Limited by guarantee company with flat management articles

A company set up under the Companies Act to operate for the benefit of residents (or tenants) — rather than run as a business for profit — is known as a flat management (or property management) company. It is also sometimes called a right to manage company, where residents can jointly run a property, such as a block of flats.

A flat management company can either be registered as a company limited by shares or a company limited by guarantee. Both of the company types offer limited liability for its members, subject to the company trading properly in line with insolvency legislation.

Should I choose limited by shares or limited by guarantee?

The main advantage of using a guarantee company is that no stamped (or stamp exempt) transfer is needed on changes of members (on sale of the related lease). The articles can simply provide for the membership of the outgoing lessee to terminate automatically when they cease to hold the lease. There is no need for any document to be signed by the member giving up their membership, and the new owner of the lease can simply be added to the membership in the place of the outgoing member.

The limited by shares company is normally designed for profit-making enterprises, but with correctly drafted articles, it can also work well for flat management companies. When a property changes hands, the leaseholders' related share should be transferred by a stock transfer form and recorded in the register of members. This can be done with just a token payment and no stamp duty is payable.

What else is required to set up a flat management company?

An arrangement must be made to deal with the running, repair and maintenance of the common parts of the building. The leaseholders of the flats act as members of the company — one or more will be appointed to act as directors and one will usually be the company secretary. They can also appoint an agent to carry out the day-to-day work or one may be specified in the leases with the freeholder.

Please note that residents who have agreed to become directors will have legal responsibilities. You must send details to Companies House about specific changes to the company when you make them, including adding or removing directors, and you must file the company’s annual accounts and a confirmation statement every year.

If you want detailed advice on this, including dealing with the landlord, please contact the Leasehold Advisory Service.

What’s included in this package?

• Formation of a new UK limited by guarantee company
• Flat management articles of association
• Super-fast online service (no signatures or paperwork required)
• Digital copies of all company documents (certificate of incorporation, memorandum and articles of association, and company register with first entries)
• Web authentication code
• Printed copies of official documents
• Pre-submission review

Optional free extras

• Free business startup and marketing guides
• Free consultation with an accountant
• Free digital marketing consultation
• Free online company manager account (web portal)
• Free customer support for the life of your company