Frequently Asked Questions
[Accountancy & other tax issues] [Club Management] [Computerisation] [Payroll Issues]
CONSTITUTIONAL201. Limited Liability
Many sports clubs are non profit making members
clubs, ruled by a constitution, but having no legal existence and being unable
to enter into contracts unless in the name of its officers or trustees ie they
are unincorporated associations. Recent events in the world of Rugby have highlighted the main
weakness of unincorporated associations which is –Personal Liability. The
insolvencies of certain high profile rugby clubs have shown that officials may
(as a last resort) be sued for club debts and theoretically all members may be
liable. In one case creditors
took individual members to court and they were means tested as to their ability
to pay. With the commercialisation
of the game of rugby, financial inducements have grown, contract of sponsorship
have been made, players contracts are being drawn up and it may be time to
reconsider whether the unincorporated members sports club is the most
appropriate organisation to manage the current game.
There are a number of alternatives to an
unincorporated body and the main attraction is the reduction in personal
liability of members by enabling a club to exist as a separate entity and enter
into contracts in its on right. The following are the main alternatives:-
great majority of businesses are run thought limited companies and there are two
Limited by Guarantee
of the company do not hold shares but guarantee, in the event of a winding up,
to contribute a
sum of money, normally £1. Such companies are non profit making and the rules and regulations of the
company allow one member one vote in general meetings. In the event of a winding up, surplus funds
must be transferred to similar charitable organisations and no funds are distributed to the members.
Limited by Shares
of the company hold shares and can receive dividends on those shares.
The shares can be
transferred to other members. The principal aim of companies limited by shares is to make a profit and
they are taxed accordingly. The rules and regulations of the company give the shareholders voting rights in
relation to the number of shares they hold. Shareholders with more than 50% of the shares therefore
control the company.
and Provident Societies
Working Men’s Clubs are registered under the Industrial and Provident
Societies Acts. The Industrial and
Provident Societies Acts were
drafted originally to govern co-operative societies whose business was intended to be conducted for the good of the community and were non
profit making. Members purchase one share and in general meetings the rules allow one member one vote. In the event of a winding up, the
funds are distributed amongst the members.
companies limited by shares, the company is run by directors, but guarantee
companies and Industrial and Provident Societies are run by
an elected Committee.
the three types of organisation above, the ones best suited for non profit
making bodies such as sports clubs seeking to limit the liability of
members are the company limited by guarantee and the Industrial and Provident Society.
experience as auditor of a large number of Working Men’s Clubs and Rugby Clubs
leads us to believe that an Industrial and Provident
Society is well suited in situations where the sports club also has a social side and runs a bar and has entertainment income etc. In the case
of rugby clubs, the RFU has sponsored a model set of rules for English rugby clubs wishing to register under the Industrial and Provident
Societies Act, thus making the registration process easier. Once a club is registered, the assets and liabilities of the old club automatically
become those of the registered club, thus saving on legal fees, etc.
further point to consider, especially in the case of rugby clubs, is the
possibility of making the playing section of the club a legally
separate organisation from the social side. The social side of the club could own the club premises and receive the bar and related income
and expenditure etc and the playing section would receive the playing income and pay the playing expenses. There are normally separate
committees for the social and playing sections and therefore the separation of the club into two in this way should not be too difficult.
Each club is different and the solution to the problem of limited liability of the members will vary according to circumstances and perhaps the
need to consider taxation implications. However, some thought should be given by all unincorporated associations as to the potential liabilities
they may be exposed to and to take action accordingly.
UNINCORPORATED ASSOCIATIONS – ADVANTAGES AND DISADVANTAGES
The advantage of an unincorporated club are:-
1. They are
simple to set up, being founded by agreement between the members, no further
steps such as registration are required.
2. Privacy –
an unincorporated association does not have to file accounts and other
information with Companies House or with the Registrar of
3. In relation
to the day to day running of the club, brewers, banks and other suppliers are
happy to deal with the officers.
The disadvantages of an unincorporated club are:
1. The club does
not have limited liability, the officers and sometimes the members of the club
may be held liable for the debts of the club and
for the performance of the club’s contracts and other obligations – see section on the liability of members, officers and trustees.
2. It is not a
body corporate and does not have a separate legal existence from its individual
members, accordingly it can neither sue nor be
sued other than through its officers and members.
3. It cannot
hold land and investments other than in the name of officers or trustees.
4. No statutory
liquidation procedures exist and an unincorporated club cannot be voluntarily
wound up under the Insolvency Act 1986.
UNINCORPORATED ASSOCIATIONS – LIABILITY OF MEMBERS, OFFICERS AND TRUSTEES
An unincorporated members’ club cannot sue nor
be sued, or hold property in its own name.
Accordingly, when an outsider is trying to sue an unincorporated
association an important question is, who is actually liable?
It must be pointed out that instances of members and officers becoming
liable for debts incurred by an unincorporated club are rare, this being due
either to the fact that third parties are reluctant to sue individual members
and officers, or are unsure of the legal outcome of their actions.
Where action is brought it is usually against the chairman and secretary
in the first instance, the action can be extremely distressing for the club
This is a confusing area of the law and because of
the lack of case law it is difficult to be definitive on the outcome of any
action brought. The distress felt
by members and officers is often compounded by this uncertainty and attempts to
determine what their actual liability is. Club
members tend to have two conflicting views of the position, either they believe
they are not liable for any debt, or that they have unlimited liability.
As a general rule a member’s liability is limited to the amount of the
subscription because when he joins a club he does not intend to incur any
liability beyond his subscriptions payable under the rules.
However, if a member or officer is found liable for a debt his liability
is usually unlimited.
Value Added Tax – Anything required to be done for VAT purposes is
the joint and several liability of first, every member holding office as
president, chairman, treasurer, secretary or any similar officer or in default,
secondly, every member holding office as a member of a committee, and in
default, thirdly, every member – VAT (General Regulations 1985, no 886, reg
PAYE and National Insurance – The employer will be liable for
payment of national insurance contributions and, if he pays the wages or salary,
for income tax under PAYE. The
employer will often be the persons who actually engage the employee, for
example, the committee, or an officer responsible for employees although the
employer may be all the members. PAYE
should be operated on all wages paid to staff and officers including cash
payment to players for playing and winning a game.
Corporation Tax – The treasurer of an association is responsible
for doing all the acts which are necessary in relation to the corporation tax
liability of an association. If an
association does not pay their tax, the Revenue can recover the outstanding sum
from the treasurer but he is entitled to retain association funds in his hands
to satisfy the tax and to be indemnified by the association.
Employment of Staff
A club should determine which of the members is
the actual employer because considerable duties and liabilities attach to that
position. Any member who is about
to become involved in the employment of staff should make sure he has the right
of indemnity from other members and the assets of the club.
In view of the potential liabilities which can arise, corporate status
should be considered before significant numbers of staff are taken on.
In addition to the provisions of employment law, PAYE and National Insurance the employer has other duties in relation to the health, safety and welfare of the employees. Failure to make provision for an employee’s safety will not only result in a potential action for damages by the employee but it is also a criminal offence.
Where it is sought to sue a club in contract, the
action must be brought against the individuals who entered into or authorised
the contract. Any officer or member
of committee may be sued who gave or authorised an order for goods or services,
because although he acted as agent for the club, the club is not a legal entity
and is unable to act as a principal or contracting party.
A member’s liability is usually limited to the
amount of his subscription, unless it can be shown that the members authorised
or ratified the contract, for example, the rules of the club may specifically
provide that goods are to be ordered on credit in which case each member may be
personally liable. Members will
also be liable if they subsequently ratify transactions which have been entered
into on their behalf without authority.
Contracts, undertakings, leases and agreements
containing such words as ‘joint and
several’ should not be signed. Such
words would make each person accepting the obligation personally liable for the
payment and performance of the contract during its whole period.
In the event of the failure of the club the liability would fall on each
individual accepting the obligation putting his personal assets at risk.
Property – Trustees are normally the proper defendant in relation
to the clubs’ premises. Trustees
of an unincorporated club do not have the same powers, duties or obligations as
the trustee of a charity. Trustees
of an unincorporated club are usually empowered to invest the clubs’ funds and
in them is also vested the property and assets of the club in trust for the
members. For any liability incurred
in the course of their duties the trustees have a lien on the property but
unless the rules provide they are not entitled to an indemnity from the club’s
members. An individual member is
not under any legal or equitable obligation to indemnify the trustees.
Individual members or a group of members may
become liable for the loss arising from the state of the club’s premises if
the court finds they were under a separate duty of care to outsiders.
For example it was held that the committee of a football club were held
personally liable when a stand collapsed and injured a spectator.
An individual member with specific responsibilities may also be held
liable to an outsider if he was negligent in the performance of his duties.
Libel and Slander – An unincorporated members’ club cannot be
sued, and redress has to be sought individually and personally against the
officer, member or employee concerned. The
members will only be liable for a defamatory statement if they have expressly or
implicitly authorised its publication.
Expulsion of Members – A common area of conflict for members’
clubs concerns the wrongful termination of membership or expulsion of a member.
An injunction for reinstatement and action for damages or defamation will
usually be made against the committee. In
rare cases individual members have become liable through a class or
On Winding Up
Surplus Assets – Where after paying all debts there are surplus
assets the rules of the club usually direct that the surplus is paid equally to
Deficits – No statutory liquidation procedures exist and an
unincorporated club cannot be voluntarily wound up under the Insolvency Act
1986. As the club is not a separate
legal entity it cannot become insolvent and as the person liable for debts
incurred varies according to the action brought, it is difficult to come to an
organised voluntary arrangement with creditors. It appears that the best scenario is that the club’s assets
are used to pay debts as far as possible and the club is allowed to quietly fade
out of existence with the outstanding creditors not bringing legal action
against officers and members. Brewers
and other trade suppliers normally accept the business risk of dealing with
members clubs and do not take action against individuals.
Where creditors do pursue it becomes a free for all.
Those who pressure the most receive some payment and in practice the
normal rules of preference are ignored. If
a club is solvent but foresees problems in the future it is advisable to
incorporate now. When and if
problems do arise the incorporated club can then take advantage of the voluntary
and compulsory Insolvency Act 1986 provisions for liquidating a company.
Two related themes recur when the liability of
members, officers and trustees are considered, firstly the constitution of the
club and secondly insurance. The standard of drafting of rules for unincorporated clubs is
variable and frequently poor. To
save legal fees rules are often cobbled together by members without full
knowledge of all the legal ramifications, occasionally a club will have no
written rules. In consideration of
the law in relation to third part liability a club should ensure it has rules to
cover such issues as indemnity, powers of the committee as employer, rules on
the expulsion and termination of membership.
It should not have a clause accepting liability for the members for goods
ordered on credit. The rules of a
club is a contract between the members, if there is not a clause on how the
rules may be changed a new constitution or rulebook may be unenforceable against
members who voted against it.
Where possible a club should insure against the
risks faced by officers, members and trustees.
Third party and employers’ liability insurance may be compulsory, but
as the insurance policy will be issued to the committee or individual officers
it is important to ensure that any member incurring liability to an outsider can
claim on the policy, it should contain a member to member indemnity.
It is also necessary to ensure that the policy contains a special
provision that all members of the public, unfortunately many policies do not
have such a clause and claims made by a member against other members of the club
In the long term the most effective and cheapest
form of additional insurance may be the incorporation of the club as a company
limited by guarantee or as an industrial and provident society.
The club would then become a body corporate with the ability to sue and
be sued in its own name.
INDUSTRIAL AND PROVIDENT SOCIETIES
Industrial and Provident Society is a Victorian name for a modern, flexible and dynamic corporate structure. The Industrial and Provident Societies Acts were drafted originally to govern co-operative societies whose business was intended to be conducted for the good of the community and were non profit making. Members purchase one share and in general meetings the rules allow one member one vote. Whilst not as widely recognised as companies they have a number of advantages over a company structure. Industrial and Provident Societies may now conduct any legal business except that of investment for profit. Consumer, agricultural and housing co-operatives, social clubs, Women's Institute markets, allotment societies, mutual investment companies, friendly societies and housing associations usually incorporate as Industrial and Provident Societies, as do some social enterprises. This process is facilitated by the existence of "model rules" developed by various governing federal bodies, which reduce legal costs of incorporation. Industrial and Provident Societies must be registered with the Financial Services Authority (FSA) who carryout a similar function as Companies House would for a company. A society can register under the Act if:
It is a society for carrying out an industry, business or trade, and
It satisfies the FSA that either:
o it is a bona-fide co-operative society; or
o its business is intended to provide benefit for the community and there are special reasons why it should be registered under this Act, rather than under the Companies Act.
A ‘bona-fide co-operative society’ acts in the benefit its own members, and the FSA would normally expect it to demonstrate the following:
there is a common economic, social or cultural need or interest amongst all its members;
the business is run for the mutual benefit of its members;
control is retained by the members, and this is exercised by them equally;
any interest paid on share or loan capital does not exceed a normal commercial rate;
profits are either re-invested, or shared fairly (although not necessarily equally); and
there are no unreasonable restrictions on membership.
An example of this might be a social club, or sports club, which exists to provide services (a bar, place to meet socially etc.) to its own members.
To demonstrate a ‘special reason’ why it should not be registered as a company, a society should demonstrate that it is run for the benefit of the community at large. The following factors would be considered by the Financial Services Authority:
a society wishes to operate on the basis of “one member, one vote” rather than on the number of shares held;
a society may be part of a group of societies;
a society is registered, and costs of complying with Companies Legislation is prohibitive; or
there may be other practical business reasons.
In addition, the following must apply:
the society is run primarily for the benefit of people who are not members;
any interest paid on share or loan capital does not exceed a normal commercial rate;
the society’s rules prohibit profits or assets being distributed to members; and
on dissolution, the society’s rules require assets to be transferred to a body with similar objects and not distributed to members.
An example of such a society might be a Housing Association, or a society that operates a community transport vehicle.
FEATURES OF AN INDUSTRIAL AND PROVIDENT SOCIETY
Matters to be provided for in the society’s rules – schedule 1 of the Industrial and Provident Societies Act 1965 lists the following matters which should be provided for in the society’s rules:-
1. The name of the society.
2. The object of the society.
3. The registered office of the society to which all communications and notices of the society may be addressed.
4. Terms of admission of the members, including any society or company investing funds in the society under the provisions of the said Act.
5. The mode of holding meetings, the scale and right of voting, and the mode of making, altering or rescinding rules.
6. The appointment and removal of a committee of management and of managers or other officers and their respective powers and remuneration.
7. The maximum amount of interest in the shares of the society which may be held by any member otherwise and by virtue of the Industrial and
Provident Societies Act 1965.
8. Whether the society may contract loans or receive money on deposits subject to the provisions of the said Act from members or others; and,
if so, under what conditions, under what security and to what limits of amount.
9. Whether the shares or any of them shall be transferable, the form of transfer and registration on the shares, and the consent of the
committee thereto; whether the shares of any of them shall be withdrawable, and the mode of withdrawal, and the payment of the balance
due thereon on withdrawing from the society.
10. The audit of Accounts by one or more auditors appointed by the society in accordance with the requirements of the Friendly and Industrial
and Provident Societies Act 1968.
11. Whether, and if so, how members may withdraw from the society, and provision for the claims of the representatives of deceased members or
the trustees of the property of bankrupt members.
12. The mode of application of profits.
13. The custody and use of the society’s seal.
14. Whether, and if so, by what authority, and in what manner, any part of the society’s funds may be invested.
Statutory obligations – On or after registration the following conditions must be fulfilled:-
1. Notice of any change in the registered office must be sent to the Registrar.
2. The registered name of the society must be painted or affixed outside its registered office and every other place in which business is carried on.
3. A society must have its registered name mentioned in all notices, advertisements, letters, cheques, etc.
4. Proper books of account must be kept as required by the Industrial and Provident Societies Act.
5. An annual return must be made to the Registrar together with a copy of the Accounts and if appropriate the report of the auditor.
6. A register of members must be kept.
7. A copy of the Accounts must always be hung up in a conspicuous position at the societies’ registered office.
Membership and Shares – Each member must hold at least one share in the society which may be as low as 5p. No person may hold more than £20,000 in shares, although it is recommended that the rules state that each member hold one share only which should not be transferable and on which no dividend or interest should be paid. There is no limit on the nominal capital of an industrial and provident society, and it is possible provided the rules allow to raise capital through an issue of shares to members.
Meetings and Voting – The rules of the society must deal with the mode of holding meetings, and the scale and rights of voting. At General Meetings the rules usually provide for one member one vote.
Umbrella of Governing Body – The legislation is ideally suited for groups of societies or clubs who are associated to an umbrella governing body, such groups would share common objectives and include for example the co-operative movement and the Club and Institute Union. The member society owns the shares of the governing body. The governing body would sponsor standard model rules appropriate to the activities of the group.
Disputes – Under section 60 of the Industrial and Provident Societies Act there are cost effective and efficient procedures for dealing with internal disputes. Disputes between members and the society or any of its officers must be decided in the manner directed by the rules of the society. A decision so given is binding and conclusive on all parties without appeal to any court unless, for example, it has not been determined in accordance with the rules, or has been reached contrary to natural justice or in bad faith. An application for enforcement of a decision made under the society’s rules for dealing with disputes may be made to the county court.
ADVANTAGES AND DISADVANTAGES OF AN INDUSTRIAL AND PROVIDENT SOCIETY
The effect of incorporation of a society is contained in section 3 of the Industrial and Provident Societies Act 1965:-
A registered society shall by virtue of its registration be a body corporate by its registered name, by which it may sue and be sued, with perpetual succession and a common seal and with limited liability; and that registration shall vest in the society all property for the time being vested in any person in trust for the society, and all legal proceedings pending by or against the trustees of the society may be brought or continued against the society in its registered name.
Other advantages of an industrial and provident society include:-
1. High quality rulebook and constitution as the rules are reviewed by the Financial Services Authority and sponsored by a governing body they are comprehensive and consistent. A separate rulebook for bylaws should not usually be required.
2. A floating charge can be given over the society’s assets making it easier to raise finance.
3. The transfer of assets to the society from an unincorporated entity is automatic, no legal conveyance is required and no stamp duty is payable.
4. Simplified and inexpensive procedures for settling disputes.
5. Certain privileges under the Licensing Act.
6. Statutory procedures exist for both member’s voluntary and compulsory dissolution and winding up. Simplified procedures exist for the winding
up of solvent societies and in addition industrial and provident societies can be treated as a company for the purpose of Insolvency Law
(Section 55 Industrial and Provident Societies Act 1965: Re Norse Self Build Association Limited).
7. Compared to other structures they enjoy favourable corporation tax treatment, e.g., like bank interest may be paid gross to third parties; interest
paid can be used as an allowable deduction against taxable income from any source regardless of the purpose of the loan.
Disadvantages of Industrial and Provident Societies are:-
1. If model rules have not been sponsored they can be difficult and expensive to set up. The model rules have to provide for certain specified
matters and are reviewed by the Financial Services Authority prior to acceptance.
2. Reduction in privacy, an annual return and accounts have to be filed with the Registrar, and a statutory audit may be required.
3. The Financial Services Authority has the power to appoint an inspector to examine the affairs of a society.
4. An annual fee is payable to the Financial Services Authority.
5. Solicitors, bankers, accountants and other professional advisors are often unfamiliar with industrial and provident society law.
EXAMPLE OF PROMOTING BODIES FOR MODEL RULES OF AN INDUSTRIAL AND PROVIDENT SOCIETY
Association of British Credit Unions Limited
Association of Conservative Clubs
Baywind Energy Co-operative Limited
CDS Co-operative Housing Society Limited
Club & Institute Union Limited (CIU)
Co-operative UK Limited
Country Markets Limited
National Federation of Community Organisations
National Housing Federation
National Society of Allotments and Leisure Gardeners Limited
National Farmers Union
Plunkett Foundation ‘VIRSA’ - community shops
Royal British Legion
Rugby Football Union
UK Credit Unions Limited
Welsh Agricultural Organisation Society Limited
WI Country Markets Limited
QUESTION AND ANSWER SECTION
Q. Does the Society have to pay tax?
The taxation of Industrial and Provident Societies is covered by section 486 of the Income and Corporation Taxes Act 1988 and in principle are subject to Corporation Tax. However, taxation cannot arise on ‘self supply’, in practice, this means that tax does not arise on profits made from trading with the society’s members, for instance on the profits of alcohol sold to members. However, a charge may arise on the following:
trading activities with non-members;
chargeable gains on the disposal of assets;
capital sums derived from assets
A number of rugby and sporting clubs have applied for Community Amateur Sports Status to obtain a more favourable treatment of corporate and other taxes.
Q. Does the Society require an audit?
Any Industrial and Provident Society with aggregate receipts and payments of less than £5,000, assets less than £5,000 and less than 500 members is an exempt society with automatic audit exemption. For Industrial and Provident Societies above this limit, audit exemption is not automatic but requires the passing of a member’s resolution. Audit exemption is gained by considering the threshold for the previous year, so the vote at the general meeting is for next year’s audit. The resolution will fail if 20% or more of the votes are ‘against’ and 10% or more of members entitled to vote are ‘against’. The Articles of the society may also require an audit, in which case audit exemption is not available.
Where a member’s resolution has been passed to gain audit exemption an ‘independent accountants report’ signed by a registered auditor is required where income exceeds £90,000.
A full audit would always be required where income is more than £5.6million or total assets exceed £2.8m.
Q. What financial information has to be presented to members?
Annual accounts have to be prepared and presented to members. The format of accounts and reports for Industrial and Provident Societies is very different from reporting for other entities and the legislation allows greater flexibility than Company Law. Many societies continue to prepare accounts in Companies Act format with reference to ‘directors’ and other Company Act terms, such accounts can be misleading for members and may not be fully compliant with Industrial & Provident Society legislation.
Q. What details of members has to be kept?
Section 44 of the Industrial and Provident Societies Act 1965 requires a register of members must be kept, detailing:
the names and addresses of the members;
number of shares they hold;
a statement of other property held in the society, e.g. loans or deposits;
the date the person became a member;
the date, where relevant, the person ceased to become a member; and
the names and addresses of the officers of the society with the offices held and the dates they assumed office.
Any member of the society can inspect any of the above information apart from the number of shares and the other property held in the society by each member.
OTHER LEGAL STRUCTURES
A Company Limited by Guarantee and an Unincorporated Association –
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
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 sports 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
Registered charities are frequently incorporated
as a company limited by guarantee. An
Industrial and Provident Society would be an unsuitable vehicle for registered
charity status because under the Charities Act 1993 Industrial and Provident
Societies can only be ‘exempt’ charities.
Friendly Societies -
This legislation is no longer available to sports and social clubs and tends to
be used mainly by financial institutions. A
number of workingmen’s and sports clubs are, for historic reasons friendly
societies 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
RE-REGISTRATION FROM A FRIENDLY SOCIETY TO AN INDUSTRIAL AND PROVIDENT SOCIETY
Working men’s clubs are registered under either
the Industrial and Provident Societies Act 1965 or the Friendly Society Act of
1974. Some clubs, particularly
sport and rugby clubs are often unregistered.
As most institutions registered under the Friendly Societies Act are
either insurance or building societies, the requirements of the Act are onerous.
Accordingly provision has been made for clubs to de-register and
re-register under the Industrial and Provident Societies Act. The advantages of re-registering are:-
· The club is given ‘Limited corporate status; the club will no longer need to have trustees.
The requirement of the Industrial and Provident Society Act in
such matters as accounting records and systems of business control is more
suited to working men’s clubs.
Relief is given for bank or other loan interest when calculating
the club’s corporation tax liability. A club registered under the Friendly
Society Act is not able to claim loan interest relief.
Under the Industrial and Provident Societies Act there is no fee
for appointing trustees, or where appropriate the Friendly Societies £70
annual fee will no longer be payable.
There may be adverse
consequences of re-registration for example, there may be an impact on rates
There are five stages to follow to re-register:
1. Members consent to the proposal.
2. Drawing up of rules under the Industrial and Provident Society Act 1965.
3. Completion of the application form.
4. Registration of the application.
5. Transfer of
all property and documents held by the former trustees.
Where a club is unregistered it will not be
recognised as a separate legal entity and would not be able to benefit from the
advantage of registration. For
example, a registered club is able to sue and be sued in it’s own name.
Where a club is unregistered any liabilities incurred are the
responsibility of all the members in equal shares.
CHANGE OF NAME
To move with the times many clubs are changing their names often replacing the word workingmens’ with social or sports and social club. The process for changing names will vary depending on how the club is constituted, in all cases the members rulebook should be complied with: Industrial & Provident or Friendly Society – the change of name should be passed at a General Meeting of the members and from the Financial Services Authority (FSA) website the ‘Change of Name’ form should be completed and forwarded to the FSA for approval and registration.
Limited company – the company’s articles should be referred to but the change of name usually requires a ‘Special Resolution’ passed by the members in a General Meeting. A Special Resolution requires 75% of the members present to support the change of name. A copy of the Special Resolution, Companies House form NM01 and a fee should be forwarded to Companies House for approval and registration of the change of name.
The FSA and Companies House may reject certain names or require further evidence to support the use of the name, for example if the name is considered offensive or a restricted word, such as Group. Clubs situated in Wales may use Cyfyngedig or Cyf instead of Limited or Ltd.
Once the change of name has been completed the
club should inform H M Revenue & Customs, the bank, brewery and other suppliers.
As a reminder changing the clubs name is not a formula to reduce debts, the club
will have the same rights and obligations after the change of name as before.