How Shelf Companies Lost Their Appeal and What to Do Now
Also known as a ready-made company or an off-the-shelf company, a shelf company is a pre-registered business you can buy and customise.
When you establish your company as a limited company, one of the things that you have to do is set up the articles of association. These are the rules concerning how the company will operate, the purpose of the business and the structure of it. In some cases, charities may need to become a company due to the risk of financial liability from controlling substantial assets, due to employing staff or even engaging in charitable purposes that have some element of commercial risk.
In this situation, the charity can be set up as a company limited by guarantee and it will create articles of association and memorandum regarding them. These are known as governing documents and will show that the company has been established for non-profit purposes and without share capital. But what happens if you need to change these articles of association at some point further down the line?
Making changes
The process for changing articles of association for a charitable business is a little different from a normal limited company. In this situation, you need to obtain approval for your changes from at least three quarter (75%) of the company’s members. These are usually guarantors or trustees of your charity. This is normally done by passing something called a special resolution at a general meeting.
You must also ensure that you get written consent from the Charity Commission before you make any changes to the articles of association as there are some ‘regulated alterations’ that the changes must meet.
Getting approval for the changes
In a normal limited company, the purpose of the business is to make a profit for its members or shareholders. But a charity is set up as a non-profit limited by guarantee and this means it has less freedom than a normal limited company. It cannot simply change the statement of objects, for example, in any way it wants – this is the description of the company’s purpose. It also faces limits on administrative powers or provisions that are established in the articles of association.
Any significant changes to a charitable company fall under the regulations within section 198 of the Charities Act 2011. This means that approval must be given by the Commission for some changes. These are all termed as ‘regulated alternation’ and need consent in writing from the Commission before they can be put into practices by the charity.
Regulated alteration
There are three broad categories of regulated alterations that apply to charities and their changes to articles of association:
- Any changes to the objects of the charity – this means the description of the charities purpose
- Changes to what happens to the property owned by the charity if it is wound up
- Changes to which authorised funds of property can be used to the benefit of directors or member or anyone connected with them
Once the commission has agreed with the changes, the company’s members then go on to pass the resolution. A company director or secretary then needs to send a copy of the resolution to Companies House within 15 days of the resolution being passed in order for it to be complete. Only once this change is registered with Companies House does the new articles of association come into effect.
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Notifying the Charity Commission
The commission has to keep an up to date register of all the charities it oversees and information about them so it is a legal requirement to notify them of any proposed changes, whether regulated or not. This should be done through an online form that states:
- What the charges are
- Evidence they were made correctly
- The date the resolution was passed
- Whether the statement of objects has changed and the date these changes were registered with Companies House if this was the case
The amended articles can be sent with the online form and this allows the commission to update their register. Apart from the statement of objects, all changes take place from the date of the special resolution is passed by members. If no consent is required from the commission, then the changes aren’t classed as regulated alterations.
Companies House
To notify Companies House about the changes, you need to send the new articles and resolution via the online WebFiling system. Or you can use a company formation specialist to do the work for you and ensure that all the paperwork is submitted on the right forms in the right timescales.
To do this, all you need is the information required and your unique Companies House authentication code.
