Unlimited companies

What are the essential features of an unlimited company?

The principal and obvious feature is that the members have unlimited joint and several liability for the company's debts. There are no prescribed model articles for unlimited companies registered from 1st October 2009. For unlimited companies registered before that date it is Table E. Most unlimited companies are not required to file their accounts with the Registrar, though they must do so if the company is a holding company or subsidiary of a limited company.

What sort of organisation might suit being an unlimited company?

Given the potential liability, such companies tend to be relatively small where the members can keep a close eye on them. They are sometimes used by professional practices as an alternative to partnerships.

Why would anyone in their right mind agree to be a member of an unlimited company?

Given the potential unlimited joint and several liability your question is understandable, and there are only around five thousand unlimited companies registered in the United Kingdom. One reason could be that the members want the world to know that they have total confidence in the company - it should impress the bank manager if the company asks for a loan. The members could be people who might be attracted to a general partnership, where the partners have unlimited liability, but want the structure of a company and company law.

Companies limited by guarantee

What are the essential features of a company limited by guarantee?

The members do not own shares with the consequence that dividends cannot be paid. Profits (or more accurately surpluses) are invested, retained in the company or spent in furtherance of the objects of the company. When the company is wound up the net assets are not paid to the members, but distributed according to the objects and constitution of the company.

The members comprise the subscribers to the memorandum and such other persons as the directors approve for admission to membership. Each member signs a guarantee that in the event of the company becoming insolvent, he will contribute up to a specified sum. The amount of the guarantee is frequently nominal, such as, for example, ten members agreeing to contribute up to one pound each.

Are there minimum or maximum amounts for the guarantees in a company limited by guarantee?


What sort of organisation might suit being a company limited by guarantee?

Companies limited by guarantee are often charitable organisations. They may also appeal to sports associations, trade associations, flat management companies, and Chambers of Commerce among others.

Community interest companies

What is a community interest company?

A Community Interest Company must have 'Community Interest Company7 or 'CIC' at the end of its name, so it could be, for example, 'Bognor Regis Affordable Childcare CIC Ltd'. It is possible for a community interest company to be a PLC, a company limited by guarantee or a private company limited by shares. Most of them are private companies limited by guarantee.

Please tell me more about community interest companies?

The distinguishing features of a Community Interest Company include the following:

It must show that it will pursue purposes beneficial to the community and not an unduly restricted group of beneficiaries.

Regulations permit the exclusion of companies with certain objectives. Political parties and political campaigning organisations are examples.

A CIC is not able to have charitable status. However, charities are able to have CICs as subsidiaries.

A CIC is required to produce an annual community interest company report. This is publicly available at Companies House.

A CIC is prohibited from distributing any profits to its members. However, a CIC that is limited by shares does have the option of issuing dividend-paying "investor shares". The dividends payable on such shares are subject to a cap.

When a CIC is wound up its residual assets are not distributed to its members, as in the case of a normal company. Instead, they pass to another suitable organisation that has restrictions on the distribution of its profits, for example another CIC or a charity.

A regulator has been appointed to police and generally supervise CICs. The regulator approves applications for CIC status and has powers to investigate alleged abuses of CIC status. He can remove directors, freeze assets and apply to the court for a CIC to be wound up.

A CIC has none of the benefits or burdens of charitable status. It is not subject to regulation by the Charity Commission or the charitable jurisdiction of the High Court.

What sort of companies might be community interest companies?

A Community Interest Company is a non-profit distributing enterprise, but it is not an option for a registered charity or a political party. It may, for example, be suitable for businesses operating in such areas as childcare, social housing, leisure and community transport. The special characteristics of the CIC are intended to make it a particularly suitable vehicle for some types of social enterprise - essentially, those that wish to work for community benefit within the relative freedom of the non-charitable company form, but with a clear assurance of non-profit-distribution status.

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