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Transferring Assets

Monday, Apr-22, 2024

Transferring Assets

James Towler

Following a series of instructions to transfer assets from members’ clubs to companies, Head of Corporate and Commercial James Towler takes a look at why this can be a good idea.

We have recently been advising on a number of transfers of assets from members’ clubs to companies limited by guarantee.

While this note is not intended to be advice, since every case is specific to its own facts, these transfers generally make sense for a number of reasons since after completion:

  • The club and its directors will have the protection of limited liability whereas before completion the members and Trustees (if applicable) are exposed to full liability to the extent of their own personal assets, if the assets of the club are insufficient to meet its liabilities. The liability of each member is typically limited to no more than £10 if the new company is unable to meet its liabilities;
  • The club will be able to borrow and enter into contracts in its own name, rather than in the personal names of a few members or Trustees. This will feel more comfortable for those individuals;
  • Real property will be transferred into and remain in the name of the new company at completion, without the need to file notice of change of the Trustees at the Land Registry upon them joining or retiring from the club;
  • This has the added benefit of not having to find and appoint new Trustees of real property when the current Trustees retire or die – new Trustees do not just grow on trees!

Following completion, the new company will have annual reporting obligations, such as filing accounts and a confirmation statement at Companies House, but these obligations are neither onerous nor costly and in most cases can be achieved with no or minimal external advice.

In most cases neither Capital Gains Tax nor Stamp Duty Land Tax will be payable at completion. Any accumulated capital gain on assets will be rolled over into the new company. No SDLT will be payable, provided no money is paid for the transfer of real property to the new company and the shares in the new company have no material value, which is generally the case with a members’ club incorporated as a company limited by guarantee.

Each case is different and tax advice should be taken before acting.

For further information, please contact James Towler or David Leuchars at McCormicks.

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