Becoming a Company Limited by Guarantee by W60x88


									Wigan & Leigh CVS

                Becoming a Company Limited by Guarantee

Where Can We Get Help?

    Wigan and Leigh Council for Voluntary service can provide information
     and support to voluntary organisations looking to become companies
     limited by guarantee.
    We can provide guidance NOT legal advice. It is advisable to seek
     legal advice in some situations.
    Charity Commission, Charity Law Association, Companies House etc.

Why Become a Company Ltd by Guarantee?

    To limit the liability of your organisation’s governing body.
    Your organisation will be recognised as a ‘legal person’ in its own right.
    Your organisation can enter into contracts etc in its own right. It will be
     able to enter into contracts as a company instead of individual
     members of the management committee having to do this.
    Any legal action would be brought against the company.
    - If, when the organisation folds, it cannot meet its financial obligations,
     the members are protected form personal liability (in most cases).

Any Drawbacks?

    Higher running expenses (registration, submitting of annual accounts
     and returns).
    More legal requirements and paper work.
    Incorporation does not give complete protection against personal
    Names and addresses of each of the company directors will be
     displayed on Companies House website.
    You need to weigh up the pros and cons of becoming a company and
     decide whether it is appropriate for your organisation.

What Else do we Need to Consider?

- There are some further issues that you may need to consider before making
your final decision.
-Are you already registered as a charity- this has implications for the process
you will follow.
If you are not already a registered charity, do you wish to become one?
    - You will, in the eyes of the law, be creating a brand new organisation,
       and therefore this may have implications if you are in receipt of any
       funding. If your aims, objects and projects are to remain the same, then
       funders could simply transfer the funding over to the new organisation.                          1                         Updated Jul 08
Wigan & Leigh CVS
       It is essential that you contact them before you start the process just in
       case there have any issues.
   -   You may also be registered with or affiliated to other agencies who
       may need notifying before you begin the process. For example, if you
       are registered with Ofsted, you will need to re-register as a new

Ok, We’ve decided becoming a Company Ltd by Guarantee is Right for
our Group – What do We Need to do Now?

    There are four main steps to becoming a Charitable Company Limited
     by Guarantee:
        – Write and sign your governing document and then register with
           Companies House.
        – If you are a charity, or wish to become one, you need to
           apply to the Charity Commission at this point.
        – Transfer everything from the old organisation to the new
           company (Date of Transfer).
        – Wind down the old organisation.

What will Our New Governing Document Be?

At present, you may have a constitution that sets out how your group is run.
All members of the governing body have a responsibility to know and
understand this.

When you become a co ltd by guarantee your governing document is called
the Memorandum and Articles of Association. There are some significant
differences between this and the constitution of an unincorporated

    Model governing documents are available from the Charity
    It is vital that you are involved in putting this together and that you
     understand what it all means.
    This will be called your Memorandum and Articles of Association.

Registering With Companies House

       -   Once you have completed an signed your memorandum and
           articles, you will need to send this to Companies House, along with:
       -   Companies House Form 10, completed and signed by the first
           directors and Company Secretary (if applicable)
       -   Companies House Form 12, your declaration on applying for
       -   If you wish to be exempt from having to use the word ‘limited’ you
           will also need to send Form 30 (5)(a)
       -   a £20 registration fee is also required.                           2                         Updated Jul 08
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      -   Companies House will then process the application and send you
          your Certificate of Incorporation.

Registering as a Charity

    Once you have received your Certificate of Incorporation from
     Companies House, you will then need to register with the Charity
    If you are an existing charity, after incorporation you will need to re-
     register with the Charity Commission

The Next Steps…

    At this stage you will have a brand new company but your old
     organisation will still exist so, before you wind up your existing
     organisation, there are some steps you need to take:
         – Set up a bank account
         – Contact current funders
         – Order company stationary
         – Sort out any contracts that remain in the name of the existing
         – Members of the existing organisation must re-apply.
         – Policies and procedures must be formally adopted by the new
         – Check that your constitution allows for your assets to be
             transferred to the new company

You should now be ready to transfer assets from the old to the new company:

    A resolution must be made, by the governing body of the old
     organisation at a general meeting, to dissolve the existing organisation.
    They must set a ‘date of transfer’.
    Any employees must be notified in writing of the new company

Winding Up the Old Organisation

Before finally winding up the existing organisation, you will need to hold
an AGM:

    You will need to hold an AGM for the existing organisation to approve:
         – The final accounts
         – The final resolution to dissolve the organisation
    You should then dissolve the organisation in the way that is set out in
     the constitution.
    If you are an existing charity, send final accounts to the Charity
     Commission.                          3                         Updated Jul 08
Wigan & Leigh CVS

    CVS are here to support you through this process- tailored support,
     library facility.
    The Charity Commission has useful publications- order from
    Companies House-
    Charity Law Association-
    Sandy Adirondack- author of The Voluntary Sector Legal Handbook,
     legal updates-
    Pro Help- legal help for voluntary/community groups-

          !! The Charities Act 2006 and the Companies Act 2006

Some provisions in the new acts may affect the above procedure:

!The Companies Act 2006!

Some (but not all) of the provisions in the Companies Act 2006 have come
into force. If you would like to find out more visit: or where you
can find further information.

There are two further stages in the implementation of the Companies Act
2006 scheduled for October 2008 and October 2009. Keep an eye on the
Companies House website for changes:

! The Charities Act and the Introduction of the CIO (Charitable
Incorporated Company)!

The Charities Act 2006 introduces a new legal form of incorporation which is
designed specifically for charities, the Charitable Incorporated Organisation
(CIO). The CIO will combine the advantages of a corporate structure such as
reduced risk of personal liability without the burden of dual regulation. The
Charity Commission will be producing detailed guidance which will include
how to set up a CIO; the process for a charitable company or charitable
industrial and provident society to convert to a CIO, and the process for an
unincorporated association to change to a CIO structure. Details of when the
CIO will be available for charities to use will appear on the Charity
Commission website .                         4                        Updated Jul 08

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