HMRC internal manual

VAT Groups

Eligibility for VAT group treatment: control conditions: definition of the expression 'membership of a company'

In most cases, membership of a company is conferred by the holding of at least one share. It is the share capital of a company which gives the share holders their voting rights. The holders of all classes of shares have equal voting rights unless restrictions are specifically imposed. Such restrictions, if there are any, will be laid down in the company’s memorandum or articles of association. However, voting rights are invariably attached to the ordinary shares or equities, each share normally giving the holder one vote at general meetings of the company.

It is important to note that private companies limited by guarantee have no shares. The members of such companies are the people who undertake to provide the guarantees and the voting rights are attached to the guarantees. The percentage of voting rights that an individual member of such a company holds may be proportionate to the extent of the guarantees provided by him or her. Typically such companies are set up for charitable or non-profit making purposes; in these cases each member normally has the same voting rights and guarantee level (e.g. £1 - meaning they are liable to contribute up to £1 to the company to help repay its debts if it becomes insolvent)

For example:

If a member of a private company limited by guarantee has provided fifty five percent of the guarantees, it is likely that he will hold a similar percentage of the voting rights. The details of the voting rights to guarantee ratio can be found in the Articles of Association.