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Limited Company by Guarantee

limit member voting rights

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A limited company by gurantee is normally run by its members.  

Though the director wants to restrict voting rights two just two members and suppose to be non profit making.  The Articles I understand must state one member one vote.

Is it possible to only give voting rights for two members under this structure.  Its a golfing association but it seems more like trading entity.

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By paul.benny
12th Mar 2021 11:15

What's your client trying to achieve? Sounds like there's more to this than the bare question asked here.

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By lionofludesch
12th Mar 2021 12:23

Are these two members mates of the director, by any chance ?

Sure - it's possible. All you need to do is get enough members to vote to disenfranchise themselves by voting to change the Articles.

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Replying to lionofludesch:
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By sanjay100
12th Mar 2021 12:46

I understand they want to use the word association and the articles need to say one member one vote

There will be many other members of the association but the director does not want them to have voting rights.

I suppose the key question is if later down the line they do not follow the constitution what the repercussions will be especially if it suppose to have been non profit.

The director is based overseas and seems to want the overseas as association to invoice the UK association for services and using its name. Thinking about it just seems a bit dodgy and perhaps should setup a Limited company with shareholders.

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By lionofludesch
12th Mar 2021 12:45

Well, that's nice, Sanjay, but what do the actual "owners" of the company - that is, the existing members - want ?

Will they vote for his plan ?

I'm guessing no, but I could be wrong. Maybe they could be persuaded.

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Replying to lionofludesch:
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By sanjay100
12th Mar 2021 12:59

They want to form an association to promote golf and there will initially be two members which will grow to around 100.

These members will need to have one vote each which the directors do not want.

I don't think the members will be too impressed if funds will be transferred overseas

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By lionofludesch
12th Mar 2021 13:08

sanjay100 wrote:

They want to form an association to promote golf and there will initially be two members which will grow to around 100.

So this association hasn't been formed yet ? I'm confused now. I thought it was an existing entity.

Well, if it hasn't been formed, there are (literally) no rules yet. You're wrong that it has to be one man/woman/other, one vote. It only has to be that if that's what the Articles say.

But then a guarantee company doesn't look appropriate. This is a proprietary venture for the director and his two mates.

You need to be a bit more transparent about the plan, Sanjay. At the moment, information is being dragged out of you piecemeal

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Replying to lionofludesch:
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By sanjay100
12th Mar 2021 14:04

Sorry yes I should have mentioned it has not been formed yet

I spoke to companies house and they said the articles must say one member one vote to use the word "association".

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By lionofludesch
12th Mar 2021 14:36

sanjay100 wrote:

Sorry yes I should have mentioned it has not been formed yet

I spoke to companies house and they said the articles must say one member one vote to use the word "association".

OK - well, seems reasonable. But if you knew that, why are you asking if the membership needs to have one vote apiece ? Companies House have already told you they do. It's not going to cut much ice if you say, "yes, I know you said this but I asked on AWeb and they said that was rubbish."

I agree with Tax Dragon, now's the time to be suggesting a visit to the lawyer.

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By Tax Dragon
12th Mar 2021 14:08

Tbh I think what they need at this stage is a legal advisor for the legal advice and an accountant for the sorts of stuff that Aweb can discuss.

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Replying to Tax Dragon:
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By sanjay100
12th Mar 2021 15:17

Yes you are correct and will tell them to engage a Solicitor

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By paul.benny
12th Mar 2021 14:37

So it's relatively simple:
If you want to call yourselves an 'association', it has to be one person, one vote. If you're not up with that democracy, use a different name. I'm a 'member' of the AA but they long since stopped being called The Automobile Association and I don't have any votes.

Limited by Guarantee is usually only used for not-for-profit companies. Because of there are filing requirements related to the guarantees, it would be workable for situation where the 'membership' is constantly changing.

This scenario has an air of someone selecting a solution before they've properly worked out what they're trying to do.

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Replying to paul.benny:
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By sanjay100
12th Mar 2021 15:20

I agree the key is the use of the word association and it seems they want to make profit and shift it elsewhere but hide behind the limited company by guarantee and also not give members a say in the organisation.

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