BScale_Establishing a presence in the UK

BScale_Establishing a presence in the

BURGES SALMON BSCALEEmerging apresence in the UKLegal services for start-ups, scale-ups,founders and investorsFor non-UK entities looking to establish a presence in the UKbut not, for example, looking to acquire a UK entity, enterinto a UK joint venture or appoint an agent/distributor thereare, broadly speaking, two options:• incorporate a private limited company (for example, as aUK subsidiary of an existing non-UK entity); or• set up a UK establishment (more commonly known as a“branch”) of an existing non-UK entity.The reasons for choosing one over the other will varysignificantly from business to business. Typically our overseasclients choose to incorporate a UK subsidiary for theirsubstantive UK business. However, some choose to establisha branch first and then incorporate a subsidiary once UKoperations have grown.The decision whether to incorporate a subsidiary or establisha branch will depend upon a number of factors – a summaryof some of the key advantages and disadvantages of eachoption is set out below.Incorporating a private limited companyAdvantages• Separate legal identity so (in the absence of parentcompany guarantees, for example) the liabilities of theUK entity are ‘ring-fenced’ and limited to the fully paidup amount of the share capital.• Generally viewed as having more ‘substance’ so it will beeasier for the entity to borrow and give security over UKassets – although a parent company guarantee might berequired if the new entity has a weak balance sheet and/or a short trading history.• Corporation tax liabilities of a UK entity are generallyeasier to compute than for a branch.• Customers may wish to deal with a UK entity and seeseparate subsidiary accounts when assessing the strengthof a business.• Cheap and easy to set-up – for example, our CompanySecretarial Team can incorporate a company (withstandard constitutional documents) for as little as £500(plus VAT and disbursements).Disadvantages• It may increase the regulatory burden – for example,directors of the entity will be bound by the statutorydirectors’ duties set out in the Companies Act 2006and, if not applicable already, the establishment of asubsidiary could trigger the requirement to producegroup accounts.• It will be important to ensure that the company isresident in the UK for tax purposes (i.e. the company’seffective management must take place in the UK) asotherwise there is a risk that the company’s profits will besubject to double taxation.• There will be on-going filing requirements and runningcosts – for example, filings with the Registrar ofCompanies.