The limited company is an organisational structure which gives limited liability to its members. Some sports organisations take on the form of a limited company. This is a more accountable form than, for example, an unincorporated association.

There are two incorporated forms to choose between when setting up as a limited company:

• Company limited by shares (CLS) - shareholders each hold shares in the company. Their liability is limited to the amount unpaid on shares they hold. A public limited company (plc) differs from a CLS in that its shares can be sold to the general public.
• Company limited by guarantee (CLG) - each of the members gives a guarantee for a certain sum that will be put towards the company's finances if the company is wound up. A CLG cannot raise finance by issuing shares, nor pay dividends to its members.

Every limited company is governed by a Board that takes overall responsibility for its work. The Board is responsible for the governance of the organisation - ensuring it is effectively and properly run and is meeting its overall purposes as set out in its governing document.

Company limited by shares (CLS)

The advatage of a company limited by shares is the shares make it easy for investors to invest in the club.  The issue with shares in a membership organisation is that each time a member joins a share has to be issued to them and each time a member leaves their share has to be transferred to somebody else or redeemed. The shares cannot be advertised and sold publicly.  A further issue with companies limited by shares for membership organisations is the control that share holders can exert.  If anyone holds over 50% of the shares then they will be able to control the Board and if they hold 75% of the shares then they are able to change its constitution and have complete control of the company.  For these reasons a more suitable limited company for membership organisations is the limited by guarantee model.

Company limited by guarantee (CLG)

The advantage of a company limited by liability is that the company assumes a separate legal identity.  This means if it becomes insolvent or a claim is brought against it then the members will not be liable to other than the amount which each member has guaranteed to pay, typically £1 (unless they have broken company law).

The main drawback to being a company limited by guarantee is the administration required.  This includes filing annual accounts and directors details at Companies House and keeping these details up to date every time a Director is appointed or removed.  In addition to this the Directors of the company (the Board members) have duties and responsibilities in company law such as the duty to promote the success of the company, to act in the best interests of the company and to comply with its Articles of Association.

Regardless of the this drawback, most sports organisations form as a company limited by guarantee because of the protection this gives to members.

Downloads:

Application to register a company.pdf

Application form for setting up a limited company.

Company Formation.pdf

Guiding document to setting up a limited company from companies house.