Glossary of Terms



Abbreviated Accounts
A shorter form of annual accounts filed at Companies House by a company qualifying as a small or medium-sized company under the UK Companies Act. The use of abbreviated accounts minimizes the information made such as profit, loss and turnover.

A reporting accountant is either any member of a body listed below who, under the rules of that body, is entitled to engage in public practice, and who is eligible for appointment as a reporting accountant; or any person, (whether or not a member of any such body), who is eligible for appointment as a company auditor under the rules of that body. The bodies referred to are: Institute of Chartered Accountants in England and Wales/ Scotland/ Ireland, Association of Chartered Certified Accountants / Authorised Public Accountants / Accounting Technicians /International Accountants; Institute of Management Accountants / Chartered Secretaries and Administrators. An individual, body corporate or firm may be appointed as a reporting accountant. A partnership that is not a legal person may be appointed under section 26 of the Companies Act 1989. The reporting accountant must be independent and meet the conditions set out in section 27 of the Companies Act 1989. This means, for example, that he or she cannot be an officer or employee of the company.

Accounting Reference Date
The annual anniversary upon which a company´s financial year ends.

Accounting Reference Period
The period which ends on the accounting reference date.

A generic term for the financial documents that companies in the UK are required to file each year. Most companies filings will include a Profit & Loss account, a Balance Sheet, a Director´s Report and Auditor´s Statement. Companies that do not file accounts on schedule incur fines from Companies House on a sliding schedule, and will eventually be dissolved if they do not comply. Please see Company Filing Requirements for more information.

Administration Order
The order of a court to appoint an administrator to manage a company in financial difficulties in an attempt to secure its survival or winding-up. For more about administration and getting your money back, visit the In Administration page.

Allotment of Shares
The distribution of shares to those who have applied for them. When shares are allotted, the holder of the shares becomes a member of the company.

Alternate Director
Someone appointed by the board members to act and speak on their behalf during temporary absence.

Annual Accounts
All limited and unlimited companies, whether or not they are trading, must keep accounting records. Certain information may be omitted from the accounts of medium-sized and small companies. Please see Annual Accounts for more information.

Annual General Meeting (AGM)
The one meeting of company members that has to be held each calendar year unless it has elected not to do so. Annual meetings of a company´s shareholders to lay the annual accounts and directors´ and auditors´ reports before the shareholders and deal with other matters. Private companies can dispense with the need for AGMs by passing elective resolutions.

Annual Return (363)
A prescribed form which must be filed annually with Companies House by a limited company. Summarises current directorships, shareholders, company´s activities and company/capital structure.

Annual Return Date or ARD
The Annual Return should be filed within 28 days of this date each year.

Articles of Association
The rules of the company - its written constitution, the document containing the company´s regulations for its internal management.

Anything owned with monetary value. This includes both real and personal property.

An audit is the official inspection of a company´s accounts by a qualified accountant as required by Companies House each year to ensure that the company balance sheet reflects the true state of its affairs.

The specially qualified person or firm appointed by the company to examine its books of account and issue a report which accompanies the statutory annual accounts - and to report on them to company members

Authorised Capital
The total amount of share capital that a company is allowed to issue.

Authorised Share Capital
The total number (and value) of shares a company is legally entitled to issue - the nominal capital which the company is authorised to issue by its memorandum of association. This may be increased by an ordinary or special resolution depending on the provisions of the articles of association.


Balance Sheet
The year end statement of the company´s financial position. Whilst the Profit & Loss account is the culmination of a years activities, the Balance Sheet looks at the company´s assets and liabilities on one day - in effect a snapshot.

The directors of a company.

Board Meeting
A meeting of the directors.

Bonus Issue
Accumulated profits which are converted into issued shares. The existing members are given them, for example one bonus share may be given for every five already held. Also known as capitalisation or scrip issue.


When shares are issued, the members may be allowed to pay for them by installments. Each installment is a call.

Cash Flow
The movement of cash in and out of a business. Cash is usually required to pay a company´s bills and commitments. A company with negative cash flow has less cash coming in as receipts than going out in payments. Negative cash flow can bankrupt a business that may actually be running profitably. EU & UK Data Ltd calculates Cash Flow as the Pre-tax Profit of the company plus Depreciation charged against that Profit.

Certified Accountant
A member of the Association of Certified Accountants. Certified accountants are authorised to audit the books of limited companies. Members use the initials ACCA or FCCA.

Certificate of Incorporation
The company´s ´birth certificate´ as issued by Companies House on the day of incorporation.

The Director who presides over members´ meetings and board meetings.

A loan taken out by the company, usually against some form of security. When a company borrows money the lender may require security for the debt. This is usually in the form of a legal document entitling the lender to take possession of certain of the company´s assets if the debt is not repaid. This security is called a charge. Thus, there might be a charge over the freehold property to secure a bank loan.

Chartered Accountant
A member of one of the Institutes of Chartered Accountants. Chartered accountants are authorised to audit books of limited companies. Members use the initials ACA, FCA, CA. Chartered secretary A member of the Institute of Chartered Secretaries and Administrators - members´ initials are either ACIS or FCIS.

Close Company
Companies under the control of five or fewer persons.

Collection Period
How long, on average, a company takes to pay its´ debts.

Companies Act 2006
Formerly the Company Law Reform Bill, the Companies Act 2006 will effectively replace existing companies legislation with the exception of provisions relating to company investigations and community interest companies. For more information please see ourCompanies Act 2006 help section.

Companies House
Where the Registrar of Companies works and where all company forms, returns and accounts are filed. Companies House is an executive agency of the Department of Trade and Industry, and has five main functions:

- the registration of new companies;
- the registration of documents required to be delivered under companies;
- insolvency and related legislation;
- the provision of company information to the public;
- dissolution and striking off companies from the register;
- ensuring that companies comply with their obligations in connection with the above functions.

Company Agent
A Director is a company agent acting on its instructions.

Company Name
As registered at Companies House. Only one company can hold this name at any one time. A company can change it´s name at any time, unlike it´s number which is permanent.

Company Seal
A company may execute deeds by affixing its seal to them. There is no longer any requirement for a company to have a seal and it may execute deeds by either two directors or a Director and the company secretary signing the relevant document.

Convertible Shares or Stock
If the Articles allow, a company may, by resolution, convert one class of one type of its shares into another class or into stock or vice versa.

A company is a corporation or legal ´person´.

Cost of sales
Cost components directly related to turnover.

County Court judgement
A CCJ is an order from a County Court that the company must pay an outstanding debt. Generally related to non payment of a loan, mortgage etc debt in general. If the debt is paid off, the CCJ will be satisfied and recorded. When settling debts companies often overlook notifying the court so a judgement may appear unsettled when the debt has actually been paid. More information please see our help pages on County Court judgments.

An individual or organisation to which the company owes money - most commonly a supplier.

Credit Limit
An absolute measure of a company´s ability to settle potential credit transactions. EU & UK Data Ltd currently gauges the ability by use of three values: Cash Flow,Working Capital and Net Worth. The average of these 3 components is then taken as a guide for the credit capacity of the company. The final figure calculated will depend on the previously derived Credit Score. The % applied is directly proportional to credit score, the greater the score the higher the %.

Current Ratio
The Current Assets divided by Current Liabilities. If greater than 1 then assets are greater than liabilities, less than 1 then liabilities are greater than assets. A very useful indicator, especially of cash flow. See also Liquidity Ratio.


A security issued by a company on which the interest is payable whether or not the company makes a profit. Companies issue securities in order to raise capital. The loan is usually secured by the general credit worthiness of the company rather than any specific item.

An individual or organisation that owes the company money. This sum of these figures is counted as a current asset.

A legal document proving that an action has taken or will take place.

A Director is an officer and agent of the company - who manages company business on behalf of the shareholders and has a duty of care, skill and good faith. Every company must have at least one Director . The secretary may be a Director but not the sole Director . See our Company Director help pages for more information.

Director (nominee)
Appointed to represent substantial shareholders.

Director (non-executive)
A part-time Director , usually with a specific expertise.

Once a company is struck off the Companies Register it ceases to exist and is dissolved. The company will be dissolved when the Registrar publishes a notice to that effect in the London Gazette. At the time of striking off a letter will be issued to the contact name on Form 652a confirming the proposed date of dissolution.

A sum paid to shareholders out of profits.

Dividends payable
Includes both proposed and paid items and provisions / appropriations determined by FRS4

A company is dormant during a period if it has had no “significant accounting transactions” during the period, (ie transactions which are required to be entered into its accounting records).

A dormant company is not exempt from filing accounts but the accounts to be filed are much simpler than for a trading company. More on dormant companies here.


Elective Resolution
A resolution which a private company is entitled to pass to reduce or remove certain administrative or formal requirements. It requires the consent of all those shareholders entitled to vote.

Emergency General Meeting
An extraordinary general meeting called by the members.

An individual who works for the company directly. Not a contractor or free-lancer. Companies incur PAYE and National Insurance liabilities on behalf of their employees.

Executive Director
A salaried Director having specific responsibilities, for example, Financial Director.

Extraordinary General Meeting
Any meeting of shareholders which is not the AGM. All members must be given proper notice.

Extraordinary Resolution
A resolution required to effect decisions in certain circumstances (a creditors´ winding up) and which requires a majority of not less than 75% of the company members voting in person or by proxy at a general meeting.


Finance Acts
Every year there is a Finance Act which determines the tax laws of the country. It is introduced to Parliament by the Chancellor of the Exchequer in the Budget speech.

Financial assets. Deposits, stocks, bonds, notes, currencies, and other instruments that possess value and give rise to claims, liabilities, or equity investment. Financial assets include bank loans, direct investments, and official private holdings of debt and equity securities and other instruments.

Fixed assets. Produced assets that are used repeatedly, or continuously, in processes of production for an extended period of time. They consist of equipment and software and structures (including, by convention, owner-occupied housing), but exclude consumer durables.


Usually expressed as a percentage, it is the ratio of borrowings to shareholders funds. If over 100% then total borrowings are greater than shareholders funds and the company would be vulnerable to interest rate rises.

General Meeting
A meeting of shareholders. It may be an annual general meeting or an Extraordinary General Meeting where shareholders give their approval for transactions.

Gross profit
This indicates the profit before deducting depreciation, distribution, selling and administration costs. It is an indicator of the underlying profitability of a company´s core operations.

Guarantee (company limited by)
A company where the liability of the members is limited, usually to £1. They are usually for charitable purposes or clubs.




To form a limited company by following procedures prescribed by law. On incorporation the limited company becomes a separate legal entity distinct from its owners.

Incorporation Date
The day Companies House recognised the company´s existence and issued a Certificate of Incorporation - in effect the company´s ´birth certificate´. All transactions conducted from this day forwards qualify the owners for limited liability.

The inability of a company to meet its debts as they become due.

Another name for a legal document.

Intangible Assets
Assets which have no material existence i.e. goodwill.

Interest Payable
Interest paid by the company. This will be the net charge for interest after any capitalised element. It should be noted that many private companies do not disclose this figure in full, or aggregate short and long term, and hire purchase interest together.

Issued Capital
The amount of a company´s share capital that has been issued to members/shareholders.

Issued Shares
The shares that have been paid for and for which the certificates have been issued - shares which have been actually allotted by the company and in respect of which the allottees have been entered in the company´s register of members.






The right to keep possession of a property until the debt due in respect of it has been paid.

Limited Company - Ltd
A company whose liability is limited to its share capital.

Limited by Guarantee
A company where the liability of the members is limited, usually to £1. They are usually for charitable purposes or clubs.

Limited Liability Partnership
A special type of partnership regulated by the Limited Liability Partnership Act 2000.

The process of turning all of a company´s assets into cash, usually done in order to pay off liabilities.

The official responsible for paying off the debts of a company.

Liquidity Ratio
Current Assets, less Stock, divided by Current Liabilities. Because stock, which can be hard to liquidate or overstated in the accounts, is removed from the equation this is a more testing index than Current Ratio.


Managing Director
A managing Director can be appointed only if the company´s Articles so allow. The other directors entrust some of their powers to him.

A person whose name has been entered in the company´s register of members in respect of the shares he holds in the company.

Memorandum of Association
A document which governs the relationship of the company with the world at large, stating its name, its domicile, what it may do, that its liability is limited and the amount of its authorised share capital – the company´s charter enabling the outsider to establish the extent of the company´s powers.

Written records of formal proceedings of shareholders´ and directors´ meetings.

A mortgage is a secured charge for which the lender has stipulated property (real estate) as security. The document giving evidence to this is the mortgage deed.


Net Worth
Calculated as the Total Assets minus the Total Liabilities where the former is also adjusted to eliminate any Intangible Assets.

Nominal Capital
The total share capital that could be inverted into the company by its owners.

Non-Executive Director
Usually a Director who only attends Board Meetings.

Non-Trading Company
A company which does not trade.

Non-trading income
Comprises investment income, such as income from quoted & unquoted investments, rents received, share of profit from associated companies; as well as reserves adjustments, such as transfers from capital grant reserve. Interest relief grants, write-offs of investments and intangibles will also be included.


Ordinary Resolution
Used for increasing authorised capital, making a bonus issue, subdividing shares, removing auditor or Director . All other resolutions are extraordinary or special – a decision reached by a simple majority (more than 50%) of company members voting in person or by proxy.

Operating Profit
Indicates the profit and loss arising from core business activities. The figure is pre-tax profit plus Interest paid minus non trading income.

Ordinary Share
The most usual form of share capital. They carry the highest risk and rank last in line in the event of a liquidation.

Short term outstanding amount on the current account at the bank. A current liability.


PLC or Public Limited Company
A public limited company is a company which is registered as such and complies with the following:

  • it must state that it is a public limited company both in its memorandum and in its name. The memorandum must contain a clause stating that it is a public limited company and the name must end with "Public Limited Company" or "PLC" (or the Welsh equivalents "Cwmni Cyfyngedig Cyhoeddus" or "CCC").
  • the memorandum must be in the form specified in Table F of the Companies (Tables A to F) Regulations 1985, or as near to that form as circumstances permits.
  • it must have an authorised share capital of at least £50,000.
  • before it can commence business, it must have allotted shares to the value of at least £50,000 a quarter of which, £12,500, must be paid up in cash. Each share allotted must be paid up to at least one quarter of its nominal value together with the whole of any premium.

Companies House regulations regarding PLCs are more stringent than for other limited companies. In particular a PLC has only seven moths from year end to file accounts. Private companies have 10 months.

PLC has access to capital markets and can offer its shares for sale to the public through a recognised Stock Exchange, and can issue advertisements offering any of its securities for sale to the public. In contrast a private company may not offer to the public any shares in that company.

However there is no requirement for a PLC to have stock market listing.

Ascertaining the will of the shareholders at a general meeting of the company by counting shareholders´ votes according to the size of their share holdings. On a poll a proxy may vote.

The rights of existing shareholders granting them first option to acquire shares which are to be transferred or issued in proportion to their present share holding.

Preferential Creditor
In a winding up, those creditors who must be paid first, namely rates, taxes, wages of servants or clerk, DHSS payments etc.

Preference Shares
Preference shares rank before ordinary shares for repayment in the event of a liquidation. They usually carry preferential dividend rights but restricted voting rights.

Pre-tax profit
The residue (or loss) after all operating expenses (wages, rent, raw materials etc) have been subtracted from turnover. Before deduction of tax, dividends, subventions or group relief, and other appropriations. Where applicable it includes associated companies share of profits and losses. Extraordinary items are excluded. Items described by the company as exceptional are included.

Private Company
All companies are private unless they are registered as a Public Limited Company.

Profit after tax
Represents the profit/or loss after deduction of corporation taxation, but before the deduction of dividends, minority interests and extraordinary items.

Profit and Loss Account
The account of the business´s trading performance between two balance sheets, the P&L deals with sales, cost of sales, and the profit & loss a company has made in a period of time, usually a financial year.

- Small companies file abbreviated balance sheet and notes - does not include profit and loss and employees
- Medium companies can file abbreviated profit and loss - does not include turnover
- Large companies file profit and loss -includes turnover

The name given to both the person who votes at a meeting on behalf of a member, and to the form the members use for appointing the representative – authorisation by a shareholder allowing another to vote his shares.

Public Limited Company (plc)
A type of company incorporated by registration under the Companies Act which may offer its shares to the public (a private company cannot do this) and is subject to a number of additional requirements under the Companies Act.


The number of shareholders or directors necessary to hold a valid meeting.


A person appointed by the court to administer the affairs of a company or partnership, and to collect and manage the assets, in serious financial difficulties. In the case of bankruptcy, the assets may be sold and distributed by a receiver to creditors.

A company in the hands of the receiver is in receivership.

Redeemable Shares or Stock
Issued capital that is to be repaid at a future date.

Registered Office
The legal address of the company as recorded at Companies House, where the statutory books are usually kept. An appointed representative of the company should always be available here to receive mail. May be the main trading address of the company or could be the address of the company´s accountants, solicitors or associated company. Must be an address in the UK. For more information please see Registered Office.

Register of Members
The book in which are recorded the names and details of all members together with the dates and details of their share transactions.

Registrar of Companies
The government official appointed to ensure that all companies´ statutory submissions are properly filed.

Registry Trust
On behalf of the Department for Constitutional Affairs, The Registry Trust operates the Registry of judgments, Orders and Fines for England and Wales

At company meetings the members decide on a course of action by voting on ´resolutions´, for example to pay a dividend, appoint a Director , or remove an auditor – decision made by directors or shareholders in accordance with requisite majorities set out in articles of association. Resolutions may be approved in meetings or by written resolution.

Retained profits
This is the amount carried from the Profit and Loss Account balance on the Balance Sheet, after the deduction of extraordinary items, taxation, dividends and any other appropriations (e.g. Minority Interests). Value added trading profit plus salaries & wages - for the value added calculation, staff costs are grossed up to reflect national insurance costs. Value added represents the difference between the sales income received and bought in materials and services expended in the period.

Rights Issue
An issue of shares by an existing company which it sells to its members on favourable terms. Not to be confused with a bonus issue which is issued free to the members.

Risk Score
In the course of any one year, approximately 2% of trading companies will become insolvent. At EU & UK Data Ltd we use a unique predictive scoring model, aimed at enabling you to detect those companies at risk of corporate failure within the next 12 months. For more information on calculating the risk score, please see Calculating the Risk Score.


Scrip Issue
Accumulated profits which are converted into issued shares. The existing members are given them, for example one bonus share may be given for every five already held. Also known as capitalisation or bonus issue.

The company´s signature. It is a device that leaves the company´s individual impression on documents such as share certificates, deeds, etc.

The name of the person responsible for maintaining company records and minutes of board meetings. Every company must have a named company secretary who can be a person or another company. The secretary may be a Director but not the sole Director .

Share Capital
The ´money´ put up by the members of a company to finance it. Authorised share capital is the amount they are legally entitled to put up. Issued share capital is the amount they have actually put up.

Share Certificate
Written and executed instrument showing who holds title to a particular share or series of shares.

Share Capital
The part of the capital of a company held by a member (shareholder). Shares may be numbered and are issued as units of definite face value; shareholders are not always called on to pay the full face value of their shares, though they bind themselves to do so.

A holder of one or more shares in the capital of a company. These are the owners of the company. Shareholders can be people or other companies or businesses. Companies House uses the more official term ´member´.

Shareholders Funds
Take Current Liabilities and Long Term, Liabilities FROM Total Assets to establish what is left, and this residue belongs to the owners.

SIC Code
A US Standard Industrial Classification code. An aid to marketing applications by identifying the subject business activities as a code.

Special Resolution
Most company business is decided by voting on special resolutions for which 75 per cent of the members present (or proxies) must be in favour.

Stamp Duty
The tax payable on documents, generally at 0.5 per cent. Share transfers.

Statutory Accounts
The accounts produced each year which must be audited and comply with company law.

Statutory Books
The books which record details of members, directors, company secretary, etc. – the records that a company must keep as required by law. Changes must in many cases be notified to Companies House. The records should normally be kept at the company´s registered office and are available to the public for inspection.

Goods owned by the company, usually raw material for the manufacturing process. Stock is a current asset, and a means of dividing up the capital of a company into intermediate amounts. Shares can only be £1, 50p, 25p but stock-holders can own odd amounts like £1500.83 work of stock if they so wish.

Striking Off
A company may be struck off the Companies Register if it fails to submit the necessary returns or if the members request the Registrar to do so. The process of removing a company from the Companies Register as held at Companies House. This can either be requested by the company itself, or initiated by Companies House themselves. The most common cause is non-filing of accounts and lack of response from mail sent by Companies House.

The person who signs the memorandum of association and is issued the first shares in a new company.


Table A
The list of standard regulations which many companies adopt as their constitution (i.e. for their Articles of Association). – regulations for the management of a company from the Schedule to Statutory Instrument 1985/805 which are commonly adopted as the articles of association of companies.

Tangible Fixed Assets
Assets which can be realised for cash after one year i.e. material goods such as Fixtures & Fittings or property.

Tax charges paid against profits - can be negative, representing a tax credit.

Trading Assets
An address of business premises of a company. This is not always available as the company is not required by law to file this information. This may or may not be a different address to the Registered Office.

Total invoiced sales net of VAT. Only large companies file turnover.




VAT or Value Added Tax
Value Added Tax is a sales tax set at 15% of value within the UK. Most goods and services supplied within the UK are liable to VAT. Companies must charge VAT when supplying within the UK. A company that is VAT registered may reclaim VAT on purchases. There is no VAT on exports beyond the UK.


The cessation of a business.

Working Capital
Calculated as the difference between the Total Current Assets and Total Current Liabilities.

Written Resolution
A resolution passed either by the shareholders or the directors of the company by signing a written form of the resolution rather than voting at a meeting of the company or at a meting of the directors of the company.






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