From time to time we are asked whether the law in Scotland for registering a company is different than the law in England.
The short answer is ‘not really’, though after a company is formed there are important differences which govern how it operates.
The regulatory framework for companies in Scotland is the same as in the UK. Private companies are governed by the Companies Act 2006 (there is no separate Scottish Company law regime)
- There is a single UK-wide system of company registration and a single register of companies. However, there are separate registrars in Scotland, Northern Ireland, and England and Wales.
- In order to register a limited company in Scotland it must be incorporated at Companies House in Edinburgh.
If you want to get down to the real detail;
- To form a Scottish company, the following must be sent to the Registrar at Companies House in Edinburgh (Scotland):
- Form IN01
- proposed company name;
- type of company;
- registered office address (a Scottish-registered company must have its registered office in Scotland);
- whether prescribed model articles are adopted;
- names of company officers;
- a statement of share capital and initial shareholdings; and
- a statement of compliance.
There is no material difference with incorporating a limited liability company in England.
Once a company is formed, however, there are material differences in the laws which apply to its operation. For example;
- Different procedural rules apply to the insolvency regime in Scotland – there is no ‘Official Receiver’ in Scotland, and some different rules apply, particularly in the area of individual bankruptcy’
- Contract law – in Scotland, the concept of ‘consideration’ does not apply, so that contracts can be binding on a promisor even if they get nothing in return from the promise. In the UK a contract without ‘consideration’ is generally not properly formed
- The system of taxation and business rates is different
- Employment contract differences. For example, Scottish employees can get the benefit of an extra day of Bank Holiday (St Andrews Day), though there is less uniformity than in England about workers automatically being given Bank Holidays off. Employment Tribunal rules on evidence also differ.
- Civil court rules and different statute of limitations. For example, in Scotland contract claims are ‘prescribed’ or ‘limited’ after 5 years whereas in England it’s generally 6 years. In England, the County Court system hears smaller cases with a hierarchy which then extends through the High Court, the Court of Appeal and then the Supreme Court.
- Property law differences. There is no equivalent of the Landlord and Tenant Act which applies in England, with disputes being resolved in Scotland primarily by reference to the lease itself. Ordinarily there is no automatic right to renew in commercial tenancies (unlike in England)
On top of that, there are other more obscure local hazards to watch out for. (It is illegal to be drunk and in charge of a cow in Scotland under the Licensing Act of 1872).
So, there are some differences in the laws that apply to companies North of the Border. But if the Scots get around to holding a Referendum again, and decide to leave the UK, then the laws are already sufficiently similar that a wholesale disentanglement will not be required (unlike Brexit!)
Clive Rich is the founder and Chairman of LawBite. LawBite is an online legal service taking SME’s all the way from ‘idea’ to ‘ideal’ as they start, grow and succeed. Its fully regulated law firm delivers fast, expert advice at half the price of a traditional firm of lawyers. Its 24/7 Platform provides access to the lawyers, easy to understand documents, and easy to use software tools all delivered with a human touch.
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