There are several common reasons why company formation applications are rejected. The majority of these are simple mistakes and oversights, so they are easy to avoid with a little care and attention to detail. We outline these below and explain what happens if your application is unsuccessful the first time.
Common reasons for rejected company formations
Companies House rejects less than 10% of online incorporation applications, compared to more than 50% of postal applications. The reason for this disparity is that the online forms have a number of built-in checks, which are designed to ensure that all mandatory fields are completed before submission.
However, despite these checks, applicants sometimes enter the wrong information in certain sections of the online form. So, whether you are completing your application online or on paper, take care to avoid these 15 common issues that will result in a rejected company formation:
1. Problems with the company name
Problems related to company names are responsible for many unsuccessful incorporations. Typical issues include:
- a name that is the ‘same as’ or ‘too like’ an existing company name on the register
- failing to include the required name ending of ‘Limited’ or ‘Ltd’ (or ‘Cyfyngedig’ or ‘Cyf’ if you are incorporating a Welsh company with a registered office situated in Wales)
- including the Welsh company name ending when the registered office is situated anywhere other than Wales
- applying for name ending exemption when the company does not meet the qualifying conditions
- using restricted or ‘sensitive’ words and expressions in a company name without including the required supporting documentation (e.g. a letter of non-objection from the specified authorising body)
- including offensive words, or attempting to register a name that is offensive in nature
- a name that Companies House considers to be misleading
- using special characters, signs, symbols, or punctuation that are not permitted
GOV.UK provides full guidance on company name rules and restrictions. We would recommend reading this carefully before applying to register a company.
The name-check tool on our homepage will tell you if your company name is available and whether it contains any sensitive words. As a client of Quality Company Formations, we will also advise which authority you need to contact to obtain the necessary supporting documentation, where applicable.
2. Location of registered office
If there is a disparity between the situation of the company’s registered office address and the jurisdiction of incorporation, Companies House will reject the application.
The registered office must be in the UK jurisdiction where the company is being incorporated. For example, if you wish to incorporate a company in Scotland, you must provide a registered office address in Scotland.
3. Using a PO Box as a registered office address
A company’s registered office must be a full physical address. Consequently, you cannot use a PO Box as a registered office unless you provide the full address, including the building name and/or number, street name, town or city, and postcode.
4. Unsuitable company director
There aren’t many rules on who you can and cannot appoint as a company director. However, your company formation application will be rejected if you try to appoint someone who is under the age of 16, an undischarged bankrupt, or disqualified from acting as a company director.
5. Appointing a company as the only director
At all times, companies must have at least one director who is a natural person. This means that you cannot appoint another company as the sole director.
If you wish to appoint a company or other type of corporate body as a director, you must also appoint at least one natural person as a director.
6. Not providing the full forename(s) of a director, secretary, shareholder, or PSC
When you enter the personal details of the directors, company secretary, shareholders, and people with significant control (PSCs) of the company, you must provide their full forename(s) and surname. If you simply enter an initial instead of the forename (e.g. J. Smith or John A. Smith), Companies House will reject your application.
7. Providing a non-residential address as a home address
Directors, company secretaries, and PSCs must each provide their usual residential address on the application form. If Companies House believes that a commercial address has been provided as a home address, the company formation will likely be rejected.
There is no need to worry about your residential address being placed on public record. This will only happen if you use it as your service address or the company’s registered office.
8. Residential address does not correspond with country of residence
In addition to providing their usual residential address, every director and PSC must state their country of residence. If these two pieces of information do not correspond (e.g. you supply a UK home address but your country of residence is overseas), Companies House will not approve the application.
9. Wrongly claiming exemption to suppress personal details
In limited circumstances, directors can claim exemption under section 243 of the Companies Act 2006 from disclosing their home address. PSCs can claim exemption under section 790ZF from disclosing all personal details.
As a director or PSC, you can only apply to protect your details if you (or someone who lives with you) is at serious risk of violence or intimidation as a result of the company’s activities or by being associated with the company.
If you wrongly claim exemption, or fail to provide the required supporting evidence, Companies House is likely to reject the application to incorporate the company.
10. Missing PSC information
Missing or incorrect information related to people with significant control is a common cause of rejected applications.
Should you fail to provide all of the required information for each PSC that you register, including the nature of their control, your incorporation may be rejected.
If your company does not have any PSCs, you must provide the following statement in your application:
“The company knows or has reason to believe that there will be no person with significant control (either a registrable person or relevant legal entity) in relation to the company.”
If you do not include this statement where no PSC information has been provided, your company formation will be rejected.
11. Other missing data
The issue of missing data does not arise with online incorporations, because you cannot progress through the online form unless you complete each section fully.
However, if you use the postal application from Companies House, it’s much easier to make a mistake or accidentally omit certain details on the paper form.
If any essential data is missing, such as a director’s address or date of birth, Companies House will not approve your application.
12. Attempting to issue fractional shares
Company shares must be whole. You cannot have fractional shares – i.e. portions of whole shares. For example, you can’t issue 10 shares and split them evenly between three shareholders, because doing so would result in each person holding 3.33 shares.
You can issue as many shares as you like in your company, so this problem is easy to avoid. If you require an even share split across all shareholders, simply give each person the same whole number and value of shares of the same class.
13. Problems with the prescribed particulars
The prescribed particulars summarise the rights attached to company shares. You must provide this information in your company formation application.
Companies House will reject your application if the prescribed particulars of rights are not provided in full, or if reference to another document is required to access information on share rights.
Examples of wording that will result in a rejected application include:
- “please see the articles of association for share rights”
- “prescribed particulars as set out in the articles”
- “not applicable”
- “pari passu”
If you are issuing only ordinary shares and adopting Model articles of association in their entirety, Companies House will accept the following statement for the prescribed particulars:
“Ordinary shares have full rights in the company with respect to voting, dividends, and distributions.”
14. Unsuitable articles of association
If you decide to register a company with either amended Model articles or bespoke articles of association, you must ensure that the provisions set out in the document are consistent with company law.
If any part of the articles is found to be unsuitable or inadequate, Companies House will be unable to register your company.
If you require assistance with your amended or bespoke articles of association, our Company Secretarial Team can provide a Drafting Service for £90.00 plus VAT.
15. Format of security questions
When you file a company formation application online, you need to provide answers to three security questions. The purpose of this is to create an online ‘signature’. If you provide answers in the wrong format (e.g. entering three numbers when the security question asks for three letters), your application will be rejected.
Form a company online for the best chance of success
If you use the online or postal incorporation services from Companies House, you will be notified by email or post (whichever applies) if your application is rejected. You will then have to rectify the issue yourself and resubmit the form in the same manner as before.
The risk of rejection is significantly lower if you form a company online through a reputable and experienced agent like Quality Company Formations. Currently, QCF has a rejection rate of less than 1%.
Aside from the built-in checks featured within our simple online form, your application will benefit from a thorough Pre-Submission Review by one of our company formation experts. They will check the form for obvious mistakes and potential issues that you may have overlooked, before submitting it to Companies House.
When Companies House receives your completed application, they will examine it to ensure that the information you have provided complies with UK company formation requirements.
In the event that it does not, Companies House will notify us (usually within 3 to 6 business hours of submission) and specify exactly why it has been rejected.
If the issue is minor (e.g. a spelling mistake), we will simply fix and resubmit the application on your behalf. Where we require additional information, we will contact you immediately to request the relevant information.
There is no additional charge or filing fee to pay for resubmissions, but no refund can be provided at this stage.
If the amended form satisfies the examination and checks, Companies House will approve your company formation, issue a Certificate of Incorporation, and record your new company details on the public record.
Thanks for reading
Almost all rejected company formation applications are caused by basic errors or oversights that can easily be avoided with a little extra care and attention.
This is one of the reasons why it is beneficial to incorporate through an experienced and reputable company formation agent like Quality Company Formations.
Even if the worst should happen, it’s relatively quick and easy to amend and resubmit an online application. Issues with postal applications, however, do take significantly longer to rectify.
If you have any questions, or would like to speak to us about setting up a company online, please comment below or get in touch with our company formation team.