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E-Quick Package |
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 £ 42.00 | No Renewal fees | | |
 This is our most popular package with UK residents, and includes:
 Submission of applications that details company's executive officers
Guarantee company formation is usually achieved within 6-8 workday hours (Companies House permitting)
Payment of UK legal and initiation fees
The appointment of your own candidates as directors and secretary (a minimum of two people are required)
The following documents will be e-mailed to you (Note: these documents are to be printed and signed):
Electronic Certificate of Incorporation (PDF)
Electronic Special Memorandum & Articles of Association (MS Word)
Minutes of the First Meeting of Directors (MS Word)
Membership Certificates and company Register
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Economy Package |
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| £ 92.00 | Renewal fees from £50.00 | | |
This is our most popular package with EU residents, and includes:
Submission of applications that details company's executive officers
Company limited by guarantee formation is usually achieved within 6-8 workday hours (Companies House permitting)
Payment of UK legal and initiation fees
The appointment of your own candidates as directors and secretary (a minimum of two people are required)
A registered office address for 12 months, provided by Coddan
An application form for the following year's renewal of the Registered Office Address service (£50.00)
Annual Return and Annual Account reminder
The following documents will be e-mailed to you (Note: these documents are to be printed and signed):
Electronic Certificate of Incorporation (PDF)
Electronic Special Memorandum & Articles of Association (MS Word)
Minutes of the First Meeting of Directors (MS Word)
Membership Certificates and company Register
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Premier Package |
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| £ 141.95 | Renewal fees from £99.95 | | |
This is our most popular package with small business, and includes:
Submission of applications that details company's executive director
Non-profit company registration is usually achieved within 6-8 workday hours (Companies House permitting)
Payment of UK legal and initiation fees
Applicant appointment of director for company (appointed electronically)
A registered office address for 12 months, provided by Coddan
An application form for the following year's renewal of the Registered Office Address service (£50.00)
Nominee company secretarial service for 12 months (next year - £49.95)
The following documents will be posted to you (these documents will be sent via Royal Mail):
The original laminated Certificate of Incorporation
A bound copy of the Memorandum and Articles of Association
The Minutes of the First Directors' Meeting
One (minimum) printed Membership Certificates and Company Register
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Deluxe Package |
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| £ 266.95 | Renewal fees from £224.95 | | |
This is our most popular package with overseas residents, and includes:
Non-profit company incorporation is usually achieved within 6-8 workday hours (Companies House permitting)
Payment of UK legal and initiation fees
A registered office address for 12 months, provided by Coddan
An application form for the following year's renewal of the Registered Office Address service (£50.00)
Nominee company secretary service for 12 months (next year - £49.95)
Coddan provides a company nominee director service for 1 year (next year - £125.00)
The name of the nominee director & secretary will appear as a public record
Annual Return and Annual Account reminder
The following two hard bound copies of corporate documents will be posted to you (Note: these documents are sent to you through Royal Mail Service, and are to be completed upon arrival):
The original laminated Certificate of Incorporation
A bound copy of the Memorandum and Articles of Association
The Minutes of the First Directors' Meeting
One (minimum) printed Membership Certificates and Company Register
A pre-signed, undated letter of resignation from the nominee director
A General Power of Attorney signed by nominee director
An indemnity Letter for General Power of Attorney
A nominee service agreement which provides for the indemnification of the nominees
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| Business Start-Up: Legal Requirements | | |
A guarantee company does not have a share capital.
A guarantee company has Members.
Members are guarantors instead of Shareholders.
A guarantee company can hold property.
A guarantee company can borrow money in its own name.
Guarantee companies are required to have a secretary.
Secretary usually described as the senior administrator.
This person may also be a member or director, but need not be.
A company must have a minimum of one Member.
Members can be corporate bodies or private individuals.
Members can be of any nationality.
The company is required to have a registered office in the UK.
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(click here for other packages)
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| 1. Company subscribers may be residents outside the UK.
2. You must appoint a minimum of 1 Director.
3. Directors can be corporate bodies or private individuals.
4. A Director can be of any nationality.
5. All companies must appoint a company Secretary.
6. A Secretary can be of any nationality.
7. If there is only ONE Director he or she CANNOT also be the Secretary.
8. They have legal identities separate from its members.
9. Individual members are almost totally protected against liability.
10. They can buy and sell property in the name of the organisation. |
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- DEAR VISITORS, If you want to become familiar with the description and the contents of UK guarantee company formation packages, offered by our company and to find above, what kind of service is included in this or that guarantee company incorporation package, to get an idea about the price of annual renewal of the service, and about the general legal requirements to the company incorporation within foreign countries, please, select the package you need from the list, situated below the banner. The information in the banner will be renewed according to the package you've chosen.
Please note » The prices payable for the items that you order are clearly set out in the web site. There will be no contract of any kind between you and us unless and until we receive payment from you. We act as your agent in the incorporation of companies and electronic filing of Companies House forms. We are not able to guarantee that any such filing will be acceptable to Companies House, nor are there any contractual obligation upon us to do so. If Companies House rejects incorporation or other electronic filing, we will credit your account with a full refund and the contract between us will be made void. Companies House does not offer a cancellation facility for the incorporation of companies or the electronic filing of documents. We will be unable to cancel any such submission on your behalf and will not refund any payment you have made. All prices shown at Coddan Web Site (www.uk-ltd-formation.co.uk) are in Great British pounds.
Live Help » Live Help is a real time "chat" feature which enables you to interact with a customer service representative without a phone call. Get answers to your questions while using our website. Clicking the "Live Help" button will start an on-line session with one of our representatives. Live Help is currently available during normal business hours. Outside of the above opening hours our business center will be closed. When you click on the button you will see an e-mail form that will allow you to send us a mail with your questions. Live Help is absolutely free! There are no hidden fees. We offer the service as a courtesy to our website visitors.
 What Is This Section About?
This section explains when charities may engage in trading activities for fund-raising purposes, and when a separate subsidiary trading company should be established to carry out those activities.
This section also contains some basic information on the implications of income and corporation tax on trading revenues. Detailed information on the taxation of trading profits earned by charities can be obtained from the Inland Revenue. They have produced a comprehensive leaflet entitled Trading by Charities (IR 2001). We refer to that leaflet throughout this guidance and trustees are advised to obtain a copy. It is on the web at (http://www.inlandrevenue.gov.uk).
- What Constitutes Trading?
What constitutes a "trade" for tax purposes is primarily a matter for the Inland Revenue, but the fact that all profits or surpluses are to be used for charitable purposes does not prevent an activity from being a "trade".
Income from the following activities will, generally, not be regarded as trading income:
The sale of donated goods. The grant of a lease of land and buildings where no services are provided. The trustees will normally need to obtain the advice of their own qualified surveyor regarding a proper rent for the property. Charity law allows charities to exercise a trade in the course of the actual carrying out of a primary purpose of the charity. This is called "primary purpose trading". Typical examples include:
The provision of educational services by a charitable school or college in return for course fees. The holding of an art exhibition by a charitable art gallery or museum in return for admission fees. The carrying out of trading involving the charity's beneficiaries. The provision of residential accommodation by a residential care charity in return for payment. The sale of tickets for a theatrical production staged by a theatre charity. The sale of certain educational goods by a charitable art gallery or museum.
The profits of a primary purpose trade are exempt from tax (but not necessarily exempt from VAT), provided that the profits are applied solely to the purposes of the charity. If necessary, the Inland Revenue will advise trustees whether a particular activity is primary purpose trading. In case of any doubt or difficulty trustees may need to consult their own legal and accountancy advisers as well.
Trustees may also wish to use trading activities as a way of raising money. If fund-raising is the main or sole aim of such trading activities (rather than primary purpose trading which also happens to produce an income) this is called "non-primary purpose trading". Charity law does not permit charities to carry out non-primary purpose trading themselves on a substantial basis in order to raise additional funds. This is because of the general expectation that contributions made to a charity will be used for its purposes or invested prudently, rather than being risked in trading activities simply to raise money. In addition if a charity itself carries on a trade in order to raise further funds, it may not only be in breach of charity law, but may also incur tax liabilities on trading surpluses.
There is no statutory definition of "all incoming resources". But, for the purposes of this limit, the Inland Revenue considers that "all incoming resources" means the total receipts of the charity for the year from all sources (grants, donations, investment income, trading receipts, etc.), calculated in accordance with the normal charity accounting rules. In order to qualify for the exemption, the trading turnover must either not in fact exceed the relevant threshold during the relevant tax year or, if the turnover does exceed the threshold, the charity must have had a reasonable expectation at the start of the tax year, that it would not do so.
Unless prohibited by its governing document, any charity can carry out these small levels of non-primary purpose trading, and be exempt from any tax on the profits, provided that the profits are applied for the purposes of the charity. More details of the exemption can be found in Inland Revenue leaflet IR 2001. If trustees have any difficulties with the application of the exemption they should contact the Inland Revenue. Charities which wish to trade on a more substantial basis for the main purpose of raising funds, may separate out, or "hive off", those trading activities to a subsidiary non-charitable trading company. This protects the property of the charity from the risks and liabilities of the trade. There can also be tax advantages in this. Charity law, however, requires trustees to follow prudent investment policies and they will need to bear this in mind when considering whether to invest any funds belonging to the charity in the subsidiary trading company.
- Special Types Of Trading. Ancillary Trading
A charity may also exercise a trade which is ancillary to the carrying out of a primary purpose of the charity. This is treated as primary purpose trading for both charity law and tax purposes.
An ancillary trade is one that does not directly further a primary purpose but is exercised in the course of the actual carrying out of a primary purpose of the charity. The raising of funds is not, in itself, regarded as an ancillary trade. An example of an ancillary trade is the sale of food and drink in a restaurant or bar by a theatre charity to members of an audience. More detail can be found in the Inland Revenue leaflet IR 2001.
- Occasional Trading
The profits of some other forms of trading taking place at occasional fund-raising events for charity such as auctions, jumble sales and fetes are by concession relieved from tax . Supplies made by a charity or by a subsidiary trading company at qualifying fund-raising events are also exempt from VAT. If a charity exercises a fund-raising trade which is expected to have a significant turnover, we strongly advise that the activity should be carried out through a subsidiary trading company.
- Mixed Trading
A charity may exercise a mixed trade, i.e. a single trade which has both primary purpose and non-primary purpose elements. For example, a shop in a charitable art gallery may sell a range of goods some of which relate to its primary purpose trading (e.g. books relating to the exhibition, copies of paintings) and some that do not (e.g. promotional pens, mugs and tea towels). In practice the Inland Revenue will accept that all of the profits of a mixed trade will be within the primary purpose exemption from tax if: the turnover of the part of the trade which is not for a primary purpose is no more than £ 50,000 in a particular tax year; and the turnover of that part of the trade is less than 10% of the turnover of the whole trade in that year.
The following examples illustrate this:
Charity A carries on a trade with a turnover during a tax year of £ 60,000. Of this, £ 55,000 is primary purpose and £ 5,000 is not. Because the non-primary purpose turnover is less than 10% of the total and less than £ 50,000, the whole trade is treated as primary purpose, and any profit will be exempt from tax. In this case, the new exemption for small scale trading is irrelevant. Charity B carries on a trade with turnover during a tax year of £ 45,000. Of this, £ 35,000 is primary purpose and £ 10,000 is not. Because the non-primary purpose turnover exceeds 10% of the total, the whole trade is treated as non-primary purpose. In this case, the exemption for small scale trading may be relevant if the total incoming resources of the charity for the tax year are £ 180,000 or more. If the small scale trading exemption is not available, the whole of any profit from the trade will be taxable.
- Sale Of Donated Goods
A charity may sell assets (including goods, land, buildings and investments) which have been given to it specifically for the purpose of raising funds. This is not the exercise of a trade, and there is no need for it to be carried out by a subsidiary trading company. The sale of donated goods is within the scope of VAT, but is zero-rated, if the goods are sold through charity shops, or sold through charity auctions or similar events to the general public, disabled people, or people receiving certain specified benefits or are exported. In some circumstances the sale of donated goods by a subsidiary trading company would also be zero-rated. If land, or buildings, are to be sold the provisions of section 36 of the Charities Act 1993 will apply.
If the donated assets are substantially altered or improved prior to sale (e.g. by turning donated raw materials into finished, saleable goods) then the profits obtained from that sale may be treated as trading income. Simple sorting and cleaning items, or giving them minor repairs does not have the effect of making the profits obtained from their sale trading income.
- Shops Selling Both Donated And Ordinary Trading Stock
This is not the same as mixed trading. The sale of donated goods is not trading at all. The sale of ordinary trading stock will simple be treated as a separate, standalone trade. Any significant sale of ordinary trading stock should normally be undertaken by a subsidiary trading company. In some cases where a charity is selling donated goods, it may also be able to sell ordinary trading stock from the same shop as agent for a subsidiary trading company. The reason for doing this is that the charity may then be able to claim charity rating relief in respect of the premises used for selling both donated goods and ordinary trading stock. Where the subsidiary trading company "employs" the charity to sell the trading stock to customers, the company owns the stock and all profits on its sale accrue to it. Such arrangements will satisfy the charity law requirements which inhibit charities trading directly for fund-raising purposes, as the profits and liabilities of the trade are legally those of the subsidiary trading company not the charity.
For tax purposes the profits of the trade will be treated as belonging to the subsidiary trading company and not to the charity. As a matter of charity law the charity should make a charge for the services and facilities which it provides to the subsidiary trading company. But if this charge goes significantly beyond the reimbursement of the charity's costs, any surplus may be taxable. Apart from tax questions, the legal relationships need to be carefully considered. We strongly recommend that trustees wishing to enter into such an arrangement should seek advice from their own professional advisers about all aspects of the arrangement. We recommend that they should also contact Charity Commission and the Inland Revenue at an early stage. Where such an arrangement is being proposed, we advise trustees to ask themselves whether it is in the best interests of the charity. For example, trustees may need to consider whether the charity is having to finance the trading subsidiary's activity in a hidden or indirect way.
- Establishing a Subsidiary Trading Company
Where a charity wishes to benefit substantially from permanent trading for the purpose of fund-raising, trustees should consider creating a subsidiary trading company. This avoids the risk of committing a breach of trust, and the profits of the trade may be passed to the charity in a tax-efficient way under the Gift Aid scheme (which includes payments made under deeds of covenant). Such a trading company may be wholly owned by one charity, or may be owned jointly by a number of charities. Clearly, in the second case consideration should be given as to how the profits of the company are to be divided between the participating charities.
Three questions which the trustees will need to address are:
Whether the charity's investment powers permit the making of an investment in a subsidiary trading company. Whether an investment of this sort in a trading venture is too speculative for a charity (i.e. is the proposed company likely to be successful, and have appropriate business plans and financial forecasts been prepared and considered). Whether investment in a subsidiary trading company is in line with the charity's current investment policy. The authorised share capital of such companies is usually small, perhaps £ 100, of which only 2 shares may be issued. The charity can freely make nominal subscription of share capital in the trading subsidiary. However, where substantial investment by the charity in the subsidiary is required - normally in the form of loan capital, - such an investment must be: within the investment powers of the charity; and a commercially sound proposition.
As a subsidiary trading company is formed as a method of raising funds for the charity, except by way of investment, funds should flow in one direction only: from the subsidiary trading company to the charity. We recommend that a fixed period should be specified for the payment of any funds owing to the charity by the company (perhaps 30 days from the date when payment falls due).
- Problems That Can Arise When Separation is Considered
The establishment of a subsidiary trading company may solve some of the problems facing a charity which either wishes to, or already undertakes, trading activities. However, there are some other points which the trustees might wish to consider first. Some of these factors are outlined below.
- Rate Relief
Non-domestic premises used by a charity for its purposes are entitled to 80% mandatory rate relief. The remaining 20% may be waived at the discretion of the rating authority. In order to qualify for relief a property must be occupied by a charity or, the trustees of a charity, and be occupied wholly or mainly for charitable purposes. "Charitable purposes" normally exclude fund-raising but include the sale of donated goods. Premises used partly by a charity for its purposes and partly by a non-charitable subsidiary trading company will qualify for relief only in respect of the part actually occupied by the charity.
Where the charity is acting as agent for the trading company the charity may claim that it is in occupation of the whole of the shop premises used for the sale of both donated and ordinary trading stock. In such a case, the charity would be occupying the shop partly for its (charitable) purposes and partly for another purpose (which would not by itself qualify for relief). This does not mean, however, that the relief is necessarily lost because it may be possible to satisfy the authority that the shop is occupied "mainly" for charitable purposes (for example if in a particular period the value of the sales of the donated goods exceeds the value of the sales of the ordinary trading stock). In such cases the trustees should contact the appropriate rating authority and if necessary their own legal advisers for further advice.
- Value Added Tax
In general, however, charities receive no special treatment in respect of VAT on their business activities, and registration is required if their taxable turnover exceeds the statutory limit. This can be found in the current edition of VAT Notice 700/1 (Should I be registered for VAT?). The VAT notices 701/1 (Charities) and 701/5 (Clubs and Associations) give further information and, may be obtained by phoning the HM Customs & Excise National advice Service on 0845 010 9000.
- Additional Cost Of Operating A Subsidiary Trading Company
Trustees will need to weigh up with their own legal and accounting advisers, where appropriate, whether they should hive off very small trading operations to a subsidiary trading company (thus incurring some administrative expense) or whether, if the activity is contained within the charity, it will benefit from the tax exemption for small trading.
- Trustees As Directors Of A Subsidiary Trading Company
People who are trustees of a charity often become directors of a subsidiary trading company owned by that charity. Clearly there may be some need for the trustees to be represented on the board of the subsidiary trading company. There are however difficulties if all the trustees become directors of the trading company, or if all the directors are trustees. An individual who is both a trustee of the charity and a director of a subsidiary trading company will have two different sets of responsibilities to fulfil even though the company was established as a means of raising funds for the charity. It can be difficult to balance these responsibilities.
We recommend that there should be at least one person who is a trustee of the charity and not a director of the trading company, and at least one person who is a director of the trading company and not a trustee of the charity. The people without dual interests can be expected to give suitable advice to their colleagues as to the proper course of action in a conflict of interest situation and this should reduce the risk that any transaction between the charity and the company being challenged or questioned. A charity trustee cannot be paid for his services as a director, or employee, of the subsidiary trading company (or, of course, as an employee or trustee of the charity) unless the governing document of the charity specifically provides for this.
- Powers Of Investment
If trustees intend to invest charity funds in a subsidiary trading company, they should first make sure that they have the legal power to do so. The majority of trustees, but not all, have such a power, either in their governing document or as a result of the Trustee Act 2000, which came into force on 1 February 2001. Where trustees do have power to invest in a subsidiary trading company they must, before exercising their power, have regard to the standard investment criteria. These require trustees to consider whether a proposed investment in a subsidiary trading company is of a type which it is suitable for the charity to make, and whether the proposed investment is a suitable investment of that type. Trustees must also consider the need for diversity across the charity’s investments as a whole. Trustees must normally also take professional investment advice. When making and reviewing investments trustees must exercise such care and skill as is reasonable in the circumstances.
As a first step, the financial viability of the subsidiary trading company needs to be assessed by the charity. Appropriate advice will need to be taken based on the business plan, cash flow forecasts, profit projections, risk analysis etc provided by the subsidiary trading company. The trustees must take all reasonable steps to minimise any loss to the charity should the venture fail, and must be particularly careful in situations where the subsidiary trading company is operating at a loss and requires new capital.
We suggest trustees pay particular attention to the length of time funds may be tied up in investments in subsidiary trading companies. Funds needed in the short to medium term may not be easily realised when invested in this way.
- What Form Should The Investment Take?
Normally, investment in a subsidiary trading company should take the form of secured loans by the charity on market terms. Charities should not ordinarily subscribe anything more than nominal sums for the issue of share capital by the subsidiary trading company (in order to satisfy the formal requirements of company law). The subscription of shares in the subsidiary trading company by the charity normally exposes the charity's investment to greater risk (because the repayment of share capital, in the event of the liquidation of the subsidiary trading company, has a lower priority than the repayment of loans).
- Secured Loans
Trustees should ensure that loans which they make are properly serviced by the subsidiary trading company. This means that interest payments should actually be made to the charity (and not simple be rolled up with the outstanding principal of the loan). The loans will need to appear in the charity's accounts. A programme for the repayment of capital should exist.
- Unsecured And Interest Free Loans
Charities should not normally make unsecured or interest free loans to subsidiary trading companies. Such loans are not compatible with the proper discharge of the duties and responsibilities of charity trustees. If the subsidiary trading company fails the trustees may find themselves personally liable for any losses to the charity's funds if they have acted in breach of trust.
- Equity Subscription
In certain circumstances structuring an investment in a subsidiary trading company in the form of a loan from the charity could have the effect of making the company insolvent, in which case it would not be able to trade. For example, the taxable profits of the trading subsidiary in a particular financial period may exceed its accounting profits. If, in order to maximise its tax relief, the subsidiary pays over the whole of the taxable profit to the charity, it may have to be financed by the charity to bridge a gap between the taxable and the accounting profit. A loan for this purpose could have the effect of making the subsidiary trading company insolvent, and the professional advisers of the charity may advise it to subscribe for equity capital in the company instead.
- Are There Any Tax Implications For Investing In A Subsidiary Trading Company?
Yes. There are special rules in Schedule 20 to the Income and Corporation Taxes Act 1988 which apply to investment of a charity's funds in a trading company. If these rules are not followed the charity will risk losing some or all of its tax exemptions. To qualify for relief, the charity must make an investment:
For charitable purposes only. For the benefit of the charity. Not for the avoidance of tax. Investments in subsidiary trading companies have to be specially justified to the Inland Revenue before they are treated as qualifying investments for tax purposes. Unless the charity is in a position to demonstrate clearly that:
A particular investment in a trading subsidiary is beneficial to the charity; and it is not connected with tax avoidance. It may well have difficulty in avoiding a restriction of its charity tax reliefs. The Inland Revenue leaflet IR 2001 gives further information on this.
- Continuing Funding By Charities
Difficulties can arise where, the subsidiary trading company, passes the whole of its profits to the charity (i.e. whole profit-shedding) under the Gift Aid scheme (which includes payments made under deeds of covenant) leaving it with no funds for internal investment. This can create cash flow difficulties. The charity often has to lend money to the subsidiary trading company to enable it to continue. So far as the charity is concerned such loans must be considered as investments but, as the subsidiary trading company has little or no substance (if it can retain no profits), the charity cannot always justify the investment under trust law.
We suggest some charities may prefer to accept the tax consequences of a measure of profit retention by the subsidiary trading company. This can enable the subsidiary trading company to function in a normal commercial way, and reduce or eliminate the need for the charity to invest (and risk) its own money in the subsidiary trading company. As with all other forms of investment, the arrangements for the transfer of profits should be reviewed periodically and charities should not restrict themselves to only one of the options: whole profit-shedding; or profit retention.
- Use Of The Charity's Land By The Subsidiary Trading Company
Such use should be covered by a formal lease or licence of the property concerned from the charity, to the subsidiary trading company. The subsidiary trading company should pay a rent or fee which is comparable to that which would be payable for letting the property on the open market. The granting of a lease will (and a licence may) constitute a disposition of the charity's land. Any such disposition will need to be authorised by the Commission because the trading company is a "connected person" in relation to the charity.
- The Tax Treatment Of Trading Profits
The profits of a charity's subsidiary trading company are, like the profits of any other trading company, taxable. However, gifts by the company to the charity out of the profits can, if properly structured, effectively avoid any tax liability. Information on how to achieve this is contained in the Inland Revenue leaflet IR 2001
- Reviewing The Relationship Between The Charity & The Subsidiary Trading Company
The trustees should as a matter of good practice review regularly the relationship between the charity and the subsidiary trading company. The purpose of establishing such a company is to raise funds for the charity, and its effectiveness in doing this should be monitored. Any investments which the charity has made in its subsidiary trading company should also be reviewed regularly.
If the trading company is running at a loss for any significant amount of time and without any special short-term factors in play, then the trustees should consider seriously the trading company's viability. In such a case the primary duty of the trustees is to minimise any losses suffered by the charity regardless as to any feelings of moral obligation the trustees may feel to the trading company or its directors. If the trustees sink further funds into supporting an ailing subsidiary at a time when it was reasonably clear that the failure of the company was likely or inevitable, then this could constitute a breach of trust on the part of the trustees putting them at personal risk to make good any losses to the charity. Trustees facing these circumstances should take advice from their professional advisers as to the course of action which they should follow. Summary of points to consider when establishing & funding a subsidiary trading company:
The financial structures of the charity and the subsidiary trading company ought to be kept separate. The separate identities of the charity and the subsidiary trading company should be made clear in all publicity material and, in dealings with suppliers. The names of the charity and the subsidiary trading company should be distinguished from each other to prevent confusion between the activities of the two organisations. The establishment of a trading subsidiary, where the directors of that company are the same people as the trustees of the charity, cannot be used as a means of paying the charity’s trustees "by the back door". The charity must not settle the debts of the subsidiary trading company. The charity should not feel any moral obligation to fund the subsidiary trading company. Any financial support the charity can give to the subsidiary trading company including non-cash commitments (e.g. staff, office space and equipment) should be carefully assessed. The charity buying stock and donating it to the subsidiary trading company should be avoided. Plan for the subsidiary trading company to be financially viable as soon as possible. Normally, this will be within its first 5 years of operation. The need to obtain the Commissions authority to any proposal for a lease of property by a charity to a subsidiary trading company. To ensure that investments in a subsidiary trading company are qualifying investments for tax purposes.
In addition to the above, the trustees must be aware of what rights ownership of shares in the subsidiary trading company will give to the charity (or themselves). Examples of such rights are: voting powers. Appointment of directors, remuneration and dividends.
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