Local Authority Companies – the importance of good governance
There are a multifold different types of company that breathe, but not all of them are fit for all types of exercise.
The main marketable structures available to Councils are
- Company Limited by Shares
- Company Limited by Guarantee
- Community Interest Company
- Community Benefit Society
- Limited Liability Partnership (LLP LLP)
The following paragraphs elliptically describe each in added detail.
Company Limited by Shares
This is the usual legal form for profit- making private companies and is where shareholders buy shares that allow them to earn throw-ins from the company ’s post levy returns. Utmost Council retained companies are set up as this type of company, with the Council being the main sole shareholder. They invest all of the equity in the company and so take all the throw-ins once the company is profitable. The rudimentary purpose and benefit of a limited company is that it creates a separate legal substance which limits the liability of the Council (or or any other shareholder) if the company ever becomes insolvent.
Company Limited by Guarantee
This form of company has no shareholders so there's no distribution of perquisites. Instead the company has Members who each guarantee to pay up to£ 1 towards the company ’s debts. All superabundances are eitherre-invested in the company or the community. This is the most common form of company for not-for- profit social enterprises. It's so questionable to be suitable for a private rented jacket company, unless there's no intention to earn a return on the investment.
Community Interest Company (CIC CIC)
A Community Interest Company is rested on a conventional company model, either limited by shares or by guarantee, with two more features designed to secure that its exertion are shouldered for the benefit of the community.
Firstly, a CIC must submit to the Regulator on its setup a community interest statement that sets out the company ’s benefit to the community. Secondly, the memorandum/ themes of association must state that ‘ the company shall not transfer any of its wherewithal other than for full consideration ’, except in cases where the wherewithal are transferred to another asset-locked body resembling as another CIC or a charity, or the transfer is made ‘ for the benefit of the community other than by way of a transfer of wherewithal to an asset-locked body ’.
Notwithstanding, the regulations do make provision for the payment of restricted tips in the case of a CIC limited by shares. As a result, once again, if the intention is to supply uncapped tips to the Council, or potentially dispose of any of the tracts in the future to anon-charitable thing, either this structure might not be suitable.
Community Benefit Society
This commercial form, which replaced Industrial and Provident Societies, has members rather than shareholders, and as a result there's no share capital and no distribution of cumshaws. These organisations are registered with the Financial Conduct Authority rather than Companies House. They can be charitable, which offers assessment advantages, but aren't challenged to be registered with the Charities Commission. As a result, this form of commercial structure would also not be apt for our purposes.
Limited Liability Partnership (LLP LLP)
Where two or additional parties are working together to achieve a common design, with the dream of combining their coffers and experience, there can be assessment advantages to forming a LLP rather than creating a company limited by shares that's strained as a separate existent.
For exemplification, a Council could input land means, whilst a private consort inputs equity capital and development know-how and staffing exchequer, to assume a communal development producing homes for deal or long- term rent.
Normally, the confederation would partake lucre from the communal crapshoot proportionate to the value of their investment in the arrangement. Each consort is either stretched single-handedly in relation to their investment in the LLP, rather than the company paying duties on the lucre in its own right. This is known as being duty transparent and would perform in the Local Authority admitting its share of the LLP lucre duty free, as it's shielded from belly duty, although the return to the Council would still probably be lesser than it would be if it was the sole shareholder in a company limited by shares.
The LLP structure can also make it easier to make changes to the linkup as it progresses, as opposed to issuing or retailing shares in a limitedcompany., although LLPs are still registered at Companies House and regulated like a separate company.