A Firm Basis
A Town Teams Report
For the Department for Communities and Local Government
by the ATCM
Supported by:
A Firm Basis: A Town Teams Report
ISBN: 978-1-901799-09-5
Report by: Association of Town & City Management (ATCM)
Contributor: Julian Dobson
Urban Pollinators, a consultancy led by writer and researcher Julian
Dobson, exists to share and apply ideas about improving towns, cities
and communities. They do that by writing, researching, training and
facilitation, and hosting conversations and events. They specialise in
regeneration and placemaking and have a particular interest in the
future of town and city centres.
Caveat
Although this booklet is intended for general guidance to the
incorporation of town centre management companies in the UK, legal
requirements do differ in Scotland and Northern Ireland and specialist
advice should be sought. This booklet was up-to-date as at its date of
publication of 25-1-2013, but the law may have changed since then.
A Firm Basis: A Town Teams Report - Prepared January 2013
Contents
1 Introduction
2
2
3
4
2 Mission and method
Forming, storming, norming, performing?
Form follows function
5
5
6
3 Public sector models – pros and cons
7
4 Community first?
8
9
10
11
5 Cooperative and mutual organisations
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14
14
6 Legal structures for companies and partnerships
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15
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16
7 Making it happen
Forming your organisation
17
18
Directors, officers and members
21
The purpose of this guide
Context and challenge
New approaches for new objectives?
Charitable status and objectives
Charitable Incorporated Organisations
Community interest companies
What is a co-operative?
Legal structures for co-operatives
Industrial and provident societies
Companies limited by shares
Companies limited by guarantee
Limited liability partnerships
Online company formation
Tailor-made companies
Incorporation
Choosing a name
Trading names
Memorandum of association
Articles of association
Information
Role and composition of the board
Appointing a chair
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18
18
19
19
20
20
20
21
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A Firm Basis
Appointing board members
Local authority involvement
Employees of companies
Tenure of directors
Directors’ remuneration
Directors’ legal responsibilities Operational responsibilities of directors
The company secretary
Members of the company
What does membership offer?
Responsibilities of membership
Admitting new members
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23
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24
25
25
26
26
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Accounts
VAT
Income
Registered office
Meetings
Statutory returns
Disclosure of status
Insurance
Employees and pensions
Professional advisors
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31
31
32
Appendix A
33
33
34
Appendix B
35
35
Finance, administration and compliance
Next steps
Suggested job description for chair of the board
Suggested job description for board member
Useful organisations and resources referred to in this guide
4
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A Town Teams Report - Prepared January 2013
1 Introduction
The purpose of this guide
This guide is for town centre managers and town teams that are in the early stages of setting up an
independent organisation for their town centres. It aims to help you explore the kind of legal form
your organisation could adopt, which may to enable you to do your job even better.
This guide updates and replaces the previous ATCM guide, A Firm Basis, which examined how town
centre management organisations could establish themselves as companies limited by guarantee.
It now also examines a range of other options, including informal partnerships, community interest
companies and co-operatives, to enable new organisations to make an informed choice about their
governance and legal form. It is designed as an introductory guide and should not be used as a
substitute for bespoke professional or legal advice.
It is designed mainly for organisations in England and Wales, and focuses on the laws applying in
those countries. However, the issues it addresses are also relevant to Scotland and Northern Ireland,
and where there are different arrangements in different jurisdictions this is noted in the text.
Organisations in Scotland and Northern Ireland should also seek specialist advice from professionals
familiar with the legal requirements in their countries.
The guide is designed to help town teams or town centre managers consider:
• the implications of current challenges for the future of town centres
• the pros and cons of being an informal or formal organisation
• what is your mission and how do you hope to achieve it?
• the advantages and disadvantages of public, private or community-based organisational
forms
• the practical steps you need to take to get started with your chosen structure
Context and challenge
The years since the financial crisis of 2008 have seen a new wave of interest in the future of our town
centres and high streets. Prompted by waves of high profile store closures and regular headlines
about the blight of empty shops, there has been a surge of local and national government action.
At national level this has included the Portas Review of the high street in England, followed by a
series of government initiatives to encourage innovative action led by ‘town teams’. The Meanwhile
initiative has encouraged creative temporary uses of vacant spaces, while the Empty Shops Network
has mobilised local action, with a strong emphasis on using social media tools. In Scotland, the Town
Centres Regeneration Fund initiative has been followed by a government-sponsored town centres
review. There has also been an inquiry into town centres by the Welsh Assembly.
At local level, there have been a wide range of informal and ad hoc activities aimed at reviving or
supporting struggling town centres. Local authorities have staged festivals and events; traders and
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A Firm Basis
residents have launched local loyalty schemes; entrepreneurs have investigated different ways of
doing business on the high street.
It has become clear in recent years that the traditional high street of British picture postcards has
not only gone in many places, but is beginning to give way to a wide range of different models. The
reasons for this are complex, but include changing shopping habits and the rise of online retailing;
reduced household incomes; business rates; and the rise in ‘distressed assets’ – property owned by
banks and lenders after their owners have gone into liquidation.
While plenty of locations still suffer from the ‘clone town’ syndrome, others are more worried
about becoming ghost towns. Conversely, some ‘prime’ locations are still booming. Expert research
commissioned by ATCM and others has revealed a growing polarisation between prime centres and
the rest, a fragmentation of markets, and strains on household budgets that are likely to continue
with a negative impact on traditional shopping centres.
Alongside these pressures, new ways of thinking about town centres are emerging. The idea
of the social town centre, drawing on the work of urbanists such as Jan Gehl, has seen a revival
corresponding to the loss of faith in ‘retail-led regeneration’. Commentators are seeing the town
centre as community hub where new ways of meeting, learning and producing can be explored, not
just as shopping centres.
Cuts in local government budgets, which in the past have sustained town centre management, have
been severe. This is likely to force town teams to explore a range of different options, from business
improvement districts to community interest companies or development trusts independent of
the local authority. Finding the resources to take action, and fitting the actions to the resources, is
becoming increasingly challenging.
In these circumstances there can be no standardised approach to town centre management:
solutions will need to be geared to local needs and circumstances. But it is possible for all town
centre management organisations and town teams to work to high standards of competence and
professionalism, and to develop models that are fit for purpose within their localities.
New approaches for new objectives?
Recent years have seen an explosion of impromptu, temporary interventions to enliven town centres.
These have ranged from organised events to ‘cash mobs’ where individuals assemble and agree to
spend a certain amount of money in a local shop. ‘Pop-up’ shops and installations make imaginative
use of empty space, creating places where entrepreneurs can test ideas or display artefacts without
the risk of long term financial or legal commitments.
This ‘just do it’ philosophy encourages the flexible and spontaneous. It’s often referred to as ‘agile’,
drawing on the practice in software development to release ‘beta’ versions of a product and allow
users to identify bugs and refine it on the go until a final version is created. But how far can ‘agile’ be
a suitable model for a town team or town centre management?
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A Town Teams Report - Prepared January 2013
A town team may begin as a loose group of individuals who are passionate about improving the
place where they live. They may meet in a pub or coffee shop, decide their actions collectively and
have no organisational status. In legal terms, this is what is known as an ‘unincorporated association’
or ‘voluntary association’.
Many sports and social clubs or voluntary organisations are unincorporated. They are not registered
with any government or regulatory body, are not bound to elect officers or take minutes of meetings,
and can choose or adapt their purpose and objectives as they wish. If a group of people have only
come together for a short term purpose, such as holding an event or carnival, an unincorporated
association may be the simplest way of organising.
However, the organisation has no legal status. That means that if things go wrong, it is the individuals
who are its members, not the organisation itself, who are liable. There is nothing to prevent the
association trading or taking part in business activities, but tax status is determined on a case by case
basis. So while it may be regarded as a company for tax purposes, its members are not protected by
company law which limits their liabilities.
According to HM Revenue and Customs, an unincorporated association will meet the following
criteria:
• it is not a legal entity
• it is an organisation of persons or bodies (more than one) with an identifiable membership
(possibly changing)
• it has a membership who are bound together for a common purpose by an identifiable
constitution or rules (which may be written or oral)
• it is an organisation where the form of association is not one which is recognised in law as
being something else (for example, an incorporated body or a partnership)
• it must have an existence distinct from those persons who would be regarded as its members
• the tie between the persons need not be a legally enforceable contract
Many town teams and some town centre management partnerships may start their lives as
unincorporated associations, but if they wish to continue for the long term they may well find
the advantage of flexibility is outweighed by the disadvantage of personal liability. In addition, an
unincorporated body cannot own property or borrow money in its own right or enter into contracts
on its own behalf: these have to be done by individual members, or by all members equally. This
could quickly become burdensome and end up frustrating the ‘just do it’ philosophy.
The next five chapters of this guide provides advice for those groups which wish to regularise their
legal status. It explores the different legal forms that are available to a new organisation, summarises
the main pros and cons of each, and considers some of the practical issues that need to be addressed.
»» Decision time: Keeping it informal? You still need to think about roles, finance and
administration. Fast forward to Chapter 7.
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A Firm Basis
2 Mission and method
Forming, storming, norming, performing?
The first weeks or months of a town team or a town centre management initiative are a good time
to work through your mission and purpose. It’s a time to fine-tune aims that may start out as broad
and all-inclusive and to become clear about what you want to do, who needs to be involved, why you
are doing it and how you hope to do it.
These discussions may not be easy and it can be helpful to have the advice and guidance of an
independent facilitator at this stage. Different interest groups will have different takes on what is
needed in a town centre and which needs or initiatives should take priority.
Educational psychologist Bruce Tuckman has described the stages of group development as ‘forming,
storming, norming and performing’ – a process where once the initial group is formed, different ideas
and aspirations compete for attention and potential conflicts are surfaced. The process, if successful,
moves from competition to consensus – ‘norming’ the goals and plans of the group – and from there
to action and delivery.
A further stage, not suggested by Tuckman, is conforming – a state of atrophy where a group does
what it has always done and what is expected of it. Some town centre management partnerships,
when they have been going a few years, reach such a stage. At this point it is worth asking whether
the role and purpose of the organisation need to be reviewed and refreshed, or whether the
organisation ought to continue.
Form follows function
The process of clarifying mission and methods – what you wish to do and how you propose to do
it – shouldn’t be short-circuited. It’s one thing to agree to set up a town team to improve your local
centre; it’s more challenging to analyse what the issues are that you intend to address, why they are
perceived as problems, what actions need to be taken as a result and how you will know that the
actions you propose will have the outcomes you anticipate. Not working through these questions
in a logical way can result in organisations that are not fit for purpose or unclear about what their
purpose is.
Local circumstances, including availability of resources, will play a vital role in determining what
kind of organisation will work best. The experience of the town teams supported by former regional
development agency Yorkshire Forward in the early 2000s was varied and individual town teams
changed in response to changes in circumstances. While some were absorbed by their respective
local authorities or disbanded entirely, others, like Scarborough’s, have continued as independent
bodies. In Scarborough’s case, most of the work is done by themed action groups that meet regularly,
with the entire town team coming together for occasional open public meetings.
Once the organisation’s purpose and priorities have been agreed, it is worth examining whether
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A Town Teams Report - Prepared January 2013
these are best achieved through an informal voluntary association or through a form of organisation
that has legal status. If the latter, which of the various models on offer is the best fit?
At this point it is helpful to ask yourself whether the organisation exists mainly to further the work
of a public body like the local authority, or whether its objectives are charitable (such as education
or the relief of need) or commercial (for example, to bring more business into the town centre or
act as an advocate for business interests). This will inform not only who should be involved in the
organisation’s membership, but what kind of legal form will be most appropriate.
The following questions can serve as a quick checklist to help you decide what kind of legal form to
adopt:
• Does the legal form reflect our principles and values?
• Does it enable us to do the things we want to do?
• Does it let us raise money in the ways we want?
• Does it limit our personal liability if things go wrong?
• Does it demand resources to keep it going, and if so, is it affordable?
• Does it enable us to involve the people and organisations we want to include?
• Does it let us employ staff or contract with other individuals or organisations if we want to?
3 Public sector models – pros and cons
Often town centre managers are directly employed by local authorities, and town centre management
partnerships exist as local authority-led organisations with representatives from business and other
interests.
There are some clear advantages to such a public sector-led model. A town centre manager has the
security of council employment; funding may be guaranteed by the local authority for a fixed period;
the local authority acts as the accountable body for town centre management activities. Given that
the local council is also the planning authority and often also the highways authority, working within
a local authority framework can facilitate joined-up approaches to town centre issues. The council
also determines key issues such as discounts on business rates, licensing, and parking charges in
council-run car parks and on streets. In some towns, the local council is also an important landowner
and can directly influence what happens in town centres as a result.
Disadvantages include potential conflicts of interest between the goal of encouraging town centre
activities and businesses and the council’s regulatory functions; the relatively low status of town
centre management within many local authority hierarchies; growing vulnerability to spending cuts;
and political interventions by elected members.
One potential solution that retains the advantages of association with local government is for the
council to establish a town team or town centre management organisation as an arm’s length
company, wholly owned and controlled by the local authority but acting as a business in its own
right, with its own directors.
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A Firm Basis
Since 2000 local authorities in England and Wales have had the ‘power of wellbeing’ – the power
to act to promote or improve the economic, environmental and social wellbeing of their area. In
England this was replaced by the ‘general power of competence’ within the Localism Act 2011, which
gives councils the power to do ‘anything that individuals generally may do’ unless it is otherwise
prohibited by law. In Scotland, section 20 of the Local Government in Scotland Act 2003 provides a
‘power to advance wellbeing’ which is similarly wide-ranging.
While the legislation offers a legal umbrella for anything councils may wish to do to improve town
centres, local authorities also have specific rights to set up companies to trade commercially. In England
these are set out in the Local Government Act 2003. In the context of a town centre management
company, such trading activities could include letting property, selling advertising space or putting on
commercial events. The company would be bound by company law (see Chapters 6 and 7) but would
be additionally accountable to and under the control of the local authority. Such an arrangement can
provide political ‘cover’ for a town team or town centre management organisation while freeing it to
run its day-to-day operations as a business.
Being established as an independent organisation offers a number of advantages to town centre
management bodies:
• a formal focus on benefiting the town centre
• independence from the local authority and its budgetary cycles and constraints
• better opportunities for long-term strategic planning for the town centre
• formalising partnership arrangements and entrenching the commitment of key stakeholders
• an integrated approach to transport, leisure, culture and retail policies
• the ability to set up consultative bodies for planning and development projects independently
of the local authority
• providing forums that can include retailers, developers, investors, landowners, leisure
operators, consumers and residents
• joint initiatives focusing on specific issues, such as the public realm or crime and safety
• better promotion and marketing of the town centre
However, there are also some perceived disadvantages. These include being controlled by the local
authority, which may deter local businesses from contributing funds or feeling they are involved in
running it. It may also be harder to obtain funds from other external sources.
»» Find out more about local authority powers and responsibilities in England: www.lga.gov.uk
»» Read on to decide what legal form may be best for you.
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4 Community first?
Many town teams or town centre management organisations will think of themselves as voluntary
organisations. They may be run by volunteers; members may be participating in their own time; they
will not be operating for profit. So the kind of models prevalent in the voluntary sector may seem an
obvious choice of legal form.
There are a range of options within the not-for-profit sector. Organisations can set themselves up
as a traditional charity, or as a trading organisation that has social objectives. If the latter route is
chosen, the available models are more akin to a private company than to a charity, but with additional
safeguards to ensure they are not run for personal gain. The most commonly used models are:
• a company limited by guarantee (see Chapter 6 for full details)
• a community interest company (see below)
• an industrial and provident society (now rarely used, but see below)
Many non-profit organisations set up to promote the wellbeing of a particular area will call themselves
development trusts or ‘community anchors’. A development trust is not a legal form in itself; the title
describes the purpose and activities of the organisation rather than its status in law.
A town team or town centre management organisation may have much in common with a
development trust and see itself in similar terms. Locality, the organisation that represents such
organisations, describes its community anchors as
‘community run organisations that:
• Pursue aims which contribute to the regeneration of a community, and therefore are
concerned with the economic, social and environmental and cultural needs of their
community.
• Are independent but seek to work in partnership with other private, public and voluntary
sector organisations.
• Are owned and managed by the local community.
• Aim to generate income through trading activity that enables them to move away from
dependency on grant support. All trading surpluses are principally (completely, in the case of
a charitable community anchor organisations) reinvested in the organisation or community.’
The key issues for town teams or town centre management bodies here are to demonstrate
independence, community ownership and community benefit from trading. An organisation
controlled by the local authority or consisting principally of local businesses or traders might struggle
to fit such a definition, but might still be able adopt a similar legal form, for example as a charity or
community interest company.
»» Find out more about ‘community anchors’ from Locality: www.locality.org.uk
»» Decision time: Do you intend to be a community anchor? Read on to decide what legal
form may be best for you.
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»» Not planning to operate for community benefit? Go to Chapter 6 to consider company
status.
Charitable status and objectives
Any organisation can be a charity if its purposes are charitable. In England and Wales, there are
13 types of charitable purpose set out in the Charities Act 2011. To be a charity you must satisfy
one or other of these purposes and a test of ‘public benefit’. These purposes include education,
citizenship, environmental improvement and community development – activities that may well be
core purposes of a town team.
Charities can also include former local authority services. Wigan and Leigh Leisure Trust, for example,
is a charity that runs the leisure facilities previously provided directly by the local authority.
Charities with income over £5,000 a year have to register with the Charity Commission (or the
equivalent regulator in Scotland or Northern Ireland). The Commission will decide whether the
organisation’s activities meet its criteria and it treats each application individually. A charity can’t
exist solely for the purpose of raising money: it has to satisfy the ‘public benefit’ test and have
charitable objectives.
To be a charity, all the organisation’s activities must be charitable. So a charity which wishes to fund
its activities through trading or commercial activity is likely to need to work through a separate
organisation, such as a trading company. However, this may result in a double administrative
burden – not only does the organisation have to fulfil the requirements of charity law and answer
to the Charity Commission, but it also has to fulfil the obligations of company law. This is why many
organisations that do not exist for private profit are not charities. A range of organisational forms are
available, which are discussed below and in Chapter 6.
Being a charity offers an organisation a variety of benefits. There is no tax on capital gains (for
example, from selling property assets) and no corporation tax on surpluses. A charity can recover tax
from individual donors via Gift Aid, and is entitled to business rate relief of 80 per cent – a significant
issue for organisations occupying offices or business premises. Being a registered charity may also
help if you are looking for grants or donations.
The people who run a charity are known as trustees. They may use other titles, such as director,
but the obligations are the same. Charity trustees are legally bound to ensure the charities they run
are managed properly and fulfil their charitable purposes; they may be personally liable if things go
wrong. Charity trustees can in theory be pursued for the total cost of financial misconduct or legal
liability.
As well as making sure that the charity they run is solvent and meeting its charitable objectives,
trustees must also make sure the charity complies with prevailing charity law; avoid conflicts of
interest or using charitable assets for personal benefit; ensure the charity’s activities do not put its
funds or assets at risk; and fulfil a ‘duty of care’ to ensure the charity is run well and efficiently.
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Whether or not it is large enough to be registered with the Charity Commission, a charity should
have a constitution setting out its rules of governance. This will briefly cover the charity’s aims, roles
and duties of trustees, what the charity will spend its money on, who can be a member and under
what circumstances the charity might be dissolved. Any surplus on dissolution must generally be
passed on to another charity with similar aims. For this reason, it is generally not possible to convert
a registered charity into any other form of organisation later. Model constitutions are available from
the Charity Commission.
Charitable Incorporated Organisations
A new form of charity was created by the Charities Act 2006 – the Charitable Incorporated Organisation
(CIO). At the time of writing (November 2012) the regulations governing CIOs for England and Wales
had yet to be debated and approved by Parliament, but CIOs are already available in Scotland.
The CIO is expected to be a popular structure because it offers charities some of the benefits of
company status without having to comply separately with company law and administration. It will
only be available to charities in Scotland, England and Wales. For the first time it will offer charities
limited liability without having to adopt company status, and regulation will be done by the Charity
Commission rather than through Companies House.
CIO status will not be available to unregistered charities with income below £5,000. Implementation
of the new regulations is expected to be phased over two years (2013 and 2014), after which it will
be possible for all registered charities that do not yet operate through a limited company to convert
to charitable incorporated organisations. Subject to Parliamentary approval, it will also be possible
for charitable companies limited by guarantee or community interest companies to convert to CIO
status.
»» Find out more about charitable or CIO status from the Charity Commission: www.charitycommission.gov.uk
»» In Scotland, charities are regulated by the Office of the Scottish Charity Regulator:
www.oscr.org.uk
»» The Charity Commission for Northern Ireland is the independent regulator of charities
in Northern Ireland: www.charitycommissionni.org.uk
»» Decision time: Do you have charitable purposes but want a model that enables
commercial activity and limits personal liability? Read on to consider the pros and
cons of community interest companies.
»» Looking for a less restrictive approach? Go to Chapter 5 to look at mutual and
cooperative options, or Chapter 6 to consider company status.
Community interest companies
If your purposes are primarily social but you also want to trade as a business, you might want to
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A Firm Basis
consider becoming a community interest company or a mutual or co-operative organisation. Co-ops
are dealt with separately in Chapter 5, as they have a particular ethos and approach.
Until the CIO legal structure is available, the community interest company is a useful hybrid of
the corporate and philanthropic. It allows an organisation to trade and make profits just like any
commercial company, but restricts organisational control and distribution of surpluses in order to
ensure there is a community benefit.
Community interest companies are a relatively new legal form, created under the Companies (Audit,
Investigations and Community Enterprise) Act 2004. It is possible to become a community interest
company anywhere in the UK.
A community interest company (CIC) is not a charity, even though it has a clear social purpose. It
is a limited company that has to abide by company law (see chapters 6 and 7). But unlike ordinary
limited companies a community interest company also adheres to additional restrictions by virtue
of its legal form.
The most important of these is the ‘community interest test’. Just as a prospective charity has to
satisfy the Charity Commission that it provides a public benefit, so a CIC must prove to the Regulator
of Community Interest Companies that it exists ‘for the benefit of a community’ before it can be
registered.
A community need not be the whole population of a particular area. CICs can be set up to benefit
particular groups or categories of people – so a town centre management CIC could exist, for example,
‘to benefit users, traders and property owners in Anytown town centre’. The community in this case
is defined by its interest in and use of a particular physical place.
The regulator will not register CICs that exist for the purpose of political campaigning, or where the
benefit is only to members of a particular organisation or employer – so a town centre management
CIC that only benefits customers of a particular property owner, for example, would be unlikely to
pass the community interest test. If in doubt, it is best to take professional advice – and there may
be other models of governance that are more appropriate.
As well as having to comply with company law, producing annual returns and accounts and listing
directors and shareholders, a CIC is also overseen by the Regulator of Community Interest Companies,
based at Companies House. According to the CIC Regulator,
‘A CIC is first and foremost a limited company carrying on a social activity and must be viable as
such. A CIC carrying on a business will need to generate surpluses to support its activities, maintain
its assets, make its contribution to the community and in some cases make a limited return to its
investors. Other CICs may well depend on grants or donations to achieve these ends.’
A CIC can be structured in the same way as a limited company (see Chapter 6) – it can be limited
by privately held shares, by guarantee, or can be a public limited company where anyone can buy
shares. But assets can’t be bought and sold in the same way as those of other companies. A CIC has an
‘asset lock’ which ensures the company’s assets may only be used for the benefit of the community,
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and, if the CIC is closed down while solvent, can only be distributed to a named community interest
company or charity, not to members or investors. However this does not prevent a CIC using its
assets for normal commercial purposes, such as using a building as collateral on a loan.
While a CIC can issue shares and pay dividends on those shares, the dividend is capped to make sure
surpluses are mainly reinvested for community benefit. The limits on payments may vary and depend
on when the shares were issued. Details of current rules are available from the CIC Regulator.
In other respects a CIC operates as a normal company. A CIC is not a charity and does not receive any
of the tax benefits available to charities, although a charity can own a CIC for trading purposes and
assets can be passed between the two. It is possible for a charity to convert to a CIC or vice versa,
but in doing so the organisation makes a significant choice about which regulatory regime it wants
and the benefits and restrictions that go with that choice.
A CIC does not have to be owned by the community it is set up to benefit, and can be privately
owned. In this respect it is not like a co-operative (see below).
The concept of CICs is not yet fully understood or recognised by the public. This could present a
disadvantage when compared to charities and co-operatives. However a growing number of
organisations are establishing themselves as community interest companies, including some town
centre management companies. Reading UK CIC, for example, has been in business since July 2007.
»» Find out more about community interest companies from the CIC Regulator: www.bis.gov.uk/cicregulator/
»» Decision time: Interested in a mutual approach in which the organisation is controlled
by its members? Go to Chapter 5
»» Are the community interest test and asset lock likely to be too restrictive? Go to Chapter
6 to look at traditional company options
5 Cooperative and mutual organisations
What is a co-operative?
A co-operative is part of a worldwide movement of mutual organisations that adheres to a common
set of values. In a co-operative, the values take precedence over the structure. A co-operative may
exist as a public limited company (PLC), a private limited company, a partnership, a community
interest company (CIC) or even as a charity if it satisfies the respective requirements.
A co-op is defined by the International Co-operative Alliance as ‘an autonomous association of
persons united voluntarily to meet their common economic, social, and cultural needs and aspirations
through a jointly-owned and democratically-controlled enterprise’.
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A Firm Basis
Such a form may be attractive to town teams or town centre management organisations that wish to
be independent of public bodies or trade associations, have an open membership, exist for mutual
benefit and enjoy the freedom to trade.
A co-operative does not have to meet a legal test of community interest, but is expected to abide by
the traditional co-operative values of ‘self-help, self-responsibility, democracy, equality, equity and
solidarity’.
A set of seven internationally agreed principles sets out how co-ops should put these values into
practice:
• Voluntary and open membership
• Democratic member control (one member, one vote)
• Member economic participation (members control at least part of the organisation’s capital)
• Autonomy and independence
• Education, training and information (part of their purpose is to spread the co-operative
message)
• Co-operation with other co-operatives
• Concern for community
Legal structures for co-operatives
In the UK, a co-operative can adopt any of the legal forms available to an organisation. A limited
company may also be a co-op and call itself a social enterprise – in law, it is a limited company and
treated as such. Similarly, a co-operative that trades can decide to become a partnership in which
liability (e.g. for trading losses) is shared by its members, or, if it does not generally trade, it could
become a charity governed by trustees.
However, becoming a co-op makes a big difference to how an organisation can act within the legal
structure it has chosen. The principle of democratic control is particularly important here. While this
has the advantage of creating an organisation that can be genuinely controlled by the community
it serves and exist for community benefit, it also means the directors can be outvoted by a simple
majority of members. Membership is generally open to all: people can join easily, unlike with a CIC,
charity or normal trading company. If open membership is desired, a private limited company or
CIC might not be the best basis, as they have limits on issuing shares to the public. An industrial and
provident society (IPS – see below) may be a better option.
If you want to set your town centre organisation up as a co-op, or convert an existing organisation
into a co-op, it’s worth reading the advice of co-operative agencies such as Co-operatives UK, as well
as information on the specific legal form you intend to adopt. You are likely to need professional
advice if you are converting an existing organisation into a co-op.
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Industrial and provident societies
Many co-operative organisations in the past were set up as industrial and provident societies (IPS).
An IPS is a form of company registered under the Industrial and Provident Societies Acts 1965-2002.
It must be either a ‘bona fide co-operative’ or a company run for the benefit of the community,
providing services for people other than its own members.
An IPS must currently (2013) be registered with the Financial Services Authority. It is normally
democratically controlled by its members, shares any profits equitably between its members, and
operates a dividend cap. Membership is often open to all, although this can be restricted to a specific
area or community.
Industrial and provident societies must file an annual return and accounts to the Financial Services
Authority, but are not subject to the same auditing requirements as ordinary companies. They can
raise capital by issuing shares, though there are limits on the value of shares any individual can hold.
However many shares a member holds, they still only have one vote. An IPS can ‘lock’ its assets like
a community interest company, but is not obliged to do so.
In practice, relatively few organisations now set themselves up as industrial and provident societies.
»» Find out more about becoming a co-operative: www.uk.coop/start-co-op or
http://2012.coop/en/ica
»» Information about industrial and provident societies is available from the Financial
Services Authority: www.fsa.gov.uk
6 Legal structures for companies and
partnerships
There are three main forms of company: a private limited company, a company limited by guarantee,
and a public limited company. It is also possible to set up a private unlimited company, in which
liability is not limited at all, although few choose to do so. All companies must be registered with
Companies House and are bound by the Companies Act 2006.
All companies must file annual returns, confirming the names of their directors and registered office,
and annual accounts showing profit and loss, assets and liabilities. There are automatic penalties for
failing to submit accounts on time (see Chapter 7).
A company can do anything covered by its articles. For this reason many companies choose to
make the objects clause in their articles as general as possible, to avoid having to redraft them
if circumstances change or the company wishes to get involved in new activities. It can appoint
directors to run the company full-time, and non-executive directors who act in an advisory role, and
may be paid or unpaid.
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A Firm Basis
Companies limited by shares
The ownership of private and public limited companies is determined by shares. A public limited
company (PLC) is able to issue shares to the public in order to raise capital. As noted above, private
limited companies generally cannot do so. Larger PLC companies that are listed on the Stock Exchange
have to abide by complex Stock Exchange rules on trading in addition to company law. This is unlikely
to be an option for town centre management organisations.
A town team could set itself up as a private limited company, where shares are held by named
individuals. This is the most common legal form for small businesses and is quick and easy to set up –
ready-made companies can be bought ‘off the shelf’ and start trading straight away. A private limited
company can be set up by a single individual. The owners’ liability is limited to their shareholding
in a company, although in practice personal liability can be introduced through the back door – for
example, by lenders requiring ‘personal guarantees’ for bank loans.
A company limited by shares, whether private or public, has the advantage of being able to raise
additional capital by issuing more shares, although there are strict limits on this power in private
companies. But it is often less attractive to public or charitable funders because these standard
company forms offer no guarantee of public benefit or public ownership. For this reason, they are
not generally recommended for town centre management.
Companies limited by guarantee
A company limited by guarantee is a private company, but is not able to issue shares and therefore
cannot raise capital from the public. Every member limits their liability by guaranteeing a certain
amount if the company is wound up – usually a token £1. The ‘guarantee’ is a promise that the
directors will pay a sum towards any debts if the company is wound up, not a guarantee that the
company will operate for any social or community benefit. The company can raise finance by charging
a subscription when a new member joins or an annual subscription to maintain membership.
A company limited by guarantee can also have charitable status, although this means that the company
must also be subject to Charity Commission regulation as well as complying with company law. Such
a company would also need to satisfy the Charity Commission’s test of ‘public benefit’. But it would
have the advantage of the various tax reliefs available to charities. This is the most common form of
company used by not for profit organisations, such as community-based or voluntary organisations,
though in recent years community interest companies have become an option.
A company must be registered with the Registrar of Companies (generally referred to as ‘Companies
House’) and has two legal documents known as a ‘memorandum and articles of association’. The
modern memorandum is now just a short standard document confirming the subscribers’ intention
to form a company. The company’s articles are now its constitution, and state its aims and areas
of business. Although it is possible to adopt standardised ‘model’ articles that are fairly basic, any
prospective town centre management company should take legal advice on the form its constitution
takes.
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A company limited by guarantee uses its profits to further the interests of the company rather than to
provide returns to shareholders. Its articles may include an ‘asset lock’ similar to a charity, preventing
free distribution of surpluses to its members, either during its operation or on being dissolved.
Limited liability partnerships
An alternative to forming a company is to form a partnership. A traditional partnership is a voluntary
arrangement between at least two individuals to carry on a trading business and share the profits,
and is governed by the Partnership Act 1890. Partners are treated as self-employed and there is
no requirement to register at Companies House. This means that the partners do not have to pay
employers’ national insurance contributions, and income tax is paid by them on profits at the end of
a year. Partners have ‘joint and several’ liability for any debts if the partnership is wound up on an
insolvent basis, which could result in their personal bankruptcy.
Traditionally professional organisations such as solicitors’ or architects’ practices operated as
partnerships rather than limited companies. In recent years the traditional partnership has been
overtaken by the limited liability partnership, a legal form established by the Limited Liability
Partnerships Act 2000, which is in reality a type of limited liability company.
A limited liability partnership (LLP) has the same tax advantages as a traditional partnership, but
the organisation rather than the individual partners is responsible for debts or liabilities. An LLP
must be registered at Companies House (in Cardiff for England and Wales, or with the Scottish or
Northern Ireland equivalent), but there is no requirement for a set of governing articles. Limited
liability partnerships are governed by a ‘members’ agreement’, but this is not a legal requirement
and could even be a verbal agreement, although this is inadvisable. By law there must be at least
two partners.
Limited liability partnerships can be set up in any part of the UK. Like companies, they must file an
annual return and accounts, and notify Companies House of any changes in membership.
A partnership or limited liability partnership cannot also be a charity as its activities must be pursued
for the purpose of profit. It cannot become a company limited by shares or guarantee, and there is
no process in law for conversion – an organisation wishing to change from being a company to an
LLP, or vice versa, must go through a process of reincorporating itself in the new form, transferring all
assets, contracts and employees across and reassigning its name to a new body. Legal advice should
be sought.
In practice, a limited liability partnership is unlikely to be the preferred legal form for town teams
or town centre management organisations because of the absence of a social purpose and the
requirement to trade for profit.
»» Find out more about companies and limited liability partnerships at Companies House:
www.companieshouse.gov.uk
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A Firm Basis
7 Making it happen
This chapter is written primarily for organisations wanting to adopt the form of company limited
by guarantee or community interest company. Where there are different requirements for those
wishing to establish themselves as a charity or as an unincorporated organisation, there will be brief
summaries of the differences, but readers are recommended to seek bespoke advice.
Those wishing to adopt a different form, such as a limited liability partnership or industrial and
provident society, should also seek specialist advice. Where organisations wish to structure
themselves as co-operatives they should follow the guidance of bodies such as Co-operatives UK as
well as reading the information in this chapter.
Forming your organisation
Online company formation
Many companies used to buy a ready-made ‘shelf company’ in order to get going quickly. They
have a name and specified objects but lie dormant until purchased. Nowadays as online company
formations are so quick (typically one or two days), this is the usual method of forming a company
inexpensively.
As soon as a company is registered online it is able to open a bank account and start trading,
Tailor-made companies
It is more usual for a special purpose vehicle to be established for a town centre management
initiative. An online formation can be coupled with governing documents specifically tailored to
meet local circumstances and requirements, which are usually drawn up once the company has
been formed.
Incorporation
The incorporation of companies online can be done via an agent through specially designed software,
or through the Companies House website, or by post. Fees for incorporation vary, depending on
whether you are doing it online or by post and depending on the type of company you are registering.
Current minimum fees are detailed on the Companies House website – it costs more if you use an
agent.
To incorporate a company the following documents are required:
• application to register a company (form IN01) and the required fee
• memorandum of association
• articles of association (unless you adopt ‘model articles’ in their entirety just to get started
quickly - you will probably need to change them soon after formation)
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• additional information if your application includes a ‘sensitive’ word or expression
To complete form IN01, you will need to provide the following information:
• the proposed company name
• the situation of the company’s registered office, (England and Wales, Wales, Scotland or
Northern Ireland)
• the address of the registered office
• whether the company will be private, public or unlimited (see Chapter 6)
• choice of articles of association (see below)
• details of the proposed director(s), and the secretary if there is one
• directors’ office and home addresses
• a statement of capital and initial shareholdings or a statement of guarantee (this is no longer
part of a company’s memorandum of association)
• whether a company limited by guarantee wishes to apply to be exempt from the requirement
to use ‘limited’ or ‘cyfyngedig’ (the Welsh equivalent) in its name
• if the proposed name contains a ‘sensitive’ word or expression (in which case, you must seek
approval from the Secretary of State through Companies House)
• a statement of compliance or guarantee
Choosing a name
Names of limited companies must normally end with the word ‘Limited’ or ‘Ltd’, or their Welsh
equivalents, ‘Cyfyngedig’ or ‘Cyf.’ A company limited by guarantee may apply for exemption to this
requirement on the incorporation documents. Before doing so, it is advisable to check with a solicitor
that the company satisfies all the relevant conditions.
You cannot register the same name as another company already on the companies index. You can
check online with Companies House to see if the same or similar names have already been taken,
and it is advisable to check the Trade Marks Register of the UK Intellectual Property Office to make
sure your chosen name does not infringe any registered trade mark. An internet search for the name
can also be useful to try to avoid future accusations of infringement by someone already using the
name. If it is already in use, it might still be useable, but you should seek legal advice. The full rules
on company names are set out in the Company and Business Names (Miscellaneous Provisions)
Regulations 2009.
This does not necessarily prevent you using a similar name to one already registered, but an
existing company might object to this. If the objection is upheld Companies House might direct your
organisation to change its name.
Some names may be registered only with the written approval of the Secretary of State. They include
names that give the impression of a connection with central or local government, which may be
particularly relevant to a town centre management company. The full rules on ‘sensitive’ names are
available via the Companies House website. They include words that might suggest that the company
is a national or representative body, such as ‘British’ and ‘Association’ or words that suggest specific
functions, such as ‘charter’, ‘group’ or ‘trust’. These rules apply both when forming a new company,
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and when changing a company’s name.
A company’s name may be changed at any time by a special resolution passed in a general meeting
of the company, or by a written resolution signed by all its members.
Trading names
A company may trade under a name other than its incorporated name. For example, ‘Anytown
Town Centre Management Limited’ could trade as ‘Anytown Progress.’ Trading names, also known
as business names, are no longer registered with any government department but as with company
names the use of some words is restricted.
It is advisable to check that any proposed trading name is not already in use, does not infringe any
registered trade marks (or appear to be in use on the internet) and does not contain any words listed
as sensitive by Companies House.
Memorandum of association
The memorandum of association confirms the subscribers’ intention to form a company and become
members of that company. If the company has shares, it will also provide evidence of the members’
agreement to take at least one share each in the company.
Under the Companies Act 2006, the memorandum is much shorter than previously because all the
rules of the company (its constitution) are now contained in the articles of association (see below).
Once the company has been incorporated, it cannot (and will not need to) be amended. The wording
of the memorandum is prescribed by law. A proforma version is available on the Companies House
website, or you can use the wording given in The Companies (Registration) Regulations 2008.
Articles of association
A company’s articles of association are its rules. They are chosen by the company’s members and are
legally binding on the company and all of its members. The articles set out how decisions are taken
by the members and directors, and in the case of a private limited company or PLC will also deal with
matters connected with the shares. Any rules can be included in a company’s articles as long as they
are not against the law.
Many companies use ‘model articles’ in standard format. These are available from the Companies
House website both for companies limited by guarantee and companies limited by shares. However
they are only suitable for limited purposes. For example, the model for a company limited by shares
is only suitable for a trading company with only one shareholder. If a company wants to draw up its
own bespoke articles or amend the model articles, it is advisable first to check the content of the
model articles, and to take professional advice on any items you wish to change, add or exclude.
When you apply to register a company, you have to declare whether you are adopting model articles
in their entirety; model articles with amendments (the amendments must be filed with form IN01);
or bespoke articles (a copy of the articles must be filed with form IN01). If you are not sure whether
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you need bespoke articles, you can register using the model articles and change them at a later date.
Once a company is incorporated, it must notify Companies House every time it changes its articles. A
company can amend its articles by special resolution and deliver a copy to Companies House within
15 days of the date it is passed. It must also deliver a copy of the amended articles within 15 days of
the date the amendment takes effect.
Your company can adopt articles which include ‘restricted provisions’ which can only be repealed or
amended if certain conditions are met. This might be appropriate where a company is registered as
a company limited by guarantee but wishes to ensure it continues to operate for community benefit.
Information
Information on most aspects of company formation is available from the Companies House website.
Professional advice is also offered by solicitors, company formation agents, chartered secretaries
and (on tax aspects) accountants.
»» Rules for unincorporated associations
There are no legal requirements for unincorporated associations or voluntary bodies to adopt any
rules or constitution. However, it is good practice to have an agreed document setting out how the
organisation is to be run, who controls it and how, who can be members and why, who is responsible
for employing staff or owning property, and how the organisation can be wound up. Doing this can
avert costly and drawn-out litigation if anything goes wrong.
»» Rules for charities
Like companies, charities must be careful about the names they choose. Names should be as specific
as possible and reflect the unique purpose of the organisation if possible. If a name is too similar to
that of another charity, the Charity Commission can instruct a charity to change its name.
The equivalent of the articles of association for charities is called the governing document. This sets
out what the charity will do, how it proposes to do it, who will run it and under what circumstances
it may be changed or wound up. Advice and guidance, and model governing documents for
unincorporated or incorporated charities, are available on the Charity Commission website (or its
equivalents in Scotland and Northern Ireland).
Directors, officers and members
A private company, whether limited by shares or guarantee or operating as a community interest
company, must have at least one director. It is possible to specify within a company’s articles of
association that there should be a larger number; similarly, the articles can specify that the company
has a company secretary. It is no longer a legal requirement for private companies to have a company
secretary, but it still is for public limited companies.
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A Firm Basis
Generally, anyone can be a company director as long as they are over the age of 16, have not been
disqualified from acting as a company director and are not an undischarged bankrupt. In the latter
two cases, it is possible in theory for a court to give permission for an individual to act as a director
of a particular company. However, any public-facing company should think carefully before involving
someone in either of those categories.
Role and composition of the board
Directors (or board members) determine the strategic direction of the organisation. They should
therefore not only be committed to the organisation’s aims and purposes, but also between them
have relevant skills and experience, including legal or financial expertise and management skills, and
others relevant to town centres, such as urban design, retail, tourism or community development.
As directors of a company, the board members will have general and statutory duties. They will
be required to act in the best interests of the company as a whole at all times, rather than in the
interests of any particular group or sector with which they are connected.
Appointing a chair
Appointing the right chair of a town team or town centre management company is critical to its
success. The chair is the public champion of the project, particularly in the early stages. It is not
recommended that an elected councillor becomes chair. This avoids potential conflicts of interest
between the chair’s role as a board member and their local or political interests as a councillor; it
also avoids situations where the chair may have a casting vote, in which case the company might be
deemed to be controlled by the local authority.
When recruiting a chair, the company may approach interested individuals directly or adopt an open
recruitment policy, advertising the opportunity within the local community. An open recruitment
policy is recommended best practice in terms of equal opportunities, and helps to avoid suggestions
of favouritism or discrimination. An information pack and job description can be prepared to give
applicants as much knowledge of the role as possible. Recruitment is best done through a selection
panel rather than by an individual board member. Sample job descriptions for chairs and board
members are included in Appendix A.
Appointing board members
Board members’ skills and abilities need to complement the aims and purpose of the organisation.
In a charity, they should fit the organisation’s charitable purpose; in a co-operative they should
reflect co-operative values and principles. Within an ordinary company, whether limited by shares
or guarantee, there is no specific requirement for particular skills or qualities, but it is common sense
to make sure they are people who are competent to understand and oversee the business of the
company and fulfil their statutory duties.
A board may meet as a ‘shadow board’ before the organisation is incorporated, and this is a chance
to brief them on their duties and responsibilities and for them to familiarise themselves with the
proposed company’s objectives and activities.
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Board members’ overriding responsibility is to act in the best interests of the company. Conflicts of
interest will inevitably arise from time to time, and the company’s rules need to include provisions
for dealing with such conflicts. This is a particular issue with local authority members or employees,
who may find themselves sitting on opposite sides of the fence in their professional or political
capacity and in their role as company directors.
The day-to-day operation of the organisation will be delegated by the board to the town centre
manager or coordinator and their management team. The town centre manager (or equivalent) will
attend and report at board meetings. The board and management team will need to work closely
together in developing policies and monitoring performance.
Local authority involvement
Under the Localism Act 2011, local authorities have the power to do anything an ordinary citizen
can do as long as it is not outside the law. However, there are particular rules on local authority
involvement in companies that need to be borne in mind.
The Local Authorities (Companies) Order 1995 provides that companies which are controlled or
‘effectively controlled’ by the local authority are deemed to be regulated companies and will be
subject to local government capital finance regulations. This means that certain activities of the
company will serve to reduce the local authority’s capital resources, just as if undertaken by the
authority itself.
To avoid the implications of the 1995 Order it is essential to ensure that the local authority has
only a minority interest in the company and is not deemed to be controlling the company at board
or member level. To achieve this, local authority representation at board or member level should
remain below 20 per cent, i.e. a maximum of one local authority person on a board of six, two on a
board of 11, or three on a board of 16.
Employees of companies
Board members who are also directors or employees of other companies will usually require
permission from those companies to act as a director of a town centre management company. Some
organisations may have rules limiting the representation of their directors or employees on the
boards of other companies to avoid assuming de facto control and majority responsibility for their
affairs.
Tenure of directors
A town centre management company’s articles will normally provide for all directors, with the
exception of managing or executive directors, to resign at the first annual general meeting. The
maximum length of tenure thereafter is usually three years. This is normally achieved by a third of
the non-executive directors retiring at each subsequent annual general meeting. The order in which
this happens in the first instance may be decided by agreement between the directors, or by ballot.
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A Firm Basis
In subsequent years, directors retire in order of seniority. Retiring directors will normally be allowed
to stand for re-election. Apart from these requirements, directors cease to serve if they resign at any
other time, are removed, disqualified or die.
The model articles for a company limited by guarantee do not provide for this system of retirement
by rotation, and neither do some basic forms of articles used by company formation agents, so legal
advice may be needed to help you draw up an appropriate constitution.
Directors’ remuneration
In practice, most directors of a town centre management company will act in a voluntary, unpaid
capacity, although doing so does not diminish their legal responsibilities as directors. One or more
directors may be employed in a fulltime salaried capacity to run the company on a day-to-day basis
but this is not a legal requirement. In an organisation registered as a charity any employed manager
would not normally be a director or trustee of the charity (and would need the Charity Commission’s
permission to be) as there is a rule against trustees gaining any financial benefit from the charity,
other than reimbursement of expenses.
The company may pay directors’ expenses incurred wholly and necessarily on the company’s business
and such arrangements should be documented, though they do not have to be part of the company’s
articles of association. The level of expenses may be limited by setting allowances for particular
purposes, such as overnight stays or travel. It is important that such arrangements are transparent
and that expenses are clearly connected to the business of the company.
Directors’ legal responsibilities
The directors are responsible for the management of the company, which includes ensuring that
the company meets all its legal obligations. Their decisions must be taken in the best interests of
the company, even if such decisions are contrary to their own personal interests (or the business
they work for) or those of the company’s customers and employees. Directors act collectively as
a board and should be careful not to exercise their individual authority to commit the company to
anything, except where specific powers are delegated to a managing or executive director or to a
sub-committee of directors. The board may appoint one or more managing executives or directors
and grant them such authority, but their role and authority should be carefully defined. There are no
specific legal obligations or powers implied by job titles such as managing director or chief executive.
Every company director is personally responsible for ensuring that certain statutory documents are
prepared and delivered on time to the Registrar of Companies. In particular, these include:
• The annual return
• Annual accounts
• Notification of any change in the company’s officers or their personal details
• Notification of any change to the registered office address
• Notification of allotment of shares
• Registration of charges
Companies must keep their own registers of members, directors and directors’ residential addresses.
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When these change the registers must be updated and appropriate forms filed at Companies House
within 14 days. This can be done via the Companies House website.
The register of directors must contain an individual’s name and any former names; a ‘service address’
(which could be the company’s registered office); their normal place of residence; nationality,
business occupation and date of birth. A director that is itself a company or firm needs to provide its
corporate name, details of its registered office and details of its legal form and registration.
The register of directors is public information and must be open to inspection. The register of
directors’ residential addresses should not be made public.
There are automatic penalties if directors fail to submit statutory accounts on time. These increase
the longer the delay, and may be doubled if accounts are late in two successive years. In addition,
failure to file accounts or annual returns is a criminal offence and directors can be personally fined
in the courts, although in practice this is rare. The Registrar of Companies can take action to remove
a company from the public record if accounts and returns are not filed and this is the more likely
sanction. If this happens, the company’s assets normally become Crown property and the bank
account will be frozen. As a result the company no longer exists and cannot trade or function in any
way. It is possible for a company to be reinstated to the register, but this would include bringing the
filing up-to-date, and legal advice should be sought.
Operational responsibilities of directors
The duties of any salaried directors employed by the company will be set out in their contracts of
employment. Directors acting in an unpaid, voluntary capacity will generally undertake operational
tasks, such as participation in working groups, as volunteers.
Although such functions might not be written down, their performance is subject both to the legal
obligations described above and to the powers to remove directors under the terms of the articles
of association. These powers will typically provide for the removal of directors for persistent failure
to attend directors’ meetings or by a vote of 75 per cent of the other directors.
In practice, the most valuable contribution a busy voluntary director can make is likely to be by
contributing their particular skills and knowledge to directors’ meetings and working groups. They
may also be able to provide help in kind (for instance, by making premises available) and are likely to
have personal or business contacts who can help the town centre company’s work.
Typically, town centre companies form working groups to address issues such as the town centre
environment and services, promotions and events, safety and security, and strategic development,
and these are often led by a director with relevant expertise.
The company secretary
There is no longer a legal obligation for a private company to have a company secretary. This now
only applies to public limited companies, so is unlikely to be relevant to town centre management
companies. However, a company can still choose to have a company secretary fulfilling the traditional
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A Firm Basis
role. No specific qualifications are necessary, but a company secretary will need to be well organised
and have time to keep a close eye on the company’s business.
The company secretary is usually delegated the role of dealing with statutory administrative
functions, including maintaining the registers of members, directors and directors’ addresses, filing
annual returns, and notifying Companies House of any changes in directors, shareholdings or the
registered office.
The company secretary is normally responsible for notifying directors of meetings, keeping minutes
and records of resolutions passed, ensuring accounts are filed on time and acting as a signatory to
contracts.
The UK Corporate Governance Code, published by the Financial Reporting Council, sets out the
secretary’s relationship with the board of directors:
‘Under the direction of the chairman, the company secretary’s responsibilities include ensuring good
information flows within the board and its committees and between senior management and nonexecutive directors, as well as facilitating induction and assisting with professional development as
required.
The company secretary should be responsible for advising the board through the chairman on all
governance matters.’
Members of the company
Members of a company limited by guarantee are equivalent to shareholders in a company limited
by shares. Although they will not receive a dividend for their ‘share’, they are entitled to attend
general meetings of the company and thus influence how the company will operate. If the company
is considering a co-operative model, it is important to set membership criteria very clearly, as the
members will have democratic control of the company and will be able to outvote the directors if
they wish. If a company is set up as a private limited company, voting is weighted according to the
number of shares held by its directors.
What does membership offer?
Members have a right to attend and vote at annual general meetings and extraordinary general
meetings held by the company. By attending, they have the opportunity to call the board to account
and ask questions about the board’s performance and plans. General meetings are one of the
mechanisms of company law to ensure a board is accountable to the members. Private companies
are no longer required by law to hold AGMs, but doing so helps to ensure public accountability.
Charities and other public-facing organisations, such as town centre management companies, ought
to ensure they still hold them as a way of engaging the wider public
Members also have a right to receive the annual reports and accounts; to vote on any proposed
changes to the company’s articles of association; and receive a certificate of membership.
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Responsibilities of membership
In the event of a company limited by guarantee being wound up on an insolvent basis, each member
guarantees to pay £1, or such other nominal sum set out in the articles of association, to help settle
any debts, but is not personally liable for debts that the company cannot afford to pay. For companies
limited by shares the shareholder ought already to have paid his or her £1 (or other nominal sum)
per share. Members may be required to pay annual subscriptions to enjoy additional benefits of
membership or maintain their membership of a company limited by guarantee.
Admitting new members
New members should complete a membership form and return it to the company secretary (or
equivalent) at the registered office. The application will be considered at the next meeting of the
board and the prospective member will be informed whether or not the application has been
accepted (this responsibility can in practice be delegated to operational staff).
The board may reserve the right to decline membership without giving a reason, although it is better
practice to set membership criteria clearly to encourage equal access. Once accepted, the member’s
name is added to the company’s register of members and a certificate of membership is issued.
It is good practice for all directors of public-facing organisations to be members, but also to have
a wider membership of non-directors to demonstrate public accountability and openness. This is
particularly important for charities.
»» Rules for unincorporated associations
There are no legal requirements for unincorporated organisations to have particular officers, directors
or membership criteria. However it is good practice for organisations, however informal they are, to
be clear about who can join and why, and to set up a steering group or committee that will be the
equivalent of a board. This will generally include a chair, secretary and treasurer, even if they choose
not to use these titles.
Any organisation that intends to exist for an extended period should consider drawing up a constitution
or set of rules outlining how it will operate and who will take responsibility for financial and legal
issues.
A member of an unincorporated association does not benefit from limited liability and in the event
of the organisation being wound up on an insolvent basis all the members are personally liable for
the debts to its creditors.
»» Rules for charities
Members of a charity’s board are called trustees. Like company directors, they need to be recruited
for the practical skills, knowledge and influence they can bring to the organisation. The trustees are
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A Firm Basis
known collectively as a board, and like a board of directors are likely to include a chair, secretary and
treasurer.
Full information on the role of trustees, their duties and liabilities and best practice in recruiting
them is available from the Charity Commission, or its equivalents in Scotland and Northern Ireland.
Finance, administration and compliance
Accounts
Every limited company must submit accounts to Companies House. A new company’s financial year
begins on the date of incorporation, regardless of when it starts doing business. For a company that
has delivered accounts previously, the financial year begins on the day after the period covered by
the previous accounts. A particular financial year may be less than 12 months but not more than 18
months.
Every company has an accounting reference date, which is the date in each year to which accounts
must be drawn up. A company may apply to Companies House to change its accounting reference
date, but if it does not do so the date is the last day of the month in which the anniversary of its
incorporation falls.
A private company’s accounts must be filed within nine months of the end of a company’s financial
year. The accounts must include a directors’ report, a profit and loss account (or an income and
expenditure account if it is not trading for profit) and a balance sheet. Accounts must be delivered
both to the members of the company and to Companies House.
Smaller companies, which may include most town centre management companies, can claim
exemption from the requirement for accounts to be independently audited. From October 2012 this
applies to companies that meet at least two of the following criteria:
• annual turnover is no more than £6.5m
• assets are worth no more than £3.26m
• average number of employees is 50 or fewer
If claiming exemption, a company needs to include a statement in its annual accounts that it is
entitled to exemption under section 477 of the Companies Act 2006 relating to small companies; that
the members have not required the company to obtain an audit; and that the directors acknowledge
their accounting responsibilities and have prepared the accounts in accordance with regulations for
small companies. The full wording required for this statement is available from Companies House.
The board of directors must approve the accounts and a director must sign the balance sheet. The
directors’ report must also be approved by the board and signed by a director or the secretary.
Accounts must normally be considered by a general meeting of the company, usually its annual
general meeting. A copy must be distributed to every member and everyone entitled to attend the
relevant meeting at least 21 days before it takes place. The directors have a duty to call the meeting
at an appropriate time, and it is best that this is done within nine months of the accounting reference
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date and before the accounts are filed at Companies House.
VAT
The company must be registered for VAT if its turnover exceeds the amount stipulated by HM Revenue
and Customs. If a town centre partnership was registered for VAT before incorporation, its changed
status must be notified by law to HMRC. If registered for VAT, a quarterly VAT return will have to be
completed and payment made to HMRC. Charities do not have to register for VAT.
Rules on VAT can be complex and there are different rates applicable to different goods and services.
Full information is available from HMRC.
»» Find out more: Visit the HMRC website: www.hmrc.gov.uk
Income
The methods a company may use to generate income are set down in its articles of association,
which should be phrased sufficiently widely to permit any form of lawful activity, or the receipt of
donations. Many town centre companies offer benefits to associate members in return for an annual
subscription and use commercial initiatives to generate profits.
Town centre footfall will often be one of the company’s most valuable assets, with
significant potential for generating revenue from the sale of advertising space under licence from the
local council.
Registered office
Every company must have a registered office, which is the address to which Companies House will
send correspondence. It may be anywhere in England or Wales, or in Scotland or Northern Ireland if
the company is registered there. If the registered office is changed after incorporation, Companies
House must be informed using the appropriate form (available from the Companies House website).
Companies House uses the Post Office address database to verify addresses, so it is important to
use the full postcode. The registered office address must be a physical location in the part of the
United Kingdom where the company was incorporated. If using a PO box number, it must be part of
a physical address as there is a legal right for visitors to inspect or deliver certain documents at the
registered office.
Meetings
Rules for the company’s meetings will appear in the articles of association. A company should hold
an annual general meeting every calendar year. The first AGM must take place not more than 18
months after incorporation. No more than 15 months should elapse between AGMs. Meetings of the
board of directors may be set at the company’s discretion.
In practice, management functions are often delegated to specific individuals or working groups. The
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A Firm Basis
effect is that management is ultimately controlled by meetings but not conducted by them.
Statutory returns
Company directors are responsible for ensuring that certain information is regularly supplied to
Companies House, using the appropriate statutory forms. These are available via the Companies
House website.
The most important of these is the annual return, giving up-to-date basic information about the
company. It must include:
• the name of the company
• its registered number
• the date to which the annual return is made up
• the principal business activities of the company
• the type of company it is (private, limited by guarantee, community interest company or
public)
• the registered office address
• the address where the company keeps certain company records if not at the registered
office, and which records are held there
• details of the company secretary where applicable
• details of all the company’s directors (corporate or individual).
The return must also state whether the company’s shares (if any) have been traded on a relevant
market. If shares have not been traded it must provide information about any transfers of shares that
have taken place during the year.
Companies limited by guarantee are exempt from reporting changes in membership to Companies
House.
Directors must also inform Companies House during the year of any of the following changes, among
other things:
• change of registered office address
• appointment of company director or secretary
• change of details, for example, the address of a company director or secretary
• termination of appointment of a company director or secretary
• notification or change of address where the company records are kept available for inspection
• notification of company records held at alternate address or their returning to the registered
office address
• allotment of new shares
• change to the company’s total share capital
Filing of information is normally done online via the Companies House website, though it is also
possible to do so by post.
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Disclosure of status
Every company must display a sign with its registered name at its registered office, and at any location
where it carries on business (unless it is primarily residential accommodation).
Companies must display a sign with the company name that can be easily seen and read by visitors.
It must be included in all business communications, both hard copy and electronic, including emails,
cheques, orders and invoices. The registered name must also be disclosed on company websites,
though it need not be on every page.
Business letters, order forms and websites must also display the following information:
• the part of the UK in which the company is registered (England and Wales, or Wales, or
Scotland, or Northern Ireland)
• the company’s registered number
• the address of the company’s registered office
• if a company is exempt from the requirement to use ‘limited’ in its name, the fact that it is a
limited company
• if the company is a community interest company which is not a public company, the fact that
it is a limited company
• if it is a company which has chosen to display its share capital, it must display the amount of
paid up share capital
If anyone with whom the company has business dealings makes a written request for any of the
following, the company must provide this information, in writing, within five working days:
• the address of its registered office
• the address of any place of inspection
• the type of company records kept at the registered office or inspection place
A company does not have to state the directors’ names on its business letters unless it chooses to
do so. However, if it does decide to include any of the names then it must state the names of all its
directors.
Under section 68 of the Charities Act 1993, a charitable company whose name does not include the
word ‘charity’ or ‘charitable’ must state that it is a charity on company documents. In Scotland, there
are similar provisions within the Charities and Trustee Investment (Scotland) Act 2005.
Insurance
The directors’ duty to act in the best interests of the company includes responsibility for protecting its
assets against legal actions and other potential claims arising from its acts or those of its employees.
Adequate insurance is an important aspect of this duty.
The more a company wants to do, the more important effective insurance cover becomes. Appropriate
policies may include employer’s liability, public liability, directors’ and officers’ cover and possibly
professional indemnity. Public liability and directors’ and officers’ cover are effectively minimum
levels of protection against risks arising from the staging of public events and legal actions resulting
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A Firm Basis
from decisions of the company’s officers. It is advisable to seek guidance from an insurance broker
specialising in commercial insurance on what types of insurance to have and what levels of cover to
hold.
Some insurers may seek to limit their exposure to risk by placing restrictions on the numbers of
directors a company may have.
Employees and pensions
A company may employ staff directly or on freelance contracts, or members may provide services
in kind or on a fee basis. Where staff are employed, employers will need to provide a workplace
pension scheme. This is a change from the previous requirement to provide access to private
pension arrangements, and is being phased in from 2012. Full details are available from the Pensions
Regulator.
»» Find out more: Visit the Pensions Regulator’s website: www.thepensionsregulator.gov.uk
Professional advisors
Unless it is exempt from audit, a company must appoint an auditor who is a member of a recognised
supervisory body and eligible to act as a company auditor under the rules of that body. The directors
may appoint the first auditor to hold office until the first annual general meeting, after which the
auditor is normally appointed or re-appointed at a general meeting at which accounts are considered.
Auditors must normally be appointed annually by PLCs. For private limited companies they may
serve until they retire, resign or are removed. The auditor may not also be a director, employee or
member of the company.
The law does not stipulate the need for any other forms of professional advice, though directors owe
a duty of care to the company, which may require appropriate specialist advice at particular times.
»» Rules for unincorporated associations
There are no legal requirements for unincorporated organisations to produce annual returns and
accounts. However an annual statement of accounts is recommended standard practice, as is an
annual meeting to elect officers, receive reports and plan business for the coming year.
»» Rules for charities
There are strict rules for charities on submitting annual returns, trustees’ reports and accounts.
Charities with income over £10,000 are legally required to provide an annual return, which can be
submitted online via the Charity Commission website. For detailed information contact the Charity
Commission.
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Next steps
There are significant advantages to formalising town centre partnerships, beyond the legal advantages
of incorporation in terms of limited liability. Incorporation also means that the key stakeholders who
are members are legally bound to the organisation’s objectives. It entrenches their commitment and
offers a forum that can include public, private and voluntary sector partners equally.
The company model is familiar within the private sector, operates within a flexible regime and is
effectively regulated. It is subject to strict rules in terms of accounting and is open to public inspection.
Below is a checklist of steps you should take to establish a town centre management company:
1. Adopt model articles of association, or draw up bespoke articles (you will need legal advice
if you do this)
2. Recruit initial sole director, or shadow board of directors
3. Consider the company’s membership and membership structures, especially if thinking of a
co-operative structure
4. Submit memorandum and articles of association and other information required for
incorporation to Companies House
5. Obtain company registration number and certificate of incorporation
6. Arrange for appointment of new directors of the company, change of registered office, and
appointment of company secretary if required
7. Arrange for filing of all matters associated with the registration of the company and first
board meeting
8. Brief directors on the articles of association and their duties and responsibilities
9. Identify key strategies and priorities for action
10.Develop business plan
11.Open a bank account
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A Firm Basis
Appendix A
Suggested job description for chair of the board
Experience
• Long term commitment to economic development, regeneration, tourism, leisure and
community initiatives
• Proven track record in corporate or trust management
• Specialist professional or business skills
• Involvement in community service (paid or voluntary)
Skills and abilities
• Ability to chair meetings, act impartially, preserve order and ensure that the business of the
meeting is conducted in a proper and efficient manner
• Ability to involve other board members in discussion and debate
• Communication skills – ability to express balanced opinions and listen to the opinions of
others; ability to challenge and debate
• Analytical skills – ability to read and understand complex subject matter and comment
• Ability to communicate with the media and employees
• Other specialist skills – a mix of specialist skills will be required on the board, such as financial,
legal and technical
Knowledge
• Relevant knowledge of economic development, regeneration, town centre management
• Relevant specialist knowledge
Other requirements
• Resident in local area
• Commitment to the promotion of the area
• Support for the company’s objectives
• Awareness of strategic issues
• Appreciation of status and functioning of town centre management company
Suggested job description for board member
Experience
• Long term commitment to economic development, regeneration, tourism, leisure and
community initiatives
• Proven track record in corporate or trust management
• Specialist professional or business skills
• Involvement in community service (paid or voluntary)
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Skills and abilities
• Communication skills – ability to express balanced opinions and listen to the opinions of
others; ability to challenge and debate
• Analytical skills – ability to read and understand complex subject matter and comment
• Ability to communicate with the media and employees
• Other specialist skills – a mix of specialist skills will be required on the board, such as financial,
legal and technical
Knowledge
• Relevant knowledge of economic development, regeneration, town centre management
• Relevant specialist knowledge
Other requirements
• Resident in local area
• Commitment to the promotion of the area
• Must be prepared to give up time to attend meetings (both evenings and daytime)
• Support for the company’s objectives
• Awareness of strategic issues
• Appreciation of status and functioning of town centre management company
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A Firm Basis: A Town Teams Report - Prepared January 2013
Appendix B
Useful organisations and resources referred to in this guide
Charity Commission www.charitycommission.gov.uk
Charity Commission for Northern Ireland www.charitycommissionni.org.uk
Companies House www.companieshouse.gov.uk
Cooperatives UK http://www.uk.coop
Empty Shops Network http://emptyshops.wordpress.com
Financial Reporting Council www.frc.org.uk
Financial Services Authority www.fsa.gov.uk
HM Revenue and Customs www.hmrc.gov.uk
Local Government Association www.lga.gov.uk
Locality http://locality.org.uk
Meanwhile Space CIC www.meanwhilespace.com
Office of the Scottish Charity Regulator www.oscr.org.uk
Regulator of Community Interest Companies www.bis.gov.uk/cicregulator/
The Pensions Regulator www.thepensionsregulator.gov.uk
UK Intellectual Property Office www.ipo.gov.uk
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A Firm Basis: A Town Teams Report
Prepared January 2013
Non-Member RRP: £25.00
Published by:
The Association of Town & City Management
1 Queen Anne’s Gate
Westminster, London,
SW1H 9BT
E: [email protected]
T: 0300 3300980
W: www.atcm.org
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