A guide to third sector trading - WCVA

It’s an idea, but is it business? A guide to third sector trading
1: Getting
started
2: First steps 3: Business
planning
4: Legal and
governance
5: Funding
and
resourcing
6: Financial
controls
7: Managing
growth
8: Management
and
governance
9: Social
enterprise
10: Sources
of support
What is a trading subsidiary?
Subsidiary companies:
• A subsidiary company is a private limited company with a
shareholding owned entirely by another company (the shares
are occasionally owned jointly by a group of companies when
they set up collaborative ventures).
• As the sole shareholder, the parent company (which is
sometimes called the holding company) can exercise full control
over a subsidiary through its board, including the appointment
and dismissal of the directors. There may be several subsidiaries
each undertaking different activities.
• Subsidiaries can be set up by charities, by non charitable
companies limited by guarantee, by Community Interest
Companies and by private companies limited by shares.
What are they for? There are two basic reasons for voluntary
organisations and charities setting up a trading subsidiary:
• when you have to – because your registered charity is not
allowed to trade in the way you want (see Section 4.3 for details
of the types of trading a charity can carry out without needing a
subsidiary company)
• when you choose to – because there is an advantage to
separating trading activities from the parent organisation or
from one another.
What is involved: Setting up a trading subsidiary is relatively
straightforward and painless. If you feel unsure, check out your
proposals with another trading organisation which has taken
the same route or run them past a legal advisor. Registration is a
simple process which you can manage in-house without the need
to pay professionals such as company incorporation businesses or
solicitors.
• It involves registering a company limited by shares at
Companies House. Model articles of association are available to
download from the Companies House web site.
• The application form requires details of directors (a minimum of
two), and the company secretary, the number of shareholders
(usually one) and the value of shares (a nominal figure, say
£100).
What should they be called?
• The key principle when naming a trading subsidiary is that
the separate identities of the parent charity and the trading
subsidiary are made clear, which means that the names should
be different to prevent any confusion between the two.
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