secretary can be prosecuted.


Arbitration is a process for the resolution of disputes outside of the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound.


An Arbitrator is a disinterested person selected by agreement of contesting parties (or by the court) to hear and settle some disputed question between them.

Articles of Association

The articles are a part of the company’s constitutional documents together with the Memorandum of Association, both of which must be filed at Companies House on incorporation. The articles regulate how the company will be managed by its officers and members. Table A prescribes a standard form of Articles of Association for private limited companies (see also “Memorandum of Association”).

Audited Accounts

If the company’s annual turnover exceeds £1,000,000, its accounts must be audited by an appointed accountancy firm. Companies whose turnover is less that £90,000 can dispense with audit completely. Companies whose turnover is between £90,000 and £1,000,000 can claim exemption from audit if they have a report by a qualified accountant.


An audit is an independent assessment of the fairness by which a company's financial statements are presented by its management. It is performed by competent, independent and objective person or persons, known as auditors or accountants, who then issue a report on the results of the audit.

Authorised Share Capital

The amount of share capital stated in the memorandum of association is the company's 'authorised' capital. The company can issue shares to its shareholders up to the amount of the authorised share capital.


Balance Sheet

A statement of the book value of all of the assets and liabilities (including equity) of a business or other organization or person at a particular date, at the end of a period such as an Accounting Period. A balance sheet is often described as a "snapshot" of the company's financial condition on a given date, all that the company owes and owns.


Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due. Bankruptcy is a legally declared inability or impairment of ability of an individual to pay their creditors. The process of bankruptcy is currently governed by the Insolvency Act 1986. Once declared bankrupt, an individual may be restricted from acting as a director of a company for a period of time of 5 years.

Board of Directors

The company is managed by the board of directors, who are officers of the company. The directors are appointed by the shareholders. The directors’ powers and responsibilities are collectively exercised by the board. Directors of public companies generally have to be re-elected by shareholders every 3 years which is usually just a formality.

Business Assets

All the assets that are used in an economic undertaking for business purposes, including tangible property (e.g. equipment, stock, plant and machinery) and intangible property (e.g. goodwill, contractual debts owed to the company, intellectual property). Where a business is referred to as a going concern it means it carries the benefit of orders, contracts, customers and other aspects of revenue generation on a continuing basis.


Certificate of Good Standing

A Certificate of Good Standing confirms the company name, company number and date of incorporation and it certifies that the company has been in continuous and unbroken existence since the date of its incorporation. It also states that no action is currently being taken by the Registrar of Companies for striking the company off the register and dissolving it as defunct, and as far as the Registrar is aware, the company is not in liquidation or subject to an administration order, and no receiver or manager of the company's property has been appointed. This certificate will not be issued if the company is not up to date with the filing of annual returns and accounts.

Certificate of Incorporation

A Certificate of Incorporation will be sent to the company by the Companies Registry on first incorporation and on any change of name. The certificate includes the company number, name and date of incorporation.


A chairman is appointed by the directors from their number and officiates as chairman of meetings of the directors and shareholders. He may have a casting vote on a voting tie, but his role is primarily procedural, he does not carry greater obligations or legal responsibility than other directors.


A trust, company or unincorporated association established for charitable purposes only. To be registered as a charity, the organisation must be recognised by the Charity Commission for England and Wales or, in Scotland, by the Office of the Scottish Charity Regulator or, in Northern Ireland, by the HM Revenue and Customs.


In the UK, a company is a separate legal entity incorporated under the Companies Acts. Separate legal entity means that the company can act on its own behalf, separately from the persons who own or manage it, can have its own assets and liabilities and hold property as an owner. Incorporation is a procedure to enter a company on the register at the Companies House; the company comes into existence when it is registered and a certificate of incorporation is issued in that respect. When a company is a limited liability company, this means that its proprietors control the company but bear liability for its debts only to a limited extent.

Company Seal

This is a device for impressing the company's name onto a red seal attached to the document in a position where two directors or one director and the secretary can sign as witnesses. Traditionally a company executed deeds and other instruments, including share certificates under seal. The mechanical seal is no longer necessary as a company seal (see s 36A of the Companies Act 1985 abolishing the requirement to affix company seals to a deed).

Company Secretary

The company secretary is an officer of the company. The company secretary ensures that the company complies with relevant legislation and regulation, and keeps board members informed of their legal responsibilities. They are the company’s named representative on legal documents, and it is their responsibility to ensure that the company and its directors operate within the law. It is also their responsibility to register and communicate with shareholders, to ensure that dividends are paid and to maintain company records, such as lists of directors and shareholders, and annual accounts.

Companies House

The Companies House is the official government register of UK companies. The main functions of Companies House are to incorporate and dissolve limited companies, examine and store company information delivered under the Companies Act and related legislation and make this information available to the public.

Compulsory Liquidation

Compulsory liquidation (or compulsory winding up) - this is when the court makes an order for the company to be wound up (a 'winding-up order') on the petition of an appropriate person. If there is more than one director, all the directors must jointly present the winding-up petition - a single director cannot present a winding-up petition.

Controlling Interest

A person has a controlling interest in a company limited by shares if he or she owns more than 50% of the issued share capital of the company and when voting at general meetings can exercise voting power of more than 50%.

Corporation Tax

Corporation tax is a tax levied in the United Kingdom on the profits made by UK-resident companies and associations. It is also levied on non-UK resident companies and associations which trade in the UK through a permanent establishment. The main rate of corporation tax is 30%. However, lower rates are sometimes applicable.

Credit Note

A credit note is a monetary instrument issued by a seller that allows a buyer to purchase an item or service from that seller on a future date. Credit notes may be issued by a seller as a goodwill gesture to a buyer who wishes to return previously purchased merchandise (instead of cash repayment) in circumstances where the original sales agreement did not include an explicit refund policy for returned items. In such circumstances, a credit note of value equal to the price of the returned item is usually issued allowing the buyer to exchange his purchase for other items available with the sale.


A creditor is a person to whom money is owed whether in exchange for goods or services or under a loan agreement.



A debenture is a document or instrument that creates indebtedness owing by the company to the debenture holder, usually carrying interest and maturing on a particular date when the principal amount is repaid. Debentures tend to be secured by a floating charge and/or a collection of fixed charges over the company's assets, but they don’t need to be secured.


A director is an officer of the company charged with the conduct and management of its affairs. The directors collectively are referred to as a board of directors. Sometimes the board will appoint one of its members to be the chairman of the board. A director must be appointed in accordance with the provisions of the articles of association.

Directors’ Register

The Directors Register is one of the statutory registers that the company is required to maintain showing details of the directors and secretary. Name, address, occupation, nationality, date of birth and other directorships are recorded. (Sections 288 and 289 Companies Act 1985).


A distribution of profit earned by the company to its shareholders. A dividend must be declared by the directors from distributable profits.


This is a process by which the company ceases to exist. A company is dissolved when it is removed from the companies’ register. Once removed, a company can only be restored to the register by a court order.

Double Taxation Relief

Double taxation occurs when income is taxed both by the taxpayer's country of residence and in another country where the income arises. The purpose of double taxation relief is to remove or reduce the disincentive that this double taxation represents to outward investment. Double taxation relief can be obtained when agreements exist between countries whereby tax already paid on income in a foreign country is offset against the same tax liability in the home country or vice versa.


Extraordinary General Meeting (EGM)

A meeting of company members other than an annual general meeting.

Extraordinary Resolution

A resolution at a general meeting (AGM or EGM) which must be passed by no less than 75% of members voting at that meeting. A meeting at which an extraordinary resolution is to be passed must be called by a notice specifying the exact working of the resolution. All extraordinary resolutions must be filed at the Companies House within 15 days of them being passed.


Fiduciary Duty

Company directors owe a duty to the company to act in its best interests. They must not put their personal interests before the duty, and must not profit from their position as a fiduciary, unless the company (i.e. the shareholders) consents. The fiduciary relationship is highlighted by good faith, loyalty and trust.

Financial Year

The period starting and ending on the Accounting Reference Date in relation to which the company produces its annual accounts.

Floating Charge

This is a type of security granted by a company over its assets. The difference from a fixed charge is that the floating charge is not attached to any specific assets, but can attach over a whole class of assets owned by the company on the moment of crystallization of the floating charge. Crystallization means that whatever assets are touched by the floating charge can now be used to repay to debt that was secured by it, even though they could have been disposed of by the company before crystallization.


General Meeting

This is a meeting of the shareholders for the purpose of passing resolutions and exercising their power of control over the company. There are two kinds of a General Meeting: Annual and an Extraordinary. General Meetings are usually called by sending a formal notice to all members. Members can vote at General Meetings in person or by appointing a proxy.


Holding Company

Broadly, this is a company that owns or has an interest in one or more subsidiary companies. A definition of a Holding Company is provided in s. 736 of the Companies Act 1985.



Incorporation is a process of creating and registering a company. In the UK a company is incorporated when it is entered on the Companies Register. The process requires the applicant(s) to submit a memorandum and articles of association and any statutory forms and fees (e.g. forms naming the first director and secretary of the company, and the first subscribers). The documents are sent to the Registrar and once the company is listed on the Register, it is incorporated. A certificate of incorporation is evidence of incorporation.


Insolvency is a situation when a company is unable to pay its creditors what it owes to them. When the assets are less than liabilities, this is commonly referred to as 'balance-sheet' insolvency. When the company can no longer meet its debt obligations when they come due, this is commonly referred to as 'cash-flow' insolvency. A company which is insolvent may be put into liquidation (sometimes referred to as winding-up).

Issued Share Capital

As opposed to the Authorised Share Capital, this is the amount of shares that has been actually allotted to the shareholders. The division of the issued share capital indicates the voting power of the shareholders (see also Controlling Interest).


Joint and Several Liability

This liability means that two or more people together are liable for a debt. The creditor can sue either one or all of them to recover the debt. If the creditor sues one of the parties and recovers the debt in full, that party can sue all the others to make them contribute towards the debt in a certain proportion.

Joint Venture

An entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. The venture can be for one specific project only, or a continuing business relationship. This can take form of a contractual arrangement, partnership or a company.



Lien is a specific type of security interest, being a passive right to retain (but not sell) property until the debt or other obligation is discharged.

Limited Liability

A concept whereby a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership with limited liability. A shareholder in a limited liability company is not personally liable for any of the debts of the company, other than for the value of his investment in that company. The same is true for the members of a limited liability partnership and the limited partners in a limited partnership. By contrast, sole proprietors and partners in general partnerships are each liable for all the debts of the business (unlimited liability).


Liquidation refers to the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation can either be voluntary or compulsory. Usually a liquidator is appointed to manage the company’s assets in liquidation and distribute the proceeds to the creditors and shareholders.


Memorandum of Association

This is one of two constitutional documents required to incorporation a limited company. The Memorandum contains the intended name of the company, the address of its registered office, authorised shares capital and the classes of shares, the statement of limited liability and the objects of the company (description of what the company may do).


Under the Companies Act 1985 every general meeting and board meeting must be have a record of the proceedings. This is usually a written summary of the meeting prepared by the secretary and containing the resolutions made at the meeting and any statutory declarations that would have to be made.


Nominal Value

This is the value of a share as stated in the memorandum and on the share certificate (if any). The shares can be issued to shareholders at nominal value or at a premium (i.e. at a price above what is indicated on the shares).

Non-Executive Director

A non-executive director or outside director is a member of the board of directors of a company who does not form part of the executive management team. He or she is not an employee of the company or affiliated with it in any other way.



Officer is a person appointed to a position in the company such as director or secretary. They owe duties to the company and the shareholders and carry out the duties prescribed by statute.

Ordinary Resolution

A resolution passed at a shareholders meeting by a simple majority, i.e. majority not less than 50% plus one vote.

Ordinary Shares

An ordinary share is a default type of share issued by a company. An ordinary share carries the right to vote at general meetings at one vote per share, receive dividends and participate in the division of assets if a company is wound-up.


Parent Company

This is a company that owns one or more subsidiary companies and has majority control over them. The definition of a parent company can be found in s. 736 Companies Act 1985.


A partnership is a business carried on by two or more persons with a view to a profit, where the partners share liability and profits under an agreement. A partnership arises when the requirements in s1 Partnership Act 1890 are fulfilled. The partnership can be governed by a partnership agreement or by a tacit agreement between the parties. Ordinarily partnerships do not provide limited liability, unless they are a limited liability partnership (LLP).

Private Limited Company

This is a Company (see Company) where members benefit from a limited liability and whose shares cannot be offered to the general public.

Power of Attorney

A document given by one person (the Donor or Grantor) to another person (the Attorney), which is an authorisation to act on someone else's behalf in a legal or business matter.

Public Limited Company

A Company that offers limited liability to its members and is permitted to offer its shares for sale to the general public. There a strict requirements and regulations applicable to public limited companies, e.g. a minimum capital investment of £50,000.



This is a minimum number or persons (shareholders or board members) that must be present at a meeting in order for the meeting to be valid. Usually the quorum fixed by the Articles of Association is two, but the number can be reduced by changing the articles.



This is a situation when one or more of the company’s assets are subject to a charge or a mortgage that secures a loan to the company. If a company defaults on its loan repayment, the charge holder can appoint a receiver to sell the charged asset and recover the loan amounts from the proceeds.

Redemption of Shares

A company can buy back its own shares buy repaying the value of the shares to the shareholders. Such shares are called redeemable shares and the process is the redemption.

Registrar of Companies

This is the official government body responsible for maintaining a register of all companies incorporated in the UK. It is also called the Companies House.

Registered Office

This is the official address of a company that is held on the Companies Register. All statutory documents from the Companies house will be sent to this address. This address will show up on all public records.

Register of members

This is a statutory register that all companies must maintain under s. 352 Companies Act 1985. The register of members must contain the following information: the shareholder’s name, address, number of shares held, amount paid up on the shares, and the dates what the shares where bought or transferred.


This is a decision of either the members of the company at a general meeting or of the board at a board meeting. See also: Extraordinary Resolution, Special Resolution, Ordinary Resolution.



This a unit of ownership in a company that has an economic value. Shares in a company usually give the holder a right to vote and exercise control of the company; receive dividends and capital distributions from the company. Each share has a nominal value and is a part of the authorised share capital. Ownership of shares is evidenced by an entry on the members’ register and a Share certificate. Shares can be sold, transferred or transmitted under the provisions of the Articles of Association. Shares of private limited companies cannot be offered for sale to the general public, but shares of public companies can.

Share Capital

Share capital refers to portion of a company's equity that has been obtained (or will be obtained) by trading shares to a shareholder for cash or equivalent item of capital value. See also Authorised Share Capital and Issued Share Capital.

Share Certificate

This is a document issued to a shareholder on purchase of shares of a company. The share certificate must show the company name, incorporation number and date, the authorised share capital, the amount and the type of shares issued, the total value of the shares, the numbers of shares issued, the name and address of the shareholder and a signature from the director and/or a company seal.


This is a person or a company who owns at least one share in a company.