Kennel Club – Should the Kennel Club become a Company Limited by Guarantee

What we know next, will change what happens next and we can’t know what we will know next.’  Karl Popper (1920-1997)

Karl Popper is generally regarded as one of the great philosophers of the 20th century and the quote above makes Donald Rumsfeld’s remark about Afghanistan much less amusing because most commentators did not think it through.  Rumsfeld said, ‘There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.’  He also remarked, ‘I would not say that the future is necessarily less predictable than the past. I think the past was not predictable when it started’.   These thoughts have been wandering through my mind (a slightly confused and bizarre landscape of odd nooks and crannies, impenetrable mole hills, climbable mountains and rooms full of elephants) as I contemplated the recent communication from Clarges Street about the changes proposed in the legal status of the Kennel Club, the possible move for the club and offices a couple of hundred yards down the road and the idea that the Kennel Club will act as some sort of charitable bank

I can only comment about what I know and believe, unlike some communicating through cyberspace who appear to be putting the Kennel Club’s proposals on the conspiracy theory shelf, along with who killed John Kennedy and that the moon landings were staged in a Hollywood movie studio.

Those who have followed my ramblings over the years will know that I have long held that the Kennel Club as an institution has been well past its sell by date for many years.  Fortunately, in recent years it has behaved much more as an independent regulatory body (in so far as it can) than it did when I first came into dogs over 40 years ago.  The membership retains its elements of special standing and of course, is inevitably subject to all the resentment that any organisation wielding power and demanding payment for its services from those who have no choice but to pay, is liable.  But as an organisation and institution, although I and others are continually frustrated by its slow response and inflexibility, it remains committed to its maxim of ‘promoting the general improvement of dogs’.

You will therefore not be surprised that I welcome the change in its legal status.  I am the director of four Companies Limited by Guarantee (two of which I created), I have been a been a senior manager in a major charity as well, and have over the years, served as a director of a number of limited companies.  This does not mean that I have all the answers but it does mean I have enough understanding to begin to pick apart the ‘knowns’, ‘unknowns’ and ‘unknown unknowns’ with slightly more confidence than those who have not had that experience.  Companies Limited by Guarantee are a halfway house between a Registered Charity and a Limited Company.  These three, plus Royal Charters and Public Companies, are the usual ways in which an organisation, as distinct from an individual or group of individuals, can have a legal status.  An individual has a legal status and a small commercial group can be defined as partners (these partnerships can have limited liability similar to that of a limited company) and larger groups can organise themselves as a private club.  Private clubs includes those involved in running village halls, golf, sport and recreation, privacy (Gentleman’s Clubs) or dogs.  Most canine societies for instance are private clubs.  They are generally subject to common law in terms of their finances, employment and, more recently, blanket legal requirements such as the ban on smoking but other than that, government and local authorities prefer them to get on with what they do as, generally, they have little impact on anyone other than their own members.

Occasionally private clubs become very influential, wealthy or powerful and it is at this point that the organisation must consider whether its structure is suitable for its responsibilities.  The Kennel Club fulfils all three of these perceptions to some extent so it is sensible, particularly as it’s wealth may shortly be significantly improved, so it is entirely reasonable that the matter should be considered and in my opinion a Company Limited by Guarantee which enables membership of the organisation to retain its independence but also protects its future income and accrued assets is the right way to go.

Despite the understandable protectionism that is part of the communal DNA of the membership, there is virtually nobody now who cannot become a member, so the move towards becoming a Company Limited by Guarantee is sensible.  To give you a little more detail, companies limited by guarantee are private limited companies where the liability of the members is limited.   For instance, as things stand, should the kennel club suffer disastrous financial meltdown (as actually happened in the 50s by the way) the members would be required to provide the money to pay its debts as was the case with the Lloyds market a few years ago.  This is what it means when anyone signs up to be a guarantor for a dog show.  If anything goes wrong that guarantor is jointly responsible for the debts along with the others and this, no doubt, is why some societies have themselves decided to become companies limited by guarantee.

A guarantee company does not have share capital, but has members who are guarantors instead of shareholders.  But unlike a private club in this case the guarantee is ‘limited’ and takes the form of an undertaking from its members to pay a nominal sum in the event of the company being wound up while they are a member or within one year of their ceasing to be a member. The amount of money that is guaranteed can be as little as £1 and will be stated within the constitution of the company, (the Memorandum & Articles of Association).

Guarantee companies are useful for non-profit organisations that require corporate status. This means that its profits are not distributed to its members but are retained to be used for the purposes of the guarantee company. This does not mean that the guarantee company cannot make a profit and where an organisation enters into contracts (as the Kennel Club does regularly) a limited liability protects its Board of Trustees and its members.  In short, a guarantee company provides a clear legal identity. This provides the ability for the company to own property in its own name and a democratic structure where its participants are required to adhere to the strict laws and regulations governing limited companies generally.

I hope all this technical stuff helps and I will be returning to the other items on the Kennel Club agenda in future weeks.  However in the meantime and going back to the ‘knowns’, ‘unknowns’ and ‘unknown unknowns’, you might remember the way in which financial services were released from regulation back in the 80s when building societies were allowed to become banks.  It was an opportunity grasped by city institutions and individuals to make fantastic amounts of  money in return for the few pounds given to the shareholders Almost all have failed and are now in deep trouble while most of those societies that stayed ‘mutual,’ are solid and successful.  We should bear this in mind in the next few months.

PS 20th April 2012: Since wrting the above piece I have been made aware of a number of changes to the Companies Act which have made me question the idea that the Kennel Club becoming a Company Limited by Guarantee would be ‘a good thing’.  There are a number of snags in becoming a body that has legal status.  The options (Limited Company, Company Limited by Guarantee, Charity, Partnership, Trust etc) are strictly limited and all impose conditions that might be a straitjacket rather than a comfortable and useful coat.  At the time of writing I have yet to make up my mind as to what would be best for the world of dogs.

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