Other Legal Structures
A Company Limited by Guarantee and an Unincorporated Association – The use of two vehicles may be a viable alternative to incorporating the whole club. For example, in the case of rugby clubs the playing section may be incorporated as a company limited by guarantee while the social side, suspicious of change can remain as an unincorporated association. The social side could own the club premises and manage the bar and trading income, while the playing section would receive the sponsorship and playing income and pay the playing expenses. There are normally separate committees for the social and playing sections and the separation of the club into two in this way should not be too difficult.
A Company Limited by Shares – The principal users of companies limited by shares are businesses whose aim is to make a profit. Members of the company hold shares and can receive dividends on these shares, the shares can be transferred to other members and a dominant member with more than 50% of the shares can control the company. Companies are divided into private and public companies. A public company (plc) has certain features including a minimal share capital of £50,000 and their shares are usually but not always freely traded. These companies are considered unsuitable for a club although a number of smaller clubs have ill advisedly incorporated as a company limited by shares. Such companies are unsuitable not only because of the aims under which they have been set up, but also because their memorandum and articles require considerable redrafting. In addition company law procedures concerning, for example, such matters as the issue of shares are far too formal.
A Registered Charity – Receives favourable taxation treatment and mandatory rates relief. Because of the advantages of charities a number of sport clubs have tried to gain charitable status. A test case application brought by North Tawton Rugby Club was rejected by the Charity Commission. The Commission stated that, the law strictly limited the extent to which social clubs could be charitable and it had no alternative but to reject the application. Some clubs rent premises from a charity through a licence to occupy and indirectly receive the benefits of the rates relief obtained by the charity landlord.
Registered charities are frequently incorporated as a company limited by guarantee. An Registered Society would normally be an unsuitable vehicle for registered charity status.
Charitable Incorporated Organisation (CIO) – Charitable Incorporated Organisation is an alternative route for clubs that are considering charitable status.
Friendly Societies – This legislation is no longer available to social and social clubs and it is no longer possible to register a new society under the 1974 Act. A number of workingmen’s and social clubs are, for historic reasons are registered under the Friendly Societies Act 1974 mainly due to the fact that the legislation retained the status and position of trustees. As it is often the opposition of trustees that prevents incorporation removal of this legislation has resulted in a decline in the number of clubs becoming incorporated.
Friendly societies registered under the Friendly Societies Act 1992 are incorporated entities and are registered for effecting and carrying out contracts of insurance.
Unlimited Companies – Are becoming increasingly popular mainly due to their greater privacy and they tend to be used by one man companies. These companies have unlimited liability and for this reason are considered unsuitable in most cases for members clubs.