Setting up Property Mgt Company Limited by Shares?

Hi,
I am currently the Director/Secretary of a small property management company managing 4 apartments including common areas (garden and parking). All 4 owners including myself are directors. The company is 'Limited by Guarantee and not having a Share Capital'.
We are therefore required to have an audit and file full accounts annually.

The company P&L only has a small number of transactions, 4 of us pay in for the insurance, pay the insurance company and and pay for cost of getting the audited accounts done. We don't make a profit or loss. There are no other costs during the year. Any work that needs doing we do ourselves and this has never been an issue.

The cost of getting audited accounts each year is about 600-700 euro, we see this as a waste of time consider how simple our accounts are.

I am looking for advice on closing down the company and and starting a new company structured differently so we do not have to file audited accounts. Can we set up a company Limited by Shares to carry out the tasks needed without requiring to file audited accounts? Would there be legal implications regarding the common areas if we were to do this?

Any advice welcomed and I will of course double-check advice given when setting up the company, but I want to ensure it is worthwhile pursuing this.

Thanks,
Larry


(BTW: I have browsed the 'Property Mgt Companies' section of AAM and believe that this post is more relevant in this section as it is more concern with company structure, but if you feel there is an other more appropriate section then fair enough)

Hi

The company requires an audit because it is not set up for the purpose of generating a gain for its members. The members just come together to pool their resources to manage the common areas that they own themselves. Any surplus is owed back to the members and any deficit is due to the company by the menbers. It also requires an audit because it is a company limited by guarantee.

By transfering to a company limited by shares you will eliminate the second reason but you will not eliminate the first reason. So an audit will still be required.

I believe by undertaking the change you will be incurring a serious amount of cost when the ultimate object of the exercise is basically unachievable.

Hope this helps

Capnhand

Most small companies are audit exempt.

if you set up a company limited by shares instead of a company limited by guarantee, the company will be audit exempt as long as you meet some easy to meet requirements.

The Companies Registration Office has more information [broken link removed] They are fairly helpful so you could call them to clarify any issues.

This bit is a little confusing

All Private Limited Companies (with the exception of a private limited company not trading for the acquisition of gain) are required to attach audited accounts to their annual returns under the terms of the Companies Amendment Act, 1986.

Click to expand...

I read this as meaning that a company not trading for gain needed an audit. In fact, I think it means that such a company does not have to file accounts with their annual return.

Hi Larry

Since posting that I was speaking to an accountant who told me he has quite a few apartment management companies which are all limited by guarantee.

The solicitors strongly recommend it because it's awkward transferring shares when you sell on your apartment. ( I wouldn't have thought it was, but that was the legal argument)

Apparently it's not very easy to transfer to a company limited by shares. The guarantee company has to sell whatever it owns - the freehold? - to the new company and there might be stamp duty and even CGT.

Then the apartment owners would have to take out new leases with the new company.

Sounds complicated.

Brendan Burgess said:

Most small companies are audit exempt.

if you set up a company limited by shares instead of a company limited by guarantee, the company will be audit exempt as long as you meet some easy to meet requirements.

Click to expand...

Hi Brendan

I do not believe this is correct.

Taken from Companies Amendment (No2) Act 1999 Section 32 states that the company must be one in which the 1986 act applies. Note that the CRO have just added the bit about private limited companies themselves. It is not actually word for word what is in the legislation.


Section 2 of the 1986 act set out the scope of the act

which excludes a company not trading for the acquisition of gain by the members. A management company is not trading for the acquisition or gain by the members which means it is basically a PLC and must file the full accounts and not abridged and cannot claim audit exemption. It dosent matter if it is a private company or a company limited by guarantee. It is the fact that it is outside the scope of the 1986 act altogether.

This is a very important point because if you file unaudited accounts when you should have filed audited accounts and you are found out by your institute or otherwise, you will have to report the directors (your client) to the ODCE for an indictable offence of company law.

If you are subject to institute inspection one of the areas they will check is whether you are have correctly identified the companies that require audit and those that do not.

Unfortunately I cannot post the urls to the actual legislation as the site does not allow me to at present but I am quite certain of this. Dont go down this route it wont work!!!!

Kind Regards

capnhand

Audit is required for all property management companies whether these are limited by shares or guarantee.