Companies Limited by Guarantee: Get the details right

At last!

Great article, thanks.  Didn't realise about the "Reserves" rather than "Shareholders' funds" but just spotted that good old Iris does it automatically.

Just one point on distributions, I did come across one company that didn't place a restriction on distributions in its Articles, so presume they could have distrubuted profits to their members?  As it happens they never did but this question has arisen on here in the past.

Groups

Can a CLG own other commercial entities legitimately? I have an instance whereby a CLG owns 100% of one commercial entity and a majority of another. Both the other entities are limited by share capital.

As the CLG is the parent company, what are its filing requirements for Companies House and HMRC? Does it submit accounts detailing its own trading results or consolidated accounts?

Limited by Guarantee to Limited

Does anyone know if it is possible to change an Limited by Guarantee company to a Limited company?

Nomination to become a Director of a CLG in Gibraltar

I have been approached by board members of a CLG (residential property management company in Gibraltar) to become a director. I recently(Feb 2009) acquired a property leasehold of a studio flat in the estate and later discovered that accounts for the management company had not been presented to the members since 2003 as the Head Lessor (Company Limited by shares) had not provided "vital information" to enable the CLG to produce the accounts. I am quoting the Managing Agents acting for the CLG. To cut a long story short audited Annual Accounts for 2003,2004,2005, 2006 and 2007 were presented to the AGM in September 2009. From 2004 onwards the Income & Expenditure Accounts have shown deficits for the year and the Balance Sheets show the assets are exceeded by liabilities (the latest December 2010 accounts showing excess of liabilities over assets is approx.£70,000 (the only assets of the company are Debtors and Cash in Bank). Total Shareholders' Funds (auditor's description) is (£70,000) i.e a negative amount. It seems technically insolvent to me.

The auditor's report includes a qualified opinion which says that they are unable to obtain third party confirmation of the balance due to Head Lessor shown as in excess of £50,000 in the Creditors note in the Accounts.

Notes to the Accounts describe the company "as incorporated in 2000 as a company limited by guarantee and not having a share capital"

In the notes re ACCOUNTING POLICIES:-

The Accounts have been prepared on the "GOING CONCERN" basis which is dependent on the support of the company's members

In the notes re LIABILITIES OF MEMBERS;_

"In accordance with clause in the Memorandum of Association, every member of company undertakes to contribute to the assets of the company in the event of it being wound up while he is a member etc...for debts and liabilities of the company and the costs,charges and expenses of winding up for the adjustments of the rights of contributories among themselves such amount as may be required not exceeding £10.

Should I consider accepting the nomination as the committee proposer "believe the knowledge you have would be of great benefit to the committe and in turn to all the other owners within the estate"?

re the name Limited by guarantee

I wasn't aware that companies limited by guarantee were required to state "limited by guarantee" in their name.  Companies House inform me that all you need is the word limited after the name.

As regards the form NE01 this relates to the removal of the word 'limited'.  The relevant section number number is s60 of the Companies Act 2006.  Section 30 was for the 1985 Companies Act.

Appreciate the good article!

The article is very useful & worthwhile. we indeed appreciate the work.

Just to clarify...

Just to clarify pkhaynes is correct, a CLG name ends with the word 'Limited' and not 'Limited by Guarantee' as stated in the article.  Form NE01 removes just the word 'Limited' from the CLG name .

Also there is a reference to a Form 88 (Return of Allotments).  This is the old form reference, the correct form to file on a share company for the allotment of shares is now Form SH01.

Disclosure of Members

I was intrigued to read that "Members are listed in the same format as shareholders in Companies House records" as when i tried to find out who was involved in a CLG this information was not available. As you say there is no Return of Allotments and the Annual Returns do not disclose members. I was told that i would have to inspect the register at the registered office (and this did not fill me with confidence). Is there a requirement to list members at Companies House?

Disclosure of Members

Another way to check on the members and directors is to look at the accounts produced.  I know that it is the practice to list all current members for the period of the report including the date of their appointment.

Sandy

Accounts will only show the directors who have acted not members.  As mentioned above the only record is the company's register of members.

Paul.  Yes you are right.  I

Paul.  Yes you are right.  I was thinking of directors/Management Committee not members.

Sandy Ogunbote

Actually Jennifer’s not wrong

Actually Jennifer’s not wrong when she states that ‘Members are listed in the same format as shareholders at Companies House’ - read the text carefully - she did not say ALL members are listed. Directors are - they are members. The same form APO1 (Appointment) is used for example.

Perhaps the text should have read:

‘Members, when registered, are listed in the same format as shareholders in Companies House records although no SH01 (Return of Allotments - previously form 88) is used as there are no shares to allot.’

This is going off on a tangent slightly but I was hoping

for clarification on the question heavily discussed recently on here (with no firm conclusion), as to whether a private property management company needs to disclose its sink fund.  Some people say the fund should be held in a residents' association account, and the company would then file dormant accounts. That would seem to defeat the purpose of having a limited company since if the company is dormant it can hardly offer any protection.

I think the confusion arises between commercially run management companies and private ones.  I think the law may require commercially run companies to hold the residents' money in a separate non-company account for protection in the event of insolvency. This wouldn't be necessary for a private residents-owned company, and there would seem to me to be no reason to hide the sink fund.  It has to be disclosed to potential buyers anyway. 

Another issue which arose recently is that any company "with an interest in land" has to file a CT return, even if that interest is just owning the freehold of a block of flats, the owner-occupiers of which are the members of the company.  HMRC naturally aren't interested in processing CT returns with no tax liability, so if the company passes a special resolution to dispense with collecting ground rent, does this satisfies the "interest in land" clause and free the company from filing CT returns?  It's of academic interest only, because HMRC don't apply the rule strictly in these cases and if they rule that there is no need to file a CT return it's not likely to ever become an issue.

May2011 a huge tangent

I think you are confusing proposed regulation requiring anyone holding residend's service charge money to put it in a separate trust account with the reason behind the regulation, ie that anyone collecting variable service charges is effectively holding that money in trust, under S42 of the L&T Act 1987.

Consequently, if anyone collects and holds this money it's not theirs and so it should not appear in its books or accounts.  This is why Ltd companies, that do nothing else, can file dormant accounts and so has been the case since the 87 Act.  The Ltd company is set up to make sure there is a legal vehicle requiring all tenants to comply with their lease and make sure the property is looked after.

Have a read of a recent article on here on the topic and HMRC's guidance:

https://www.accountingweb.co.uk/article/hmrc-attempts-simplify-flat-service-charge-regime/517996 

Taxation

For a non charity CLG with exemption from the word Limited one you have mentioned the CT600 is required to be filed. Is there tax payable for any surplus generated. I am presuming not?

Very article and useful comments

Thanks Jennifer for a very useful article and to all the other "commentators". Just joined today as been approached to account for CLG!

abbreviated balance sheet of CLG

Hi , This is my first ever post. Could anyone clarify what Companies Acts sections I should quote on abbreviated accounts for a CLG ? Company was active , ie, not dormat accounts. Thanks

Taxation
Just to follow up on Philhendy's question on tax for a CLG. Is tax payable on the surplus income where a CLG's main source of income is grants and donations.
Do you submit a CT600 stating no accounts attached not subject to corporation tax or do you calculate tax on surplus income.
Can someone help?

Tax is always due on a corporations profits

Unless it is registered as a charity or a CASC

For what purpose were the contributions made?

PM or email me if you want to talk details 

Chris Smail

www.langer.co.uk

CLG's - Accounts Disclosures...

Companies Accounts disclosures:

If a CLG company has taken advantage of the exemption and dropped "Limited" from its name:

Is it required to state/disclose - on full financial statements and Abbreviated accounts - below its name, on every page:

(A Company Limited by Guarantee) ?

I have seen some published accounts that make this statement and some that don't, which is correct ?

Does this differ if the company has not taken advantage of the exemption ?

Thanks

HMRC's online CT600 refuses zero share capital

Hi

Just tried to submit a CT600 using HMRC's own online software for this, and whereas in the past I successfully submitted CT600s with zero share capital, this year the form refuses to let you navigate past the page for share capital and reserves unless you put in a positive figure for share capital ... but of course there is no share capital for company limited by guarantee ...  trying to get a workaround from HMRC, but it's a bit like pulling teeth from a chicken.

Any help in the meantime would be appreciated.

CT600

On completion of the Online CT600 , I have gone to the reduced accounts submission , but how do you offset the Corporation Tax Calculation to make it zero

Limited by Gaurantee Reserves - Help!

Hi I am hoping that somebody can advise on this....

I have a client that had dealt with the incorporation of their own company and actually incorporated a company limited by guarantee. Only a small directors remuneration was withdrawn and the intention was to withdraw the profits by way of dividend. When we became aware of this we incorporated a private limited company with the intention of withdrawing the profits from the original company by way of a management charge, clearly this would have to be dealt with in the following accounting year.

We have come complete accounts for the current year and further profits were made in the company that is limited by guarantee up to the date of that the new company was incorporated. The reserves are too high to withdraw as a management charge all in one go, as this would have VAT implications and both companies have ceased to trade. There are still reserves of about £10k, how can we extract these?

Thanks in advance......

Some technicalities!

Good article, but I have a few quibbles (pretty much just technicalities).

Yes, CLGs don't have share capital but this doesn't necessarily make them unsuitable for commercial enterprises. I work with a number of CLGs which are trading businesses. There are ways to fund companies other than through shares.

CLGs may not be able to pay dividends per se, but they can still distribute profits unless something in their articles prevents this (in practice all charities and most other CLGs will have a "not for private gain" clause).

Excess of income over expenses is usually referred to as "surplus" in charitable CLGs, but a CLG can still call its profit "profit". Commercial trading CLGs will likely use the term profit, voluntary membership organisations will likely use the term "surplus".

Where would distributed profits go on the SA100?

Where would the distributed profits go on the recipient's SA100, as they are not dividends?

Commercial Trading as a CLG

"Small, not-for-profit, non-charitable CLG are allowed to carry on a trade purely between its own members. They are deemed to trade "mutually" and as such are exempt from Corporation Tax. (HMRC - BIM24025. Ayrshire Employers' Mutual Insurance Association Ltd v CIR 27TC331)."

How then could a CLG operate as a commercial enterprise if they must trade purely between its own members.

Are there different rules for large CLG with surpluses?

CT 600 for a CIC

Doing a CT600 using HMRC software. On getting to balance sheet share capital zero but keep getting error messages saying has to be 1 or over. How can this be sorted?

Filing Accounts for dormant limited by guarantee company

I have a problem. I an trying to file dormant accounts for a company limited by guarantee but can't get beyond the share capital page. It won't accept 0.00 as Share Capital.

How do I get past this.

Annual Return for CLG

In the Annual Retrurn to Companies House, are ALL members to be included or only the appointed Directors. If so what form does one use and how much detail for non-director members.

Annual Return for CLG

Any advice from anybody?

Further Appreciation

Thank you for this article, just become a Director of a very small company looking after the common areas of a small estate and completely new to this.  This has been very helpful.

CIC Accounts Filing

A CIC cannot file accounts online at Companies House.

Doh.

CLG as subsidiary

Can a CLG become a subsidiary of another company?

We are a group of 5 residents that have set up a GLC (as recommended by our solicitor) to manage a piece of land. I need to submit our accounts to companies house & CT. We paid money into the company we created and the company bought the land so I would show it as a fixed asset but I don't know how to balance it as the companies house balance sheet only allows me to enter 'reserves' (other, or revaluation) and it's not a reserve? The land would only be sold if the company was wound up & the money received would then be split between the 5 members. Thanks for any help on this.

We are a new CIC, with small resources, so I am trying to do first year CT600 myself (treasurer). I have downloaded the form, but can't see how to show no share capital as company limited by guarantee as stated above. Can anyone help, please.