Charity or Limited Company

[gwr]

As a Society we are embarking on a process which will ultimatley end in a new tracks. Currently we are a small Society and individual members are named on the local authoity ground lease. What i am interested in finding out, how difficult is it to become a charity or limited company, incase in the future the Society folds and the parkland has to be reistated as is. Currently the Society funds will pay followed by members (if there is insufficent society funds) I understand to become a charity there must be an annual income of £5000 or more. If we become a company if the project fails the company will fold and members will be liable for a £1.

[houstonceng]

Don't know where you get the £5,000 income figure from. Many Scout Groups are registered Charities (including the one I'm Chairman of) and we would love to have an income higher than the couple of thousand wev have.

Key thing about being a Charity is that you undertake Charitable activities. Seems obvious but isn't to some.

[russell]

I went through this excersise some years ago with a vintage car club and we found that the only way to protect the club's officers was to form a limited company. You will have to keep proper accounts and file them each year at Companies House but this can now be done very cheaply on line.

Have a look at www.companieshouse.gov.uk

Regards,
Russell.

[alanstepney]

Some years ago there was a lengthy article, plus some follow-up and assorted letters, in Model Engineer, detailing the different options and advantages of each.
Another article, (I believe by Ron Gage of Chichester ME), gave detailed information on the route they had chosen to answer the same problem.

I suggest reading them, and am sure somone can give the issue numbers.

[Tony K]

Some clubs, including my own, are Friendly Societies. I am not sure of the advantages, but perhaps this is an option you have not considered.

[cotswold]

If a club has assets then a limited company is the best route for protecting (limiting) the liability of individual members. Cheltenham SME became a limited company in order to acquire the freehold of the land that it had been using since its inception.

[jgb7573]

Ickenham and District society is also a limited company (a company limited by guarantee). The point Mike (cotswold) makes about assets is interesting. Any "organisation", whether it is an individual like you or I, a non-incorporated club, a limited liability company or a charity can own assets. Our club owned much of the land on which it's clubhouse and track are built for many years before we went limited.

The benefit of limited liability so far as our club was concerned was protection of the members. In these days, it is all too easy to imagine some event happening that could end up with the club having a bigger debt than a sale of the club's assets would cover. Before we had limited liability, then whoever owned that debt could then go against each and every individual member of the club to get their money. This was irrespective of whether the member concerned was in any way responsible for the club getting into debt in the first place. We saw this as a risk that we needed to do something about. By going for a company limited by guarantee, individual members are at risk up to the amount of the guarantee (£1 in our case). So if the worst came to the worst, and some catastrophic event took place, then the club might have to fold. But individual members would be out by just £1.

There are exceptions to that £1 of course. For instance, the committee members are effectively company directors and hence have the same duties and responsibilities as any other company director. And they can get sent to prison! But the ordinary member at least should be safe.

We've been a limited company for about 9 years now and it has not caused any problems. There is some additional formality required. But this just takes a bit of organising and is no real burden. In all significant respects the club has continued to operate much the same as it always has.

I can't speak with any experience of being set up as a charity. However, I did talk about this with a club member who is a solicitor who is also involved in other charities (principally Scouting). His view was that the charity route was too restricting for us. Apart from anything else, assets owned by the cub become effectively owned by the Charity Commisioners as you have top apply to them should you need to dispose of any.

I am by no means a legal eagle so please do not treat this as anything other than the experience of someone who has been involved in the transition to limited company, and subsequent running of the club. Legal advice is strongly advised. Send me a private message if you want more information and I will put you in touch with our solicitor member. I know he has advised at least one other club on just this matter.

Hope that helps.