RTM Company Member Incorporation

[eagle2]

Please identify the legislation to support that statement.

[Milhouse]

The RTM Companies (Model Articles) (England) Regulations 2009. Clause 26.

This sets out clearly what entitlement to become a member looks like, and that the directors must register the member when they are satisfied of entitlement. Adding a condition of payment (and refusing to register a member unless this condition is met) would be a breach of the articles.

[eagle2]

I disagree, the Articles do not exclude other conditions from applying. A leaseholder cannot expect to become a member on better terms than the original members ie without paying a proportion of the start up costs.

[Milhouse]

The legislation is quite clear that the directors must register a member of the company when they are entitled to be a member, entitlement to be a member is being a qualifying leaseholder, not subject to any payment, apologies but it would be illegal to proceed the way you are suggesting.

[eagle2]

The model Articles state that the application to become a member is subject to the “provisions of the Articles …. and any rules made under those Articles”. So there is no reason why the directors cannot ask the leaseholder to pay a contribution towards the initial costs.

I cannot find any specific guidance on how to deal with those costs therefore alternative methods are permissible. It must follow that the method used should be reasonable and it cannot be considered reasonable for the initial members to pay all the costs whilst subsequent applicants become equal members having paid no contribution at all.

It is not unusual for the costs to be recovered in this manner. Alternatively, members may grant loans to the RTM Company, which may repay the loans from other income. I have also seen the costs recovered as service charges in year 1 but that could possibly be challenged by a leaseholder.