The Community Amateur Sports Club (CASC) scheme offers huge tax benefits to amateur sport clubs, but gives no protection against the risks associated with running a club. The ideal way to meet CASC rules and protect club members and officers against risk is to convert the club into a limited liability company. In theory, you could form the club into a regular limited company. But the ideal solution is to register the club as a not-for-profit company with a Constitution specifically designed to meet CASC criteria.
- What is a Community Interest Company (CIC)?
- What is a Community Amateur Sports Club (CASC)?
- How much does it cost to register a CIC?
- Advantages and disadvantages or registering the Club as a CIC
- Can our Club register as a Charity?
- Different meanings of “Member”
- How are Directors appointed?
- How can ordinary Club Members influence decisions?
- How many Directors should the Club appoint?
- What protection does “limited liability” confer?
- What risks could Club Members face if the Club remains unincorporated?
Community Interest Companies (CIC) are a modern solution for people who want to run projects for the benefit of the Community but need to protect themselves from the risks that every business, club, charity and organisation faces. Like any other organisation, a club can make money or lose money, it can be successful or it can fail, it can be lucky or it can suffer accidents or be a victim of crime. A CIC is a form of Limited Liability Company that protects club members and the people who run the club, but is specifically registered as not-for-profit. To authenticate the not-for-profit status there is an official CIC Regulator, whose duty is to make sure that each CIC sticks to the rules and preserves the honourable status expected of Community Interest Companies.
A Community Amateur Sports club is a sports club that meets the “amateur” criteria set down by HMRC and has been registered to receive tax benefits in recognition of its community service status. This can bring up to 80% relief from Corporation Tax and allows the club to collect “Gift Aid” on donations (i.e. HMRC pays the club the equivalent of the tax the donor paid on donations made to the club). For more details read our CASC page.
Our price for registering a Community Interest Company (CIC) is £ plus VAT (= total cost at today’s VAT rate £). This includes all documentation and registration fees.
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Charity registration is open to sports clubs provided they meet the Charity Commission requirements. However, the costs and administration involved in being a registered charity are beyond the scope of most local clubs. The choice between CASC and Charity registration is mutually exclusive. A Charity is not allowed to register as a CASC.
Normal usage of the word “Member” under Company Law means the people who have a stake in the company. For companies formed to run a normal profit making business that means the shareholders. For not-for-profit companies that means the Trustees (also called the directors) who each have a small cash stake in the company (a “guarantee”). But clubs have many more members than could realistically serve as directors; so the word “member” clearly has a different meaning in this case. For that purpose, the Articles of Association we use for registering CICs for sports clubs make a distinction between “Members” and “Club Members”. Club Members are those people who pay the club subscription and participate in the club; and they have a collective vote to elect the people who will serve as directors of the company (“Members” in Company Law).
Directors are appointed on first formation of the company. Thereafter, directors can be appointed and resign at the discretion of the existing directors (the Board). But ordinary Club Members normally exert their influence by re-electing officers to serve as directors of the company on a 3 year rotation basis. That means that one third of the board offer themselves for re-election each year (or not, if they no longer wish to stand) and that further directors may be appointed from time to time subject to the rules of the club.
For practical reasons, every organisation needs to limit the number of people involved in detailed decision making. The democratic principle works best when a workable number of committee members handle normal decision making on behalf of the majority. Ordinary club members exert influence through the committee members, who are appointed on a majority vote of the members. In a company, the committee is the board of directors. In a company “limited by guarantee” the directors may also be called “trustees”.
For a board of directors who offer themselves for re-election on a three-year rotational basis, the practical starting number is three. The ultimate total number of directors should be small enough to allow for practical decision making but should reflect the size of the club and the amount of work that generates. For practical purposes when signing the initial documents we recommend that the number to be appointed when forming the company and registering it as a CASC should be three. Other directors can be appointed as necessary once the registration process is completed.
“Limited liability” means that the maximum amount that the directors of the company can lose if it runs into financial problems is the assets of the company plus the stake held by each “Member” (in this case meaning each Trustee or Director). It is normal for the directors of a CIC limited by guarantee to put up a cash guarantee of £10 each. That is their stake and that is the maximum they can lose as individuals. This does not protect a director from prosecution if he or she engages in fraudulent activity. But, criminal liability excepted, a director is secured from the risks of running the club.
If the club remains unincorporated (i.e. it does not register as a limited company) its status in law is an Association of Members. That means that each and every member shares in whatever risks the club takes. If the club runs into debt, its creditors can legally claim on the assets of individual club members. If the club were to be prosecuted or sued following an incident it could affect all the members. No distinction would be made in law between richer or poorer members. Liability would fall equally on each person who was a member of the club.