Topic: Allotment Companies

[davyw1]

A recent article in a garden magazine about forming your allotment into a company. It gave the three types of company that allotment holders can form. Which i think were Limited compay Unlimited company and Registered Charity
The secretary has got it into his head that this is a good idea, basically so no one can claim compensation from or sue the management IE they don't personally pay any compensation.

Now i am under the impression the only people that can sue an allotment  management are its creditors if the allotment folds, any other claim, injury or liability is covered by your insurance.

I have a little knowledge of forming a company and what is involved IE directors, secretary ,registered accountant, registering and fines etc. so as chairman i don't want to go down this road ant further info re the above would be welcome

Davy

[Unwashed]

It's about legal identity.  As an unincorporated association it's the committee who are personally responsible.  The committee as such has no legal personality and so if the committee is sued for a debt or a tort it's members of the committee in their personal capacity who are sued and liable for any debts.

An incorporated company has a legal identity of its own just as if it was a person, and its the company that is sued for debt and tort and any money comes out of the company's assets and the liability of the directors is limited.

There are quite a number of different ways an organisation can incorporate, several suitable for an allotment association, and several less suitable.

There's the public limited company  which has the advantage that it can raise capital by a bublic share issue.  Most big companies are PLCs and their shares are bought and sold on the stock exchange. It's the most onerous way to incorporate and not suitable for an allotments association.

There's the private company limited by shares which is what most commercial organisations are.  A director's liability is limited to the value of her share and the company usually pays her dividends on her shares.  There's no particular reason why an allotment association wouldn't incorporate as a private compnay limited by shares but there are other simpler ways to do it.

There's the private company limited by guarantee which is what most not-for-profit organisations are.  Director's liability is limited to their guarantee which can be as little as £1.00.  It's quite a good structure because other organisations will understand the non-profit nature and this can be helpful, but there are simpler structures still.

There are unlimited equivelents to the above too where, on formal liquidation, the director's liability is not limited to her ownership of the company, but it's a niche thing and not particularly interesting thing in the context of allotments.

There's the industrial and provident society and this is the structure that the NSALG would most likely recommend.  You need to have the company's constitution (confusingly called its rules, and nothing to do with the site rules) approved, but the NSALG has a pre-approved set of model rules that makes the process easy - if those rules suit you.

There's the Community Interest Company which is a new structure with its own regulator.  It's advantage is what's called an asset lock which guarantees that the company's assets are used for community purposes.  It's meant to be simple, but it all looks very complicated to me.

Whether you can or want to register as a charity depends on the formal objects of the organisation being charitable (and I think the provision of allotments for the labouring poor counts).  You'd have to check out the advantages and disadvantages of charitable status.  A CIC can't also be a charity.  The model you choose also has implication for Corporation Tax.

If it was me, I'd be looking at a private company limited by shares because it's a simple enough structure to get your head around, it's reporting requirements are not too heavy, and you have control over the memorandum of association so you can set the company up to work just like you want.

Note that an organisation's charitable status isn't the same thing as its corporate status.

You didn't ask, but I should also mention trusts.  An unincorporated association cannot own property - it has no legal personality - so when an unincorporated association leases landl to let to its allotmenteers the site is owned in trust, although I don't think that's generally understood.  Trust law is complicated, and although it's a reasonable way to do it, things are much simpler if the association incorporates as then it can own the site directly.

[tonybloke]

hi Davy,
we are an I&P society, registered with the FSA.

have a word with NSALG for advice on how to go down this route.
rgds, Bloke

[davyw1]

Having had a look at company limited by guarantee and  industrial and provident society i have advised the secretary to have a look at the latter and contact the NSALG re their opinion.
I understand why the secretary is conserned as we buy all our weed killers, tomorite, maxicrop etc in bulk and re bottle them so they are not proprly labled with all the instructions on, storage of a 1,000 ltrs of parrifin and so on but he is not the one that has to convince the members to agree to the change.

What i could not find in the I & P was do you have to send your accounts to a registered accountant each year as in the other companies.

Davy

[tonybloke]

our association has it's books audited yearly.

[Trevor_D]

We're a mutual (an I & P), registered with the FSA. As Secretary, it's my job to fill in an annual return. We have to add a copy of our annual accounts, but the rules on a formal audit are complex, and depend largely on your turn-over. We have ours checked by an external accountant - which isn't the same as a full audit - and signed by him and our Treasurer. But our members have to pass a motion at the AGM stating that they are happy not to demand a full professional audit.

Consult NSALG before you do anything, but look on the FSA's website as well. (One bonus to being registered with the FSA is that when we applied for Lottery funding last year, the financial checks took no time at all.)

[Digeroo]

I do not think that being a company limited in someway removes the directors or management of all liability.  I think they are expected to run the organisation in a way that ensures they can pay their debts. 

I certainly do not think it will not protect anyone from the consequences of poor management of dangerous substances.   

[Digeroo]

Suggest you read up on the Duties of Directors

There is one for Industrial and provident socities on

''www.cybermoor.org/userFiles/DIRDUTY%20IPS.doc''  It is a pdf so I have put it in inverted commas to remove the possibility of clicking on it.   

[bluecar]

Hello All.

We are a self managed Council allotment. Can we go down the industrial and provident society route? It does seem to add some extra protection for the committee and give access to funding opportunities if we register with the FSA.

I look forward to your responses.

Bluecar

[Unwashed]

Hello All.

We are a self managed Council allotment. Can we go down the industrial and provident society route? It does seem to add some extra protection for the committee and give access to funding opportunities if we register with the FSA.

I look forward to your responses.

Bluecar

No reason per se why you shouldn't incorporate, and an IPS is a perfectly reasonable way of doing it.  Does the association own a lease on the site in trust, or are you managing under licence?  Remember that incorporation brings legal responsibilities too as well as limiting liability, and an IPS has a mutual ethos which may or may not be what you want.

[tonybloke]

Hello All.

We are a self managed Council allotment. Can we go down the industrial and provident society route? It does seem to add some extra protection for the committee and give access to funding opportunities if we register with the FSA.

I look forward to your responses.

Bluecar

have a word with Liz Bunting ' nsalg, they've sorted this sort of issue out for hundreds of allotment sites!

[bluecar]

Thanks for your comments.

I don't know which we are Unwashed - I know we have some sort of agreement with the Council, so I guess it's not a lease in trust, more likely to be a signed agreement. I'll see what I can find out.

We are a member of NSALG so I can follow that link through. Thanks Tonybloke.

Regards

Bluecar