# What type of Management Company?



## MisterB (15 Oct 2012)

Hi, I'm part of a management company for 6 houses.  It was set up as a company limited by guarantee, I think.  That seems to mean that it needs audited accounts every year.  This has been very difficult to achieve as no accountant wants the work for such a small company. One explained that it has the same liabilities for him as a large company but he can only charge a few hundred Euros....not worth his while.

So, now we are told that the management company could have been one with Shares and that this would not require fully audited accounts.

Changing over will be difficult, I'm sure.  But it may well be worthwhile in the long run.  Any advice?


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## STEINER (15 Oct 2012)

hi,

surely the number of financial transactions each year for this mgmt co are quite small, requiring few accountant or auditor hours.  Regardless whether the accountant or auditor charges for 3 hours or 30 hours it still should be worthwhile income for him/her.  I don't understand one of them saying not worth his while.


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## MisterB (15 Oct 2012)

STEINER said:


> hi,
> 
> surely the number of financial transactions each year for this mgmt co are quite small, requiring few accountant or auditor hours. Regardless whether the accountant or auditor charges for 3 hours or 30 hours it still should be worthwhile income for him/her. I don't understand one of them saying not worth his while.


 
Hi Steiner,
It appears that the 'fully audited accounts' required by one type of company has more onorous liabilities for the accountant, leaving them open to 'audit' themselves. I've tried more than one accountant and get the same outcome.


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## MisterB (17 Oct 2012)

I'd be grateful if anyone could explain the differences and merits in using different types of company to operate as a management company for property with shared facilities and bills? ie.

A. Company limited by shares 
B. Company limited by guarantee


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## Joe_90 (2 Nov 2012)

The issue is that because a company limited by guarantee can't claim the audit exemption it is now treated the same as a company with a turnover of more than €8.8m or assets of more than €4.4m.  The file is subject to monitoring from the auditors institute which means that there is a substantial amount of work that goes into the planning and performance of the audit.

It would take about 1-2 hours to produce a set of accounts but may take up to 40 to complete a full audit file.  

A company limited by guarantee is set up by 7 people none of whom own the company.  They are trustees for the assets of the company. You will find the most non of profits are CLBG cos.  

When a lot of these mgt cos were set up the solicitors did not give due consideration to the audit requirement. 

A company limited by shares has shareholders who own a percentage of the assets of the company.  It's a private company and can avail of the audit exemption.


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## DB74 (2 Nov 2012)

I don't think it's as simple as shares=non-audit. The Act states that not-for-profit companies may not avail of the audit exemption and a management company would (IMO) fall under that category


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## DB74 (2 Nov 2012)

Having said that, I don't know how you could prove that a company is not trading for a profit

How do you define "not-for-profit" anyway?


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## Joe_90 (3 Nov 2012)

Db74, You are correct to claim the audit exemption a company must be covered By the Companies (Amendment) Act 1986.  The Act does not apply to S2(1) (a) a company not trading for the acquisition of gain by the members.

A non for profit will have clauses in its memo and arts specifically dealing with the objectives, ongoing reward of members ie dividends, division of assets on winding up.  It will state that dividends are not to be paid to members and that the assets are to be passed to a similar organisation on winding up and not to the members.  The members get nothing from their interest in the company.

Look at this section in terms of a property management company.  The members pool their resources to manage the insurance, common areas maintenance, refuse collection ect.  If the members went as individuals to obtain services on their own, I imagine that the total costs would end up being more.  Can this be considered to be "the gain of members" I would argue that it is for the benefit of members and members alone. Then consider the term trading.  Is the collection of service charges and the engagement of service providers considered to be economic activity ie trading again I would argue that it is.  

But it is a matter of interpretation and other may take a different view of a company ltd by shares and the operation of a mgt co.

I am not a legal expert but take the view that if say Concern was a company ltd by shares it clearly would not qualify for the audit exemption as the company is not set up for the gain of members it has a much wider remit.  The members with the directors are effectively the custodians of the assets on behalf of the community being assisted not the members.


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