South African businesses
are increasingly setting up businesses in the UK, sometimes as a hedging
strategy in the uncertain economic climate in South Africa, and often because
they want to tap into the global trade opportunities the UK is well-positioned
for.
Scott Brown, managing
director of Sable International UK, says that Britain is known for its complex
bureaucracy, but if you have your paperwork in order it is a very efficient
process. Setting up a comp
“Incorporating a company is
relatively quick and easy – The set-up can be done in 48 hours. Most people
take the subsidiary option, opposed to branch. When it comes to a branch, you
would have to declare your overseas company’s result at Companies House in the
UK and most people don’t want to do that,” said Brown.
“Setting up an entirely new
business in the UK is not impossible to do. I would recommend that if an
individual is looking to incorporate a company, they should go for the simplest
structure possible; this would be one person being the director and one person
being the shareholder which can be the same person. Over time more people can
be added.”
The Companies Act of 2006
governs company law in England and Wales. A foreign company is required to
register as an establishment with Companies House within one month of
commencing business in the UK.
“Tax number applications
including PAYE and VAT can usually be applied online though there are a number
of questions and if completed incorrectly will lead to queries from HMRC.
However, if completed correctly, you should receive the tax numbers within 5-10
working days,” said Brown.
Opening a bank account
“The red tape is not
necessarily created by the government; it’s actually created by the banks,”
said Brown.
Rampant money laundering
and tax fraud has made the banks extremely cautious. Opening a bank account can
take 3-6 months. There are certain formalities to be met from a ‘know your
client (KYC)’ and anti-money laundering perspective.
“The banks want to meet and
interview a director in person. As a chartered accountancy firm, we are also
obliged to adhere to these procedures and regulations. Usually, the proofs
obtained when we gather information to act on your behalf will also be acceptable
to a banking provider,” said Brown.
“We anticipate that the
process of opening an account should normally take between three to six months
from start to finish. However, because we know there can be delays especially
on more complex structures, we usually open a designated managed trust account
for our clients to use in the meantime.”
“The bank allows us to set
up a company trust account – the RE account can be opened in the company’s
name, their clients can make payments into that account and we can help
facilitate payments out of the account. The benefit of the RE Account is that
it can generally be set up in 1-2 weeks which means the client can be up and
running in a couple of weeks.
Issues arise with the banks
when there are multiple shareholders or multiple directors because every
director and shareholder has to be KYC. The banks may also want proof that the
business is legitimate and ask for anything from a business plan, what the
business is doing, their operations in South Africa and whether they have a
website.
The bank must be sure the
company is set up for legitimate purposes and will not be involved in crimes
such as money laundering.
Other issues that can cause
problems are when shares are held in trusts. Banks may require full disclosure
of the trust and require details of the settlor, trustees and beneficiaries.
“The banks go down to the
level of individual ownership. If you have a UK company, owned by a South
African company, owned by a trust then the account opening procedure will take
longer than normal as the banks want to know who the individuals in charge are.
Proof of ID, ownership, who you are and your physical address is everything in
the UK. You’re not going anywhere without that,” said Brown.
You do not have to be a UK
Resident in order to set up a UK company bank account, but you have to have at
least one director (not necessarily a shareholder) residing in the UK. To open
a bank account as a non-resident, you will need proof of identity and your
residential address that has been notarised. There are strict requirements
involving who can, and how they can, do this.
Private limited companies
are not obliged to appoint a company secretary unless the company’s articles
contain a reference to this position. Existing private limited companies may
retain a company secretary if they wish, and newly established companies can
opt to appoint one. If you’re running a public limited company you must, by
law, have a company secretary.
The company secretary
usually acts as the chief administrative officer of the company, leaving the
directors free to concentrate on running the business. The company secretary
doesn’t have to be a director but they do share some of the directors’ legal
responsibilities.
However, ultimate
responsibility for ensuring the company is properly administered remains with
the directors.
“One of our principals
takes this role for the UK companies we act for. With our address as the
registered office (legal, not trading) we combine the two roles and ensure that
official documents from HMRC and Companies House, are received and dealt with
in a timely and professional manner,” said Brown.
Why South Africans are
taking their businesses to the UK
“The UK offers a stable
currency, stable political structure and even in the wake of Covid-19, a stable
economy. Regardless of Brexit, the UK is an investor- and entrepreneur-friendly
country, making start-up costs for businesses lower than in most other
developed countries.
“It also has one of the
lowest corporation tax rates in Europe. As a small, densely-populated and
wealthy country, it’s easy to find a large customer base,” said Brown.
“UK markets are opening up
more because of Brexit, but Britain is still very close to Europe. UK is a very
easy place to do trade from. For export businesses, the UK is a great place to
be.”
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