Thinking of starting a company at 16? Know the rules, risks and responsibilities before you take the leap.

The Companies Act 2006 does not set a minimum age for shareholders, meaning even minors can hold shares unless a company’s articles of association explicitly state otherwise. However, the minimum age for a company director in the UK is 16 years.

Directors carry significant legal responsibilities, including ensuring that company accounts and reports are accurate and filed on time with the relevant authorities. Even if the company is dormant, you must still submit confirmation statements and accounts annually without fail.

Setting up a company is generally straightforward, but being a director comes with serious ongoing responsibilities. These duties are not just formalities, and failure to meet them can lead to personal fines, disqualification or even imprisonment.

Even dormant companies must file annual accounts and confirmation statements regularly. While directors can delegate daily tasks, such as hiring an accountant or other professionals, they remain legally responsible for the company’s records, accounts, and overall performance.

Seeking professional advice before starting a company is highly recommended, especially for a 16-year-old unlikely to have all the necessary business knowledge.

Company directors have a legal duty to act responsibly and in the best interests of their business. If a director fails to meet these responsibilities, they can face disqualification from acting as a company director for up to 15 years.

Disqualification can result from ‘unfit conduct,’ which includes actions such as trading while insolvent, failing to maintain proper accounting records, neglecting to submit statutory accounts to Companies House, not paying taxes or using company money or assets for personal benefit. It can also occur if a director is subject to bankruptcy or a Debt Relief Order.

The disqualification process typically begins when The Insolvency Service investigates a company involved in insolvency proceedings or responds to complaints. If misconduct is suspected, the director will be informed in writing and given the option to either defend the case in court or voluntarily accept a disqualification through a formal disqualification undertaking. Other authorities including Companies House, the courts or a company insolvency practitioner can also initiate disqualification proceedings.

Once disqualified, an individual cannot be involved in forming, marketing or running a company or be a director of any company registered in the UK or an overseas company that has connections with the UK. Breaking these rules can lead to a fine or imprisonment. Disqualified directors are listed on public registers maintained by Companies House and The Insolvency Service.

Under the Companies Act 2006, dividends can only be paid from realised profits, never from capital, no matter what a company’s Articles of Association say.

Dividends can only be paid by a company out of profits available for distribution, not from capital, even if the company’s Articles of Association suggest otherwise. This rule is established under Companies Act 2006, section 830, and forms a key legal restriction on dividend payments.

Profits available for distribution are defined as a company’s accumulated, realised profits (from both revenue and capital), not previously distributed or capitalised, minus its accumulated, realised losses, provided these losses haven’t already been written off through a formal reduction or reorganisation of capital.

HMRC’s internal manuals go further and state that the Act lays down what may be termed the ‘balance sheet surplus’ method of determining profits available for distribution. Under this, a company can distribute the net profit on both capital and revenue at the particular time, as shown by the relevant accounts.

Additional rules apply to certain types of companies including investment and public companies.

Fit and proper test fee to jump from £150 to £700 under HMRC’s proposed AML supervision changes

Many businesses are monitored by the Financial Conduct Authority (FCA) or certain professional bodies for Anti-Money Laundering (AML) purposes. However, HMRC is responsible for supervising more than 36,000 businesses in 9 business sectors. There are registration and annual fees that are charged for anti-money laundering supervision by HMRC. These fees have remained the same since May 2019, and HMRC is currently looking to increase the fees that they charge within the current fee structure to meet the costs of providing effective AML supervision.

HMRC plans to increase the premises fee from £300 to £400, representing a 33% increase since 2019. The reduced rate for small businesses will also increase from £180 to £200. Most affected businesses operate from a single premises.

The approvals fee, which ensures responsible individuals (BOOMs) are suitable for their roles, will remain unchanged at £40. However, the fit and proper (F&P) test fee, which applies to MSBs and TCSPs due to their higher risk profiles, will significantly rise from £150 to £700.

HMRC also plans to reintroduce an application fee of £400 for businesses newly registering or reapplying due to lapsed registration. Finally, the sanctions administration charge will be revised. While previously tied to the type of penalty, HMRC proposes a flat £2,000 charge for all types of sanctions, capped at the value of the penalty. A separate lower charge of £350 will still apply for specific regulatory failures.

These changes are open for comment until 29 August 2025, and it is expected that further information on when these new charges will be introduced will follow shortly afterwards.

You now need to set up a verified GOV.UK One Login to confirm your identity with Companies House.

To verify your identity at Companies House, you can use the GOV.UK online verification service if you have one of several accepted photo identification documents. These include a biometric passport from any country, a full or provisional UK photo driving licence, a UK biometric residence permit or card or a UK Frontier Worker permit.

You will also need to provide your current address along with the year you moved in, and you must sign into or create a GOV.UK One Login account to complete the process. Your verified identity will then be linked to your GOV.UK One Login account.

A recent update to the guidance published by Companies House makes it clear that each email address can only be used once for identity verification. If other individuals use the same email address to access GOV.UK One Login, they will need to register a separate account with a different email address.

If you do not have any of the accepted forms of photo ID but live in the UK, there are alternative ways to verify your identity. These include verifying your identity in-person at a Post Office or using details from your bank or building society account together with your National Insurance number.

If you are unable to verify your identity using any of the available online or in-person methods, you can appoint an Authorised Corporate Service Provider (ACSP), such as an accountant or solicitor to verify your identity on your behalf.