Glossary of terms

Our guide to commonly used company terms

Abbreviated accounts A condensed version of annual financial accounts which contain only a balance sheet. These are often submitted to Companies House by small companies instead of full statutory accounts.

Accounting period This refers to the period of time covered in a company's tax return. An accounting period cannot exceed a 12 month period, although it may be shorter in some cases

Accounting reference date (ARD) The end date of a company's financial year and the date to which the annual accounts are made up to. Usually this is the anniversary of the last day of the month in which the company was formed

Accounting standards The legal standard which needs to be met for a specific company's accounts must meet. These will either be International Financial Reporting Standards or UK Generally Accepted Accounting Practices (GAAP)

Active Refers to a company that is trading and active for corporation tax purposes

Allotment of shares The issuing of shares in a private limited company following incorporation

Annual accounts A company's annual accounts - sometimes called 'statutory accounts' are prepared at the end of the financial year to detail company financial performance. They are prepared for filing income tax returns, and consist of a balance sheet, profit and loss statement and detail business cash flow

Annual Return This was the term used to refer to a confirmation statement, and is a report detailing the most recent 12 months of financial activity of a company. Submission of these accounts should be within 9 months of the end of the account referencing date (ARD)

Articles of association A mandatory legal document that details the structure of a company, rules that the company must adhere to, how the company should be managed and the rights and responsibilities of the directors and shareholders

Audit A review of a company's annual accounts and carried out by an independent advisor. Exempt companies must meet two of the following criteria: an annual turnover of less that £6.5m, assets of less that £3.26m, and no more than 50 employees.

Authentication code This six figure identifying code is supplied by Companies House on the formation of a new company and enables secure signing in to digital or online filing of documents to Companies House

Balance sheet A full financial stamen which forms part of a company' s annual accounts and includes all assets, liabilities, and debtors. The document is used by external parties to see a company's worth, and plays an important part in annual audits

Business address This might be different from the registered address, and is used for non-statutory communications

Cashflow Confirmation of the total amount of money being transferred in and out of the business

Certificate of Good Standing This certificate is issued by Companies House upon request and certifies that a company has been actively trading since its incorporation, that all filing requirements and legal obligations have been met, there are no outstanding actions against the company and that the company is not in the process of being 'struck off' the Companies House register

Certificate of Incorporation Issued at the point of incorporation to show that a company has been registered with Companies House

Certificate of Incorporation on Change of Name This is sometimes known as a Certificate of Name Change, and is an official document issued by Companies House to any company which changes its name following incorporation

Companies Act 2006 A legislation which applies to all limited companies. Fully operational by 1st October 2009, it set out to modernise company law. Its predecessor was Companies Act 1985

Companies House number The unique registration number for the company as registered with Companies House

Company addresses The address to which an incorporated company is registered with Companies House and which must be used on all statutory documents. It is often different to the trading address

Company aims A brief description of the type of industry or activity that the business operates

Company director A person or organisation which is appointed to manage a company by the company owners. All private companies must have at least one director. Directors have a responsibility to lawfully run a company for the benefit of its owners and in accordance with Companies Act 2006 and the Articles of Association

Company documents This refers to official documents following registration. They consist of the Memorandum, articles of association, a certificate of incorporation and any share certificates.

Company formation The process of legally registering a company with Companies House and which allows the company to exist as a distinct legal entity, separate from its owners and which is responsible for its own debts

Company incorporation The process of incorporating a new or existing business into a limited company, registered with Companies House and which meets the legalisations within the Companies Act 2006

Company law UK company law - or corporate law - is regulated by the Companies Act 2006, and focuses on two main areas: corporate finance and corporate governance

Company limited by guarantee This type of company structure is usually used for charities or not-for-profit companies which meet the following criteria - they are owned by at least one guarantor and managed by at least one director. In addition the company must be owned by at least one shareholder. The personal liability of the guarantors must be limited to the amounts of their guarantees, and these must be paid if the company is unable to settle its outstanding invoices

Company limited by shares A company that is limited by shares is a company where profit are distributed and there are restrictions to the personal liability of the owners. Criteria to apply must be that the company is owned by at least one shareholder and managed by at least one director. Value of director shares dictates the personal liability of the shareholder

Company name This is the name of the company as registered with Companies House, and can differ from their 'trading name' . Companies House stipulate that company names must be unique and no two companies can register with the same name

Company registration The process of registering an existing business or a new company with Companies House enabling it to operate as a separate entity and have limited liability (This refers to the reduced financial obligations of company shareholders or directors to pay business debts from their personal finances, should the company struggle to settle its debts). A registered company must have a 'memorandum' and an 'articles of association' document in place at the time of registration

Company register This is the statutory record that is held by a limited company at its registered office, and which should include key information pertaining to a company, such as its officers, its share capital, and all other required statutory information

Company registration number (CRN) Also known as CRN, this unique number is issued to all companies upon registration and is formed of 8 digits, or 6 digits on 2 letters. It identifies a company and is displayed on the certificate of registration, and should appear on all statutory correspondence

Company secretary This is the person (or organisation) that is appointed to support directors with company related responsibilities. There is no legal requirement to have a company secretary

Company shareholder A person that owns all or part of a limited company through the acquisition of shares or purchase. Shareholders may also be directors. The liability of shareholder is limited to the amount of shares they own

Company tax return An annual document submitted by a trading company which is liable for corporation tax. A company tax return must be filed with HMRC every year, within 12 months o the end of a company's corporation tax accounting period

Comparisons Included in a company's ratio analysis to compare a company's financial performance against a similar firm within the same industry to ascertain its position within the market

Confirmation date The date in which Companies House require all information included in the Confirmation Statement to be confirmed. Referred to as the 'made up date' in the previous annual return. The confirmation date falls exactly 12 months after the confirmation date of the previous year

confirmation statement This has replaced the Annual Return filing requirement, and all limited companies or LLPs must submit a confirmation statement to Companies House at least every 12 months to confirm its registered details, and any changes that have happened in the previous year, pertaining to shareholders, share capital, SIC codes, Persons of Significant Control (PSCs)

Consent to act This is to confirm - either when the company is formed, or when a new director/shareholder PSCs is appointed that that person has consented to act in the related capacity.

Consolidated This term refers to a set of financial accounts for a group of associated companies, rather than detailing them separately

Corporation tax This refers to the tax that must be paid by a limited company each year and is calculated on its taxable income from its most recent accounting period. Due within 9 months and 1 day from the end of the accounting period and paid electronically to HMRC

Cost of sales Sometimes know as 'Cost of Goods' (COGS), refers to the cost involved in producing the goods or services that a business sells

County court judgments / High Court Writs The consequence of a business or person taking court action against another business or person for moneys unpaid via a formal order from either the County Courts or High Court of England & Wales. These orders allow High Court Enforcement Officers to access the business' premises and seize assets that can be sold to repay debts owed

Credit limit The amount of credit that previous suppliers have calculated as applicable for this business

Creditor days The average days deemed that a company settles its debts with trade suppliers

Currency This refer to the primary currency that the company or business operates in

Current ratio The current ratio indicates a company's ability to meet short-term debt obligations; it measures whether a firm has enough resources to pay its debts over the next 12 months. Potential creditors use this ratio in determining whether to make short-term loans. The current ratio can also give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. The current ratio is also known as the working capital ratio. The current ratio is calculated by dividing current assets by current liabilities: The higher the ratio, the more liquid the company is. Commonly acceptable current ratios of between 1.5 - 2 represent a comfortable financial position for most enterprises. Acceptable current ratios vary from industry to industry, for most industrial companies, 1.5 may be an acceptable current ratio. Low values for the current ratio (values less than 1) indicate that a firm may have difficulty meeting current obligations. However, an investor should also take note of a company's operating cash flow in order to get a better sense of its liquidity. A low current ratio can often be supported by a strong operating cash flow. A high current ratio is better than a low current ratio, because a high current ratio means that the company is more likely to meet its liabilities which are due over the next 12 months.

Debenture A long-term loan agreement or mortgage between a company and a recognised lender. This is usually secured against a company's assets

Deferred ordinary shares This refers to a share that does not have any rights to the assets of a company undergoing bankruptcy until all shareholders are paid

Designated member Official members of a Limited Liability Partnership who are appointed to ensure that the company adheres to all legal obligations and filing requirements set out in the Companies Act 2006. The Act stimulates that LLPs must have a minimum of two designated members at all times

Detrimental data Details of any other detrimental data registered against a company

Director May also be known as a 'company officer' and refers to a person or firm appointed by shareholders to manage the daily to day running of a company. Directors must be over 16 years of age, and all companies need a minimum of one director. There are no limits to how many directors a company has. Shareholders can also be directors

Director Renum or Renumeration This is the payment made for services or employment of directors on the board the company.

Directors' report An essential requirement of a company's full statutory accounts - unless the company is classed as small or is dormant. The report should include a comprehensive list of all directors and will detail the company financial standing, financial performance over the past year and any strategic plans for the following period

Disqualified director A director can be disqualified if they fail to meet the legal responsivities. Director disqualification can be up to 15 years, and prevents being a director of any company registered in the UK, or an overseas company with connections to a UK company

Dividends A distribution of earnings, often paid quarterly, by a company to its shareholders or directors and which is paid only when all other classes of shares have been paid

Dormant accounts This is when there has been no significant transactions in the financial year - however these transactions do not include filing fees paid to Companies House, or penalties for late filing of accounts

Dormant company A term applied to companies that are not trading or doing any business and does not have any other income

Extended accounting period An agreement with Companies House which gives the company more time to prepare its accounts. There are rules about how this is used and companies can only extend once every 5 years and only for 18 months

Filing deadlines A date provided by Companies House in which a company must file all required legal documents

Filing history A breakdown of all documents filed with Companies House to include category and date

Financial health rating A unique financial health rating system which provides an overall assessment of the creditworthiness of the business based on financial history, including debt payment and other factors. identeco uses GOLD, SILVER, BRONZE and a series of flags and other warning descriptions. For a fuller explanation, click here

Financial health score details A brief narrative to provide more insight into the financial health score

Financial year A company's financial year is the period of time that is covered in its annual accounts, and is usually 12 months. In the UK, the financial year runs from 6th April until 5th April the following year

Joint shareholders Joint shareholders are when a person who owns company shares, does so jointly with at least one other person. Most companies allow two or more people to co-own shares, unless expressly prohibited under their articles of association or a shareholders' agreement

Jurisdictions England and Wales; Scotland; and Northern Ireland are the 3 distinct legal jurisdictions in the UK

Know Your Customer (KYC) This is the process an organisation uses to validate the identify of an individual, customer or business to verify that the subject is not involved in money laundering and other illegal activities

Late filing penalties Companies House can impose fines on fines on a company and its directors if the annual accounts or Company Tax Return are delivered after the statutory filing deadlines

Legal entity This refers to a person or corporate body that has a legal right to enter into contracts with other legal entities

Liabilities This refers to what a company owes - and can be money, goods, or services

Limited company A limited company is a distinct legal entity responsible for its own debts. All limited companies must include 'limited', 'Ltd', or 'LTD' at the end of their name, unless they are eligible for exemption

Limited liability This refers to the reduced financial obligations of company shareholders or directors to pay business debts from their personal finances, should the company struggle to settle its debts

Limited liability partnership (LLP) This legal structure is often seen in companies that use a traditional partnership scheme, such as solicitors and accountants. An LLP incorporates the flexibility of a traditional partnership with the limited liability of a company. LLPs are not liable for corporation tax, and each member will usually pay income tax via self assessment on their individual profits

Liquidator An authorised insolvency practitioner who is appointed to manage the liquidation of a company, distributing its assets to any creditors. Where a company is solvent at the time of liquidation, assets will also be distributed to the company's shareholders

Liquidity ratio A liquidity ratio is an indicator of whether a company's current assets will be sufficient to meet its financial obligations when they become due. The liquidity ratios include the current ratio and the acid test or quick ratio. The liquidity ratios are a result of dividing cash and other liquid assets by the short-term borrowings and current liabilities. They show the number of times the short-term debt obligations are covered by the cash and liquid assets. If the value is greater than 1, it means the short-term obligations are fully covered. Generally, the higher the liquidity ratios are, the higher the margin of safety that the company possess to meet its current liabilities. Liquidity ratios greater than 1 indicate that the company is in good financial health and it is less likely fall into financial difficulties

Made-up date This is the date where all information in the confirmation statement must be accurate and 'made up' to. Typically this is the anniversary of a company's incorporation date or of the made-up date of the previous accounting period. Following this, a company has 28 days to submit documents to Companies House

Management shares A type of share in a limited company with each share carrying multiple votes. Often used by the original shareholders, as a way of retaining more control than new shareholders

Members A term to describe shareholders or guarantors of a limited company

Memorandum of association An official document required during a company's registration process, in addition to the articles of association. A memorandum of association contains the names of all shareholders or guarantors, and indicates their intention to form and become members of the company

Nominal value This pertains to company shares and the amount that a shareholder has paid or is liable to pay for each share they have in a company. This is not actual value of a share, it just determines the share capital and the total liability of the shareholders. Typically, shares have a nominal value of £1.

Non-trading income This is the amount recorded as 'total income received' on your online or paper tax calculation, less your trading income. This figure does not include losses.

Non-voting shares A share that is issued as a tax-efficient form of payment for employees, and does not carry any voting rights

Operating profit Operating profit is the total income from sales, after paying all business costs, but before paying tax

Post- tax profit Also known a PAT, this term is the final amount of profit made by a company after it has paid off all of its operating and non-operating expenses, other liabilities and taxes

Pre-tax profit Also known as EBT or Earnings Before Tax, and is a measure of a company's profits before any tax is deducted

Profit and loss statement A profit and loss (P&L) statement is a financial statement that details the revenues, costs, and expenses incurred during a specified period. Required as part of a company's full annual accounts. This section of the accounts will show the financial performance of a company during its most recent financial year - sales, cost of sales, gross profit, expenditure, net profit. Annual accounts must be filed with Companies House and HMRC every year.

PSC register Required by all companies and LLPs and details of all people with significant control (PSCs) within the company, and is usually kept at the registered office address

Public limited company A public limited company, also known as a PLC is company that is legally allowed to sell its shares to the public and like a private limited company (LTD), the members of a PLC have limited liability so they are not responsible for a company's debts, should the company be unable to settle invoices (unless the members have given personal guarantees)

Public register of companies The official register of Companies House which details all incorporated companies. This register is available to all members of the public

Ratio analysis Ratio analysis evaluates a company's profitability, liquidity, solvency, and operational efficiency using information from its financial statements. A ratio analysis provides intelligence and insights into a company's financial performance, benchmarking against a similar company within the same sector.

Redeemable shares A type of share, given to an employee with the agreement that it can be bought back after a fixed amount of time at their nominal value if an employee leaves

Registered office The address to which an incorporated company is registered with Companies House and which must be used on all statutory documents. It is often different to the trading address. Stipulations include that the address must be the same country in which the company is registered, it must be a physical address not a PO Box address

Resolutions An official record or formal document of an agreement which is reached by a directors' or shareholders' majority vote.

Retained profit Also known as 'Retained Earnings' is a business' net income that is kept within the company accounts rather than being distributed to shareholders. Retained profit is a string amount of a business's net income that is kept within its accounts, rather than paid out to shareholders.

Return Made Up The date upon which the last Annual Return was filed

Share capital Share capital is the amount of money shareholders invest in exchange for shares.

Share certificate This document verifies a person's shareholding with a company

Share class This term refers a type of share that carries ownership restrictions in companies limited by shares. The most popular share class is 'ordinary'. Other share classes include: preference shares, non-voting shares, management shares, and redeemable shares.

Share issue This refers to the creation of new shares in a company, which are then allocated to a person, or persons

Shareholder Shareholders are also known as 'members' and is a person or organisation that owns shares in a limited company. Shareholders are entitled to receive a portion of company profits dictated by the value and volume of the shares that they have. Shareholders are not usually involved in the day to day running of the business unless they are also directors.

Shareholders' agreement A shareholders' agreement (also known as a 'stockholders agreement' is an arrangement among a company's shareholders that describes how the company should be operated and outlines shareholders' rights and obligations.

Shares Shares are units of ownership in a company that is limited by shares. The volume and value of shares determines a shareholder's percentage of ownership and the voting rights that they have, as well as their financial liability for any business debts, and how much profit they receive.

SIC code SIC code stands for Standard Industrial Classification (SIC) code and is a system used by Companies House for classifying industries. It was first introduced in the UK in 1948, and is also used by the Office for National Statistics to gather and analyse data. Directors are required to state a company's SIC code(s) on the confirmation statement.

Small company Companies House groups companies into sizes small, medium and large. Companies classed as small must fulfil at least two of the following criteria: have an annual turnover of less than £6.5 million; produce a balance sheet total of less than £3.26 million; employ less than 50 people. Small companies can submit abbreviated accounts to Companies House in place of full statutory accounts.

SME The acronym for 'small and medium-sized enterprises'.

Sole trader This term refers to a trader or individual who is self-employed and registered with HMRC for Self Assessment. They will pay Income Tax on all taxable income. Sole traders are not required to register with Companies House.

Special resolution A legally binding method of passing a company decision when it is agreed by at least a 75% majority vote of shareholders. Special resolutions are usually passed for significant decisions that directors are not permitted to make. An ordinary resolution requires a majority of 50% votes in favour

Statement of capital The statement of capital is a "snapshot" of a limited company's issued share capital at a given time. Companies incorporating as private limited by shares must complete a statement of capital and initial shareholdings as part of the application to incorporate

Statutory accounts Also known as 'annual accounts' or 'financial accounts' is a set of financial reports detailing the financial activity of a company at the end of its financial year. They are submitted to Companies House each year by all limited companies and Limited Liability Partnerships (LLPs). Small companies can submit abbreviated accounts. Dormant companies can submit dormant accounts. All companies, regardless of their size, must send full statutory accounts to HMRC as part of their Tax Returns

Tangible fixed assets This term refers to physical, long-term assets owned by a company. Examples include buildings, land, property, machinery - they are often though of as something you can 'touch' and play a crucial role in the provision of the goods and services that the company delivers

Total fixed assets This refers to assets such as software, vehicles, machinery, tools, land, buildings, furniture, IT hardware. It also refers to non-tangible assets such as intellectual property, copyrights, patents and trademarks that generate revenue

TPS registered Whether the company is registered with the Telephone Preference Service to opt out of marketing calls. Also know as CTPS when referring to a corporate body

Trading status Shows whether the company is trading, with details of estimated size, or has ceased to trade

Turnover The amount of money taken by a business during a period on time

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Glossary of terms

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