Advice Note


[PDF]Advice Note - Rackcdn.com911b8d35fa947ee803d0-24c77ec73933a8e3e4a10ee81ade81fd.r93.cf3.rackcdn.com...

1 downloads 206 Views 89KB Size

PREPARED BY WALKER MORRIS LLP

PRIVATE & CONFIDENTIAL: SUBJECT TO LEGAL PRIVILEGE

Advice Note Incorporating an unincorporated association 1

What is the current structure of the Underscar Owners' Club?

1.1

The Underscar Owners' Club (the Club) is currently an unincorporated association. As a result, the Club has no legal status itself; rather it is a purely contractual arrangement between its members.

1.2

Since the Club is not a legal entity in its own right, it is unable to contract with other parties. Accordingly, any contract the Club wants to enter into must be entered into by someone on behalf of the Club. If any action of the Club causes such a contract to be breached, the individual who has entered into the contract on behalf of the Club will be held personally liable for the breach (as opposed to the Club). This could have far reaching consequences for the individual, as the individual's liability under the contract is potentially uncapped.

1.3

In addition, as the Club cannot hold land or assets itself, if the person holding the land or assets on behalf of the Club no longer wishes, or is no longer able, for whatever reason, to act in that capacity, all such land, assets etc will have to be transferred to another individual, which can be an onerous and time consuming exercise.

1.4

Finally, if the Club were subject to any insolvency or winding up proceedings in the future, the members of the Club would be held liable for the Club's debts (if any).

2

What is the Club planning to change its structure to?

2.1

The Club is proposing to become a "company" and therefore become a legal body in its own right. In order to do so, a new company, bearing the name of the Club, will have to be incorporated and registered at Companies House. It is then intended that all of the assets belonging to the Club in its current format will be transferred over to this new, incorporated company, and the unincorporated association will ultimately cease to exist.

2.2

As a separate, independent legal entity, there will inevitably be a greater degree of regulation for the Club to comply with. The primary piece of regulation governing the operation of companies in England and Wales is the Companies Act 2006 (the Act). The Act provides for four separate types of company: 2.2.1

companies limited by shares;

2.2.2

companies with unlimited liability;

2.2.3

community interest companies; and

2.2.4

companies limited by guarantee.

© Walker Morris LLP 2015. Confidential document prepared for John Huntington and Peter Allen for and on behalf of the members of the Underscar Owners' Club. This document is not to be shared, quoted or referred to, in whole or in part, without our prior written consent. We accept no responsibility to anyone other than the members of the Underscar Owners' Club in connection with this document. 1

PREPARED BY WALKER MORRIS LLP

PRIVATE & CONFIDENTIAL: SUBJECT TO LEGAL PRIVILEGE

2.3

The Club intends to incorporate itself as a company limited by guarantee which will therefore bring the Club within the regulatory requirements of the Act.

3

What are the advantages of incorporating the Club? 3.1.1

Limited liability Following incorporation, the liability of each of the Club's members will be the amount each member agrees to guarantee upon becoming a member, which ordinarily will be a nominal amount (such as £1.00). This is in contrast to an unincorporated body whose members are required to contract in their individual capacity and, as a result, their liability will potentially be uncapped. Therefore, if a claim is made against the Club, once incorporated, responsibility for meeting the claim will be borne by the Club.

3.1.2

Creation of a separate legal entity Upon incorporation, the Club will be a separate legal entity. This will enable the Club to enter into contracts, employ and engage employees and contractors, obtain external funding and hold property in its own name, as opposed to in the name of either a trustee or its members, if the Club remained unincorporated.

3.1.3

Transparency Incorporating the Club will bring it within the regulatory requirements set out in the Act. These include having to file accounts, maintain statutory books in relation to its share capital and shareholders, and ensure compliance with various procedures, particularly in relation to corporate governance at shareholder level. Although these may be more onerous than they would be if the Club remained unincorporated, the fact that the Club would be subject to such requirements can be of some publicity value as it helps to ensure that the Club is governed in a transparent manner.

3.1.4

Directors' duties Another regulatory requirement that the Act imposes upon incorporated bodies is the need to have a board of directors. This will bring with it the requirement for the directors to comply with the various duties set out in the Act. These include the duty to promote the success of the Club, the duty to exercise reasonable care, skill and diligence and the duty to avoid conflicts of interest.

3.1.5

Ownership of assets As noted in paragraph 3.1.2, following incorporation, the Club will be able to hold property in its own name. As a result, if an asset is gifted or bequeathed or otherwise transferred to the Club, the Club will own it "in perpetuity" (i.e., until the company bearing the Club's name is wound up). This will be of particular use to the Club if it intends to hold property for future, as well as current, members.

4

What are the costs involved in incorporating the Club?

4.1

Although there are inevitably some legal costs associated with the incorporation process, the Club has endeavoured to ensure that such costs are kept to a minimum.

4.2

In terms of the cost to the members of the Club, there will be no upfront cost. A company limited by guarantee operates on the premise that its members will "guarantee" an amount of money, which only becomes payable in the event that the company is wound up. In this case, the amount that a member will have to guarantee is £1.00.

© Walker Morris LLP 2015. Confidential document prepared for John Huntington and Peter Allen for and on behalf of the members of the Underscar Owners' Club. This document is not to be shared, quoted or referred to, in whole or in part, without our prior written consent. We accept no responsibility to anyone other than the members of the Underscar Owners' Club in connection with this document. 2

PREPARED BY WALKER MORRIS LLP

PRIVATE & CONFIDENTIAL: SUBJECT TO LEGAL PRIVILEGE

5

Will the trustee continue to be involved with the Club?

5.1

The Club has liaised extensively with Resort Fiduciary Services Limited (the Trustee) in relation to the plans to incorporate the Club and the Trustee has been supportive of these plans owing to the increased opportunities that incorporation could potentially bring to the Club.

5.2

The Club has agreed with the Trustee that the leases that it currently holds over parts of the Underscar estate on behalf of the Club will remain in place going forward. Accordingly, there will be no change, in the short term at least, to the current property holding structure of the Club.

6

How will the changes to the structure of the Club be brought about?

6.1

As a company limited by guarantee, the Club will have to adopt articles of association which will replace the existing constitution. So far as is possible, the articles of association will mirror the provisions of the existing constitution.

6.2

Since the articles of association will essentially be an amendment to the Club's constitution, the procedure for amending the constitution, as set out in the constitution, will have to be followed. Accordingly, a resolution will be tabled at an extraordinary general meeting of the Club's members, which will only be passed if at least three quarters of all votes cast are in favour of the resolution.

6.3

Initially, as with all member resolutions, a vote will take place on a show of hands. In the event that a member requests a poll vote, the vote will be conducted in accordance with the provisions for poll votes (i.e. each member is entitled to one vote per certificate held and proxy votes will be taken into account).

6.4

Assuming that the resolution to adopt the new articles is carried, the committee of the Club will subsequently proceed to complete the various administrative tasks required to incorporate the Club, on the advice of the Club's legal advisers.

6.5

All of the assets of the Club in its current form will then be transferred to the new company limited by guarantee, Underscar Owners' Club Limited, and the unincorporated association will ultimately cease to exist.

Walker Morris LLP 16 March 2015

© Walker Morris LLP 2015. Confidential document prepared for John Huntington and Peter Allen for and on behalf of the members of the Underscar Owners' Club. This document is not to be shared, quoted or referred to, in whole or in part, without our prior written consent. We accept no responsibility to anyone other than the members of the Underscar Owners' Club in connection with this document. 3