Doing Business In

The legal system of England and Wales is a common law legal system established by:

• case law;
• acts of Parliament;
• retained EU law; and
• international law.

The Retained EU Law (Revocation and Reform) Act 2023 came into force on 2 January 2024 and has changed the way in which law derived from the European Union is to be considered and interpreted in the United Kingdom.

The Companies Act 2006.

The Companies Act 2006 is an act of Parliament.

There is no one enforcement agency responsible for enforcing the Companies Act 2006. The Economic Crime and Corporate Transparency Act 2023 (ECCT) was enacted on 26 October 2023 and introduced wide-ranging provisions relating to economic crime and corporate transparency. Under the ECCT, the registrar of companies in the United Kingdom will be given further powers to regulate the affairs of companies – the provisions of the ECCT are being brought in over the coming months/years.

There are three main types of business structure:

• the partnership, which has no legal personality and where individuals share the profits, responsibility, debts and liabilities of the partnership as partners;
• the limited liability partnership (LLP), which shares features of a partnership and a limited company, as the partners’ liability is limited to the amount they invest in the LLP while the LLP has legal personality; and
• the limited company, which is most commonly formed as a private company limited by shares or a public company which has more stringent requirements but through which the company can offer its shares to the public.

The minimum capital rule requires that those incorporating a business place assets of at least a specified minimum value into the corporate asset pool. In the United Kingdom, this has been placed at £50,000 (or the prescribed euro equivalent) for public limited companies; no minimum capital requirement is imposed on private limited companies.

In a limited liability partnership, there is no concept of share capital but there must be some contribution from a partner which is known as the partner’s (or member’s) capital. However, there is no minimum requirement of capital for registering a limited liability partnership.

There is also no minimum capital requirement for the establishment of a partnership.

A partnership is created by two or more persons coming together with a view to profit – there is no registration requirement, so a partnership may be formed instantaneously. The partnership must:

• choose its name;
• choose a ‘nominated partner’; and
• register with His Majesty’s Revenue and Customs.

The partners may to wish to create their own partnership agreement to govern the partnership. Each partner must register as self-employed and submit a separate tax return.

An LLP:

• must have a name, at least two ‘designated members’ and a registered address;
• is advised to have an LLP agreement governing the LLP; and
• must register with Companies House.

Registration can be requested on a same-day basis.

The most common entity for investors to use is either a private company limited by shares or a public company limited by shares:

• A private company must register the company name, registered address, registered email address, at least one director, at least one shareholder, details of the company’s share capital, details of the person(s) with significant control of the company and articles of association governing how the company is run (if the company does not want to use the model articles which apply unless otherwise provided) at Companies House.
• In addition to the above requirements for a private company, a public company limited by shares must have two directors and a secretary and a minimum nominal value of allotted share capital of £50,000, of which each share must be paid up at least as to one-quarter of its nominal value and the whole of any premium.

Registration of a private or public company can be completed on a same-day basis.

The Economic Crime and Corporate Transparency Act (ECCT) introduced wide-ranging provisions relating to economic crime and corporate transparency. The measures under the ECCT are being introduced in stages and we expect that certain new requirements surrounding the incorporation of new entities will be adopted in due course. For example, we expect new identification requirements in respect of directors, officers and persons with significant control to be introduced.

There are no restrictions on non-UK individuals or entities establishing a UK business structure referred to in question 2.3.

An overseas company may carry on business directly in the United Kingdom but it must register with Companies House if it has some degree of physical presence in the United Kingdom, such as a place of business or branch where it carries on business.

Partnerships, limited partnerships, unincorporated bodies and government agencies cannot register in the United Kingdom as an overseas company.

In addition to incorporating/registering a UK business structure referred to above, or registering an overseas company at Companies House, the typical way to carry on business in the United Kingdom is via either an agency or a distribution route.

Private companies and public companies are managed by directors who make decisions at board meetings or by written resolutions. However, certain decisions must be made by shareholders at a general meeting or by written resolution. Shareholder decisions may pass by ordinary resolution (ie, approved by over 50% of the shareholders) or by special resolution (ie, approved by not less than 75% of the shareholders), depending on:

• the type of decision;
• the company’s articles of association; and
• the Companies Act 2006.

Public companies may not make decisions by way of written resolution and instead a resolution of the members must be passed at a meeting of the members.

A partnership and a limited liability partnership (LLP) are managed in accordance with the terms of the agreement that governs those business structures. If there is no agreement in place, partnerships are managed by each of the partners.

LLPs must have two designated members. If there are no designated members (or one), all members of the LLP are viewed as designated members. The designated members are responsible for:

• facilitating the completion and submission of annual accounts/confirmation statements;
• appointing and removing the auditors;
• upkeeping statutory registers;
• notifying Companies House of any changes in membership;
• registering the business for self-assessment with His Majesty’s Revenue and Customs (the designated members must also register themselves for self-assessment); and
• applying to have the LLP removed from the register.

Generally speaking, there is no legal recommendation or mandate for specialist committees to be formed for particular enterprises. However, it is possible to do so and the UK Corporate Governance Code – which companies listed on the London Stock Exchange should comply with or explain any non-compliance – recommends that certain committees be established. For example, many public companies will establish audit committees to oversee and work on audit procedures in respect of the company.

Yes, although a corporate director cannot act as a sole director as all companies must have at least one director who is a natural person. It has been proposed that the ability to appoint corporate directors be removed.

An individual may become a company director unless he or she is:

• disqualified from being a company director;
• an undischarged bankrupt (unless allowed by the court);
• under the age of 16; or
• instructed otherwise by the courts.

We expect that new measures under the Economic Crime and Corporate Transparency Act will be brought in that will require all new and existing company directors to verify their identity.

All private limited companies must have at least one director and may also decide to appoint a company secretary (although this is an optional appointment). At least one director of all companies must be a real person (it is currently possible for a company to act as a director). One need not have any specific qualifications to be appointed as a company director or company secretary of a private limited company, although a person should be aware of the responsibilities of a company director before taking on the position; this is different for a public company, where a company secretary must be appropriately qualified. There is no requirement for a director to be based in the United Kingdom or to be a UK national.

Directors are generally appointed and removed in accordance with the articles of association of the relevant company. See question 3.4 for restrictions on the appointment of directors.

The primary role of a director is to manage the operations of a company. Directors also have a number of key responsibilities and duties which are set out in the Companies Act 2006, as follows:

• to act within their powers and to exercise their powers for the purposes for which they are given;
• to promote the success of the company for the benefit of the members as a whole;
• to exercise independent judgement;
• to exercise reasonable care, skill and diligence;
• to avoid conflicts of interest;
• to declare interests in proposed or existing transactions or arrangements with the company; and
• not to accept benefits from third parties.

Generally, no. However, directors must:

• comply with their key duties (see question 3.6); and
• adhere to any restrictions specified in the articles of association of a company.

Please see question 3.6 for a list of the duties of directors. The duties are owed to the company. However, in certain situations, directors instead will owe their duties to creditors of the company.

There are numerous civil and criminal liabilities to which directors may be subject; it is impossible to list them here.

There are no local residency or nationality requirements imposed on shareholders from a UK company law perspective. However, the National Security and Investment Act 2021 introduced a new regulatory regime pursuant to which the transfer of shares in companies operating in certain sectors (known as the ‘mandatory sectors’), or where there is considered to be a national security risk as a result of the proposed transfer of shares, can be restricted on the basis of national security concerns.

There is no statutory restriction on a person under the age of 18 (known as a ‘minor’) being a shareholder of a company; but the general lack of capacity of a minor means that it is unclear how a minor can contractually agree to hold the shares and therefore many companies do not permit minors to hold shares.

Upon bankruptcy, the bankrupt’s interest in shares automatically vests in the trustee in bankruptcy, who has a right to be registered as the legal holder of those shares.

Shareholders of a company have the overall power to appoint and remove directors and therefore, if a director does not act in a way the shareholders agree to, they can change the directors.

Shareholders of a company can require the company to circulate a resolution to be voted on at a meeting (or in the case of a private company, by written resolution) where such a request is made by:

• shareholders representing at least 5% of the total voting rights of all shareholders with a right to vote on the resolution at that meeting; or
• 100 shareholders who have a right to vote on the resolution at that meeting and hold shares that have been paid up an average of at least £100 per shareholder.

Shareholders can also require the company to circulate to other shareholders a statement of not more than 1,000 words on a matter referred to in a proposed resolution (or other matter) to be dealt with at the meeting. The required levels of shareholding for making such a request are the same as above. Shareholders that require further information must engage directly with the company.

Additionally, a company’s articles of association usually provide for shareholders’ reserve powers which specify that shareholders may give a direction to the company’s directors. Any such direction must be given in the form of a special resolution which can be general in nature, but must be sufficiently clear and specific to enable the directors to know how they are to act.

The members of a company may require the directors to call a general meeting of the company.

Two types of resolutions may be put to a general meeting or, in certain circumstances, may be passed as written resolutions: ordinary resolutions and special resolutions. Ordinary resolutions require a simple majority (ie, more than 50% of the votes), while special resolutions require a 75% majority to pass. The constitutional documents of a company may impose higher percentages than these usual ones.

Corporate actions that require an ordinary resolution include:

• authorising directors to allot new shares (except where the company is a private company with only one class of share);
• approving the payment of a political donation;
• approving a loan to, or a substantial property transaction involving, a director;
• approving a payment for loss of office to a director;
• removing an auditor from office; and
• approving a liability limitation agreement between an auditor and the company.

Corporate actions that require a special resolution include:

• amending the company’s articles;
• changing the company’s name (unless an alternative procedure is set out in the articles);
• approving a reduction of capital or share buyback of capital;
• disapplying pre-emption rights; and
• re-registering a private company as public (and vice versa).

Shareholders of a company have the overall power to appoint and remove directors and therefore, if a director does not act in a way in which the shareholders agree to, they can change the directors.

Assuming that there has been no fraud or unlawful actions, or that they have not entered into a contractual arrangement such as a personal guarantee, the liability of shareholders of a limited company is limited to the amount paid for their shares. Further obligations of shareholders are generally set out in either the articles of association of a company or a shareholders’ agreement.

The liability of shareholders for debts and liabilities of the company is limited to the amount paid for their shares, absent any misfeasance.

In relation to private companies, there are formalities that must be followed concerning the issuance of securities. Generally speaking, the directors require authority to allot shares in accordance with the Companies Act 2006. The directors must also comply with the rights of pre-emption that apply to additional allotments of shares, with such rights being specified in the Companies Act 2006. However, it is possible to disapply these statutory pre-emption rights. Other rights of pre-emption can be specified in the articles of association of a company or in a shareholders’ agreement. The directors should also ensure they comply with any other procedures with regard to the allotment of new shares set out in the articles of association.

For listed companies, there is other non-statutory guidance in relation to the authority to allot and issue shares and the amount of shares that may be allotted and issued that should be considered and followed.

Yes, there are rules on the disclosure of shareholdings and stake building in relation to public companies: it is necessary to disclose percentage voting rights held in a public company as certain thresholds are passed. A public company is also given the right, via the Companies Act 2006, to:

• investigate the identity of people that have an interest in its shares; and
• send a notice to such persons requiring them to provide details of their interests in shares in the company.

In addition, all companies must disclose to Companies House the person(s) that hold significant control of them – that is, which:

• hold directly or indirectly 25% or more of the share capital or the voting rights;
• hold the right to appoint or remove a majority of the board of directors; or
• otherwise have the right to exercise significant influence or control over the company.

The shareholders of the company may provide working capital by subscribing for further shares in the company.

A company may also consider a loan to provide further working capital. This could be from:

• the shareholders;
• another entity within the same group; or
• a third party.

In addition, the company may consider:

• overdrafts;
• revolving credit facilities;
• debt factoring (or invoice finance);
• asset refinancing;
• merchant cash advances; and
• tax bill and value added tax funding.

Private companies can return value to their shareholders in several ways, as set out below. As a general rule, companies are bound by strict maintenance of capital rules and can only return value to their shareholders in certain situations.

Dividends: The most popular method of a company returning value to its shareholders is a dividend. A ‘dividend’ is a distribution of a company’s post-tax profits to its shareholders. As with all distributions, in order for a company to be able to lawfully pay a dividend, it must have sufficient distributable profits that are justified by reference to relevant accounts.

Dividends are usually paid in cash but can also be satisfied by the transfer of:

• non-cash assets (dividends in specie, also known as dividends in kind); or
• shares in the company itself (scrip or bonus dividends).

Any dividend paid out by a company will be either:

• a final dividend (ie, dividends paid once a year calculated after the annual accounts have been drawn up); or
• an interim dividend (ie dividends paid at any time throughout the year calculated before the company’s annual earnings have been determined).

Before recommending or declaring a dividend, the company’s articles of association should be checked as they usually contain express provisions regarding dividends. Subject to any restrictions in the articles of association, directors can generally resolve to pay interim dividends; however, final dividends should be recommended by directors but declared by shareholders by ordinary resolution.

Before paying a dividend, the directors should have regard to:

• their common law and equitable duties; and
• their statutory duties under the Companies Act 2006.

Company directors are under a common law duty to safeguard a company’s assets and must also consider the company’s future financial requirements before recommending or declaring a dividend.

Share buybacks: A share buyback is a purchase by a company of its own shares from a shareholder. A limited company is only permitted to purchase its own shares in accordance with Part 18 of the Companies Act 2006. In summary, Part 18 provides as follows:

• Shares must be repurchased either off-market or on-market;
• Shareholder approval is required;
• The shares being repurchased must be fully paid;
• Consideration for the share buyback must be paid in cash at the time of the purchase;
• The buyback must be financed out of:
• • distributable reserves;
  • the proceeds of a fresh issue of shares; or
  • in the case of a private limited company only, capital; and
• Following the repurchase, the shares must be cancelled or, if financed out of distributable reserves, can be held in treasury.

Capital reductions: A capital reduction occurs where a company reduces the amount of its share capital. This may be an option when the company has capital that is surplus to its requirements and that it wishes to return to shareholders.

The amount arising on a capital reduction is treated as a realised profit and, unless otherwise specified, will be credited to the profit and loss reserve of the company. The company may then be able to take further steps to return that value to its shareholders. The company may also opt to return the amount arising on the reduction directly to the shareholders. This is known as a direct payment capital reduction and either cash or non-cash assets may be returned.

A company can reduce its share capital by reducing:

• the number of shares in issue (ie, a certain number of issued shares, whether paid up or unpaid, are cancelled);
• the nominal value of the shares in issue;
• the share premium account;
• the capital redemption reserve; and/or
• the redenomination reserve.

Private limited companies which are solvent can avail of a simplified solvency statement (or ‘self-help’) capital reduction; while public limited companies, companies that are not solvent and companies that wish to cancel all their shares must utilise the more complex court-approved capital reduction route.

Bonus issue: A bonus issue is an issue of new shares (bonus shares) by a company to holders of existing shares in the company, generally in proportion to their existing holdings. No payment is required from shareholders as the bonus shares are paid up using the company’s existing profits or reserves. This procedure can be used to return value to shareholders by subsequently redeeming or repurchasing the bonus shares.

Before a company can carry out a bonus issue, the articles of association should be checked to ensure that the directors have authority to capitalise the relevant profits or reserves and issue bonus shares. The company’s directors must also have the necessary authority to allot the bonus shares.

The directors’ authority to capitalise profits or reserves and issue bonus shares is usually subject to the approval of shareholders by ordinary resolution.

Loans: It is also possible for a company to loan cash to its shareholders. The terms of such a loan should be closely examined to ensure they do not give rise to any tax or legal issues (eg, disguised distributions). The loan can then be waived at a later date, provided that this is done in accordance with the Companies Act 2006.

The National Security and Investment Act 2021 came fully into force in the United Kingdom on 4 January 2022 and is the country’s first standalone national security law. In essence, it requires the notification and approval of certain proposed transactions involving entities operating in any of 17 specified sectors of the economy, including:

• artificial intelligence;
• military and dual use goods;
• transport; and
• data infrastructure.

Any such notifiable transaction cannot proceed to completion without approval having first been obtained from the secretary of state. Any transaction that proceeds without such consent will be void as a matter of law and the parties involved could be criminally liable, in addition to the possibility of turnover-based fines being imposed on the proposed acquirer/investor.

None.

This is not a question that we can comment on.

This is not a question that we can comment on.

All companies must prepare and file annual financial statements at Companies House. There are five sizes of company to consider when preparing the annual financial statements:

• micro-entity;
• small;
• medium;
• large; and
• very large.

It is important to determine the size of company in order to ensure that the relevant regulatory requirements for the preparation and filing of the annual financial statements are applied. The larger the entity, the greater the disclosure requirements. Quoted/listed companies also have additional regulatory requirements.

The Companies Act 2006 recognises two financial reporting frameworks – International Financial Reporting Standards and UK Generally Accepted Accounting Principles – to be used for the preparation of the annual financial statements. It also requires directors to ensure that the annual financial statements give a true and fair view.

All public companies and state-owned companies must have their financial statements audited. Private companies must also have their annual financial statements audited unless they are exempt from audit. Exemption from audit is available for:

• micro entities;
• small companies; and
• dormant companies.

Subsidiary companies can also apply for an audit exemption.

A company’s annual financial statements must be approved by the board of directors and signed on behalf of the board by a director of the company. All companies must file a copy of their accounts and reports with the registrar of companies. Copies of the annual financial statements must also be sent to the company’s shareholders. Companies must file the approved annual accounts at Companies House within the following filing deadlines:

• nine months from the accounting reference date, for a private company; and
• six months from the accounting reference date, for a public company.

See question 6.1.

See question 6.1.

This is not a question that we can comment on.

For UK-incorporated companies listed on the main market in London, there is a legislative requirement to provide enhanced disclosure regarding the pay of directors (both executive and non-executive). The relevant details regarding pay must be disclosed as part of a remuneration report included in the annual report and accounts. This remuneration report is subject to an annual advisory vote at the annual general meeting. Such companies are also legally required to seek shareholder approval for a binding remuneration policy which sets out the limits of pay that can be provided to directors. Shareholder approval may also be required for certain incentive plans which relate to company shares.

Listed companies must also adhere to the remuneration elements of the Financial Conduct Authority Listing Rules and the Market Abuse Regulations. The latter include prohibitions on trading, insider dealing and reporting on share dealings by certain senior executives. The UK Corporate Governance Code also includes provisions in relation to executive pay and these are enforced on a comply or explain basis. Institutional investors also publish detailed guidance on pay – while this is not binding, publications by certain bodies can be very influential.

The disclosure and governance rules relating to other listings (eg, the Alternative Investment Market) and privately owned companies differ but are generally less onerous.

For UK-incorporated companies listed on the main market in London, executive compensation is normally determined by a remuneration committee, which is a sub-committee of the board comprising non-executive directors. The remuneration committee typically determines the pay for:

• the non-executive chair;
• any executive directors; and
• the first layer of management below this level.

The UK Corporate Governance Code provides further guidance on the membership and role of the remuneration committee.

As noted in question 7.1, there are enhanced disclosure requirements and shareholder voting that apply to pay for directors (both executive and non-executive).

For UK-incorporated companies listed on the main market in London, this is a matter for the board.

This is not a question that we can comment on.

Employees hired to work in the United Kingdom under a United Kingdom contract will be covered by UK employment law. We have set out below a summary of the core employment law rights and protections that employees benefit from in the United Kingdom. This is not exhaustive but covers the core areas. All financial figures are the current figures and are subject to review.

There is no general system of employee representation/participation.

If a business chooses to recognise a trade union (or is obliged to do so), a collective bargaining agreement will be signed. The agreement will determine the scope of the issues to which it applies. In very general terms, most trade union arrangements focus on pay, working hours and holidays, with factory management free to decide other matters. Trade unions also have a right to be involved in disciplinary and grievance issues.

Unfair dismissal: Generally, an employee who has two years’ service has the right not to be unfairly dismissed (this service requirement is not needed in certain circumstances).

The dismissal of a qualifying employee will be unfair unless:

• the employer can show that the reason for the dismissal was one of the five potentially fair reasons – that is:
• • capability or qualifications;
  • conduct;
  • redundancy;
  • breach of a statutory duty or restriction; or
  • some other substantial reason; and
• the tribunal finds that, in all the circumstances, the employer acted reasonably in treating that reason as a sufficient reason for dismissal.

Dismissals for certain reasons are deemed automatically unfair and, in most such cases, employees do not need a qualifying period of employment. These include dismissals for reasons connected to:

• pregnancy or childbirth;
• health and safety activities;
• whistleblowing;
• the exercise of various time-off rights; or
• the assertion of a statutory right.

If an employment tribunal finds that the dismissal is unfair, it can order the employer to:

• re-engage or reinstate the employee; or
• (as is more likely in practice) pay the employee compensation.

In most cases, where an employee has been held to have been unfairly dismissed, the remedy will be compensation. This will usually consist of:

• a basic award (up to £21,000); and
• a compensatory award (capped at the lower of either 52 weeks’ gross pay or ££115,115).

Associated costs: The costs of a dismissal will depend on the reason for the dismissal. Potential costs will include:

• notice pay;
• redundancy pay; and
• payment in lieu of accrued but untaken holiday as at the date of termination.

Collective dismissals: Where an employer proposes to make 20 or more redundancies in a 90-day period, it must consult with appropriate representatives of affected employees for a minimum of 30 days or 45 days (for 100-plus redundancies). Appropriate representatives will be either:

• trade union representatives if there is a recognised trade union; or
• elected employee representatives if there is not.

No decision on the redundancies should be made until the collective consultation is complete.

After the conclusion of collective consultation, a period of individual consultation (no fixed period – say, two to four weeks depending on employee numbers and circumstances) should be undertaken before notice of termination is served.

This is not a question that we can comment on.

This is not a question that we can comment on.

Corporation tax is one the core taxes. The main rate is 25% from 1 April 2023. A UK-incorporated and/or tax resident company is subject to corporation tax on worldwide profits and gains with credit granted for foreign taxes paid. Certain foreign profits and losses arising from a permanent establishment may be excluded by making an irrevocable election. Capital gains form part of a company’s taxable profits. A non-resident company is subject to corporation tax and/or UK income tax at 20% only in respect of UK-source profits.

A diverted profits tax of 31% applies where multinational companies use artificial arrangements to divert profits overseas to avoid UK tax.

Controlled foreign companies can be brought within the charge to UK corporation tax. There is a ‘gateway’ test and a number of provisions that may apply to exempt a company from the rules.

Certain industry-specific surcharges and rates are also applicable.

OECD Pillar 2 adoption provisions were included in the Finance (No 2) Act 2023 and have been enacted into law. This resulted in a global minimum tax rate of 15% and incorporated qualified domestic minimum top-up taxes into UK law. Further legislation is expected to be enacted that will implement the under-taxed profits rule.

Businesses are generally subject to a wide variety of other taxes, such as:

• business rates, which apply to property;
• employer taxes, such as national insurance contributions; and
• indirect taxes, which may or may not be fully recoverable.

In terms of transfer taxes, stamp duty at 0.5% applies to the transfer of UK shares and is payable by the transferee.

Stamp duty land tax (SDLT) is charged on transfers of real property (residential and non-residential) in England and Northern Ireland. Land and buildings transaction tax and land transaction tax are charged instead of SDLT on Scottish and Welsh property, respectively.

For residential property, the SDLT rates are between 0% and 12% (increased to 15% for certain property), depending on the value of the property. The rates for non-residential property are 0% to 5%. A 15% rate applies to purchases of residential property valued at more than £500,000 by companies and certain other vehicles, although relief from the 15% rate is available for some businesses.

In certain circumstances, transfers within a company tax group may be free from stamp duty/SDLT.

There are no foreign exchange or capital controls in the United Kingdom.

There is a requirement to notify His Majesty’s Revenue and Customs of certain international transactions whose value exceeds £100 million under the International Movements of Capital Regulations.

There is no branch remittance tax.

Withholding tax applies as follows.

Dividends (0%): There is typically no withholding tax on dividends paid by UK companies under domestic law, although a 20% withholding tax generally applies to distributions paid by a real estate investment trust from its tax-exempt rental profits (subject to relief under a tax treaty).

Interest (0%20%): There is generally no withholding tax requirement in respect of interest payments made to individuals from:

• bank deposits;
• unit trusts;
• open-ended investment companies; or
• peer-to-peer lending.

A 20% withholding tax may apply to other sources of interest.

No withholding tax applies to interest paid to a UK resident company.

Interest paid to a non-resident company is generally subject to 20% withholding tax, unless:

• the rate is reduced under a tax treaty; or
• a domestic exemption applies (eg, to payments of interest other than ‘yearly interest’ or interest on quoted eurobonds).

A reduction of the withholding tax rate under a tax treaty is not automatic; advance clearance must be granted by the UK tax authorities.

The United Kingdom’s domestic implementation of rules based on the EU Interest and Royalties Directive previously provided for an exemption from withholding tax on interest paid to EU resident companies if certain conditions were satisfied and advance clearance was granted. These provisions have been repealed and no longer apply to interest paid as from 1 June 2021 (3 March 2021 in certain circumstances).

Royalties (0%/20%): No withholding tax applies to royalties paid to a UK resident company. Withholding tax at 20% applies to most types of royalties paid to a UK resident individual, with certain exceptions.

Royalties paid to a non-resident are generally subject to a 20% withholding tax, unless the rate is reduced under a tax treaty. Advance clearance is not required to apply a reduced rate of withholding tax under a tax treaty.

The United Kingdom’s domestic implementation of rules based on the EU Interest and Royalties Directive previously provided for an exemption from withholding tax on royalties paid to EU resident companies if certain conditions were satisfied. These provisions have been repealed and no longer apply to royalties paid as from 1 June 2021 (3 March 2021 in certain circumstances).

No withholding tax applies to fees for technical services.

The United Kingdom has a comprehensive treaty network.

Participation exemption: Most dividends, including foreign dividends, are exempt from tax. In addition, capital gains on the qualifying disposal of substantial shareholdings in certain companies are not subject to corporation tax.

No deduction is available for the depreciation or amortisation of land, buildings or other tangible fixed assets. However, tax relief is available for qualifying capital expenditure on plant and machinery (including certain integral features in buildings) at an annual writing-down allowance of 6% (special rate) or 18% (main rate) on a reducing balance basis. From 1 April 2023 onwards, 100% in-year relief is available for capital expenditure incurred by companies on main rate assets and 50% for special rate assets, subject to certain exclusions. Relief is also available at a rate of 3% per annum on a straight-line basis for expenditure incurred on non-residential buildings or structures.

Tax relief is available for accounting amortisation for certain intangible assets; or alternatively, an election can be made for 4% writing down allowances.

Small and medium-sized enterprises (SMEs) undertaking eligible research and development (R&D) can claim an additional deduction on qualifying expenditure at a rate of 86% for expenditure incurred from 1 April 2023. Loss-making R&D-intensive SMEs can claim a payable credit at a rate of 10% from 1 April 2023 if not an R&D-intensive SME. Large companies may claim an ‘above the line’ R&D credit at a rate of 20% for qualifying expenditure incurred from 1 April 2023 (increasing from 13% for expenditure incurred during the period 1 April 2020 to 31 March 2023).

A patent box regime allows companies to elect to apply a corporation tax rate of 10% to all profits attributable to qualifying patents or other relevant intellectual property.

Certain industry-specific tax incentives are also available and additional tax reliefs are available for business operating within designated freeport tax and customs sites. From 1 April 2022, a new beneficial funds regime applies to qualified asset holding companies. The 2023 Budget announced the establishment of 12 tax-incentivised UK investment zones.

This is not a question that we can comment on.

The United Kingdom has a voluntary merger control regime which is contained in the Enterprise Act 2002 (EA 2002). Enforcement of the UK merger control regime is overseen by the Competition and Markets Authority (CMA).

The CMA has jurisdiction over transactions that meet the turnover or share of supply tests set out in Section 23 of the EA 2002. These thresholds are as follows:

• The value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or
• In relation to the supply of goods, at least one-quarter of all such goods which are supplied in the United Kingdom (or a substantial part thereof):
• • are supplied by one and the same person or are supplied to one and the same person; or
  • are supplied by the persons by which the enterprises concerned are carried on, or to those persons; or
• In relation to the supply of services, at least one-quarter of the supply of such services in the United Kingdom (or a substantial part thereof) is:
• • supplied by one and the same person, or for one and the same person; or
  • supplied by the persons by whom the enterprises concerned are carried on, or for those persons.

The CMA has the power to open an initial (Phase 1) investigation where it is of the view that it may have jurisdiction over a proposed or completed transaction. If, following a Phase 1 investigation, the CMA believes that the transaction has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets for goods or services in the United Kingdom, the CMA will refer the transaction to a detailed investigation (Phase 2), unless the parties offer acceptable undertakings.

Notwithstanding that the regime is voluntary, parties to a proposed transaction which are concerned that the CMA may have jurisdiction will usually make completion conditional on:

• receiving clearance from the CMA; or
• the CMA confirming that it will not refer the transaction to a Phase 2 investigation.

Separately, the EA 2002 also includes provisions that enable the secretary of state to intervene in transactions in the case of certain public interest issues – for example, maintaining:

• the plurality of news media;
• the stability of UK financial systems; or
• the United Kingdom’s ability to combat public health emergencies.

Furthermore, if the jurisdictional criteria of the EU Merger Regulation are met, the relevant parties to a proposed transaction will also be required to seek approvals under the EU merger control regime.

The following framework governs public takeovers in the United Kingdom:

• the Takeover Code, which sets out how takeovers of companies to which it applies are conducted;
• the Takeover Panel, which is an independent body designated to oversee the enforcement of the Takeover Code;
• the Companies Act 2006, which provides the statutory underpinning of much of the UK public takeover framework; and
• a number of ancillary regimes depending on the specific situation, such as:
• • the listing regime;
  • the prospectus regime;
  • the disclosure regime;
  • the market abuse and insider dealing regime;
  • the financial services legislation (eg, the Financial Services and Markets Act 2000);
  • the UK merger control regime; and
  • certain court rules (eg, schemes of arrangement).

Given the complexity and the wide-ranging nature of the UK public takeover rules, any person intending to acquire or dispose of a public company in the United Kingdom should obtain professional advice.

See question 10.1

Share sale: There are no specific employee rights/protections relating to a share sale (other than the ordinary employment law rights/protections). From an employee relations perspective, it is best practice to inform the employees about the sale and related information:

• so that they understand the rationale for the sale; and
• to alleviate any concerns about the potential impact of the sale.

Asset sale: The Transfer of Undertakings (Protection of Employment) 2006 (TUPE) may apply to an asset transfer. When TUPE applies, it has the following key consequences regarding employees.

Automatic transfer: The employment contracts of employees who are employed by the transferee and assigned to the business being transferred automatically transfer from the transferee to the transferor on their existing terms, with the exception of certain retirement and pension benefits.

Employees can object to the transfer, in which case they will not become employees of the transferee. Instead, their contracts of employment terminate by operation of law on the transfer date. There is no dismissal. If, however, employees resign in response to a repudiatory breach of contract or to substantial changes in working conditions to the employee’s material detriment, they are treated as deemed dismissals to which the enhanced protection against dismissal applies (see below).

Protection against changing terms of employment: Transferring employees benefit from enhanced protection against changes to their terms and conditions. Changes to terms of employment will be void if the sole or principal reason for the change is the transfer itself, unless either:

• the reason for the variation is an economic, technical or organisational (ETO) reason entailing changes in the workforce; or
• the terms of the contract permit the employer to make the particular variation.

Protection against dismissal: TUPE provides enhanced protection against dismissal over and above general unfair dismissal law for employees with the qualifying period of service. Dismissals will be automatically unfair if the sole or principal reason for the dismissal is the transfer itself. If, however, the reason for the dismissal is an ETO reason, the dismissal will be potentially fair and the general unfair dismissal rules will apply.

Obligation to inform and consult: Under TUPE, both the transferor and transferee must inform and (if necessary) consult with appropriate representatives (recognised trade unions or elected employee representatives (if there is no recognised union)) in relation to any of their own employees who may be affected by the transfer or any measures taken in connection with it.

A minor change has been made to TUPE for transfers taking place from 1 July 2024. These reforms allow employers to consult directly with employees in relation to a TUPE transfer if there are no existing worker representatives in place where the employer is either:

• a small business (with fewer than 50 employees); or
• a business of any size undertaking a small transfer of fewer than 10 employees.

Although there will be a duty to inform on every TUPE transfer, the duty to consult arises only where an employer envisages taking measures in respect of affected employees. Measures could involve:

• changes to terms and conditions;
• headcount reductions; or
• any other change to employees’ employment arrangements.

The information and consultation process formally begins with the provision of certain information to the appropriate representatives. The formal notice includes information about:

• the fact of the transfer;
• the proposed transfer date;
• implications for employees;
• any measures which the transferee or transferor envisage taking in connection with the transfer regarding employees; and
• any agency workers engaged by the transferor or transferee.

The required information set out above must be provided to the appropriate representatives long enough before the transfer to enable the employer to consult with them about it. There is no definition of what ‘long enough’ means – it will depend on the circumstances and the measures that are envisaged.

There is no set duration for the information and consultation process under TUPE. There is no need to reach agreement with the appropriate representatives; simply to engage in meaningful consultation with them with a view to seeking their agreement to the relevant measures envisaged. In practice, this means that the employer must negotiate in good faith on all areas of the proposed measures it intends to take over the TUPE transfer. Once the employer has satisfied this obligation, it can draw the process to a conclusion.

A failure to comply with the information and (where necessary) consultation obligations under TUPE exposes the transferee and transferor to a protective award claim under which each affected employee can seek compensation equivalent to up to 13 weeks’ uncapped pay.

This is not a question that we can comment on.

There is standalone anti-bribery legislation in the United Kingdom in the form of the Bribery Act 2010. There is also legislation proscribing the facilitation of tax evasion, which is set out in the Criminal Finances Act 2017. In both cases, a corporate entity can be liable for failure to prevent bribery or the facilitation of tax evasion (as the case may be). In addition, there are a number of laws (both common law and statutory) that regulate fraudulent conduct that are likely to be relevant in the context of acts of bribery or corruption. United Kingdom law concerning bribery and corruption does, in certain circumstances, have extraterritorial application.

Under the Economic Crime and Corporate Transparency Act, a new offence of failure to prevent fraud is about to come into force; this imposes criminal liability on corporate entities and is, broadly speaking, modelled on the Bribery Act 2010. However, it is broader in that it covers a number of predicate fraud offences that do not specifically concern bribery. At the end of 2023, common law principles concerning the attribution of criminal liability to a corporate for the acts of certain individuals associated with a corporate were codified and significantly broadened in scope.

This is not a question that we can comment on.

The annual accounts of a company must be audited unless the company is exempt from audit. The companies exempt from audit include:

• small companies;
• subsidiary companies;
• dormant companies; and
• non-profit-making companies subject to public sector audit.

These types of companies may still be required to have their accounts audited should the specific requirements for audit exemption not be met for those companies in each case.

In relation to a private company, and assuming that audit exemptions do not apply, an auditor must be appointed for each financial year. However, there is a default procedure pursuant to which the current auditor is automatically reappointed. The appointment must be made before the end of the period of 28 days beginning from:

• the end of the time allowed for sending out copies of the company’s annual accounts and reports for the previous financial year; or
• if earlier, the day on which copies of the company’s annual accounts and reports for the previous financial year are sent out in accordance with Section 423 of the Companies Act 2006.

Auditors may be appointed by either the directors or the members of a company. The secretary of state also has default powers to appoint an auditor in certain circumstances.

In relation to public companies, and assuming that audit exemptions do not apply, an auditor must be appointed for each financial year. A public company auditor remains as auditor until the conclusion of the accounts meeting next following their appointment, unless reappointed.

The appointment of an auditor is generally made by ordinary resolution of the members of the company at the accounts meeting. The secretary of state also has default powers to appoint an auditor in certain circumstances.

Generally, non-audit services should not be provided by an auditor where:

• those services would present a risk to auditor independence; and
• no satisfactory safeguards exist to protect against such risk.

More stringent restrictions exist in relation to the non-audit services that may be provided to public interest entities.

Fees for the provision of non-audit services to public interest entities are capped at 70% of the average of the audit fees paid in the last three consecutive financial years.

The most common method to dissolve an entity is either by way of a members’ voluntary liquidation (MVL) or a strike-off. For insolvent entities, a creditors’ voluntary liquidation may be initiated by a creditor; however, that is beyond the scope of this Q&A.

An MVL involves the appointment of a licensed insolvency practitioner as liquidator. An MVL is only available to solvent entities as the directors must swear a declaration of solvency and the shareholders will pass a special resolution. The liquidator then proceeds to realise the assets and seek out/pay creditor claims before returning any surplus assets to the shareholders. The liquidator affords the directors protection from creditors/claimants. However, there is a cost implication in terms of liquidator fees, together with advertising and other associated fees.

The strike-off process is undertaken by the directors of the company. The company must be dormant – that is, no trading, name change or other activity in the past three months. An application is made to the registrar of companies for the company to be removed from the register. Certain interested parties must be notified of the application. The registrar of companies advertises the intention to strike the company from the register in the Gazette. Following a period of at least two months, a second advertisement is published and upon publication, the company is dissolved.

The strike-off procedure is typically completed more quickly than an MVL and can be used in conjunction with the simplified capital reduction mechanism. However, a claimant emerging after dissolution can, for six years thereafter:

• make an application to restore a company that has been struck off; and
• potentially, pursue the directors personally.

Furthermore, any assets of the company, present or future, are deemed to be ‘bona vacantia’ and vest in the crown.

See question 13.1

This is not a question that we can comment on.

This is not a question that we can comment on.