Setting Up A UK Subsidiary

The UK is one of the most business-friendly environments in the world and many overseas companies have considered entering the UK market. If you wish your company to expand to the UK, one option that is available to you is setting up a UK subsidiary.

What is a Subsidiary Company?

A UK subsidiary is an officially incorporated body formed in the UK in accordance with local rules on company formation and registration. The subsidiary’s capital is owned either fully by its parent company or run by a company in conjunction with local partners. Whatever form of subsidiary you set up, it is important to remember that it must conform to UK rules and regulations, and not those of the jurisdiction wherein the parent company operates.

One of the main advantages of opening a subsidiary company in the UK is that it remains legally independent from its parent company at all times. This makes it easier for the UK subsidiary to carry out business independently and it also gives the UK subsidiary more creditability when it comes to seeking investment from banks and other sources, as well as when entering into contracts.

As a UK subsidiary is a completely independent body, neither the parent company nor the parent company’s shareholders are liable for any debts or obligations that the UK subsidiary takes on, and this limited liability can be beneficial when launching a new venture in another country. As a company model, the subsidiary also offers a great deal of flexibility and is able to both issue and transfer shares and bonds to partners, investors, staff, managers, or the public and can even apply for a quotation on the UK stock exchange.

How to Set up a UK Subsidiary?

The most common form of company for a UK subsidiary is the private limited company (LTD), and setting up an ltd company involves going through the standard UK company registration process and applying to Companies House.

A UK subsidiary has to have at least one named director. It must also have a registered office address and a residential and service address for the director, though only the service address will be publicly displayed. As the new entity will be a subsidiary, you must also name another individual and company as a shareholder in the subsidiary, i.e. your parent company.

The process of setting up a UK subsidiary can be completed within hours, but you will need to provide Companies House with a number of documents, the most important of which is the Articles of Association. This is effectively the subsidiary’s governing document and lays out clearly the structure of the subsidiary and relation between company and shareholders.

Once set up, the UK subsidiary will be required to provide statutory accounts to Companies House, and may have to submit to a statutory audit, although this is likely to depend on the size and profile of the overseas company. The subsidiary will also have to register for corporation tax and possibly for VAT and UK payroll tax, though administrative matters are fairly straightforward to arrange.

Find out more about our UK subsidiary registration services.

Can you Make Changes After Creating a Subsidiary Company in the UK?

Once your UK subsidiary is incorporated, you are free to make changes. This means that you can either sell part of your subsidiary company to another company to create multiple owners or turn the subsidiary into an individual business without a parent or holding company for support.

When all or part of a subsidiary is sold, the proceeds of the sale will usually become part of the listed company’s assets. And though a listed company is not always obliged to distribute the funds accrued from the sale to its shareholders, in some instances, selling a subsidiary company will require the approval of these individuals. Indeed, the terms of such an arrangement will normally include committing to distribute the sale proceeds directly to the shareholders, either in the form of dividends or bonus shares.

There’s certainly a lot to consider when registering a subsidiary company in the UK and even more to think about if you wish to make changes to the company at a later date. If you feel that selling your subsidiary company or transforming it into an entirely independent business is the best move for you, get in touch with our Corporate Governance experts today.