THE COCOO GROUP

archived.gpt: the cocoo group

-JUST file new confirmation statement TO Update the shareholder information, that includes a statement filed by me , as PSC, to reflect that the trust (not I personally) owns the shares.

You Need NOT to Change the PSC: you can stay as the PSC.  Only update the shareholder records, not the PSC register.  If more trustees join, update Companies House

since the charity is a trust and not a corporate entity, the correct approach to updating the Person with Significant Control (PSC) register will depend on whether you, as the sole trustee, still exercise control over COCOO Ltd. Here’s how it works:

 Does the Charity Trust Need to Be Listed as PSC?

No. The charity itself does not need to be listed as a PSC because trusts do not have legal personality—only individuals or legal entities (like companies) can be PSCs

Who Should Be the PSC Now?

✔️ You, as the sole trustee of the charity, should remain as the PSC of COCOO Ltd.
✔️ This is because you, personally, still control the shares on behalf of the trust, and you make all the decisions about the company.
✔️ If the charity had multiple trustees, then all trustees would likely need to be registered jointly as PSCs

 What Needs to Be Filed with Companies House?

Since you are still in control of COCOO Ltd, even though it is owned by the trust, you do not need to file a PSC07 (Cease being a PSC). Instead:

✅ Leave your PSC details as they are, because you still control the company as the sole trustee.
✅ Update the shareholder information in your next Confirmation Statement to reflect that the trust (not you personally) owns the shares.
✅ No need to file PSC03 (for a legal entity as PSC) because the charity is not a corporate body—it’s a trust, meaning it cannot be registered as a PSC

 What If More Trustees Are Appointed in the Future?

If you later appoint additional trustees, then all trustees collectively may become PSCs if they:

• Control more than 25% of shares or voting rights in COCOO Ltd.
• Have the power to appoint or remove a majority of the directors.
• Otherwise exercise significant influence or control over the company.

At that point, you would need to file PSC07 to remove yourself as the sole PSC and file PSC02 (to add multiple trustees as PSCs).

-COCOO Ltd may donate its taxable profits to COCOO Charity under the Gift Aid scheme, provided it does not affect the subsidiary’s solvency.

– group structure:

COCOO Ltd (a trading subsidiary) is fully or partially owned by COCOO Charity (a parent charitable entity), is generally a legitimate and common approach for charities to conduct commercial activities while protecting their charitable assets. However, there are several legal and strategic considerations to strengthen the structure and mitigate risks

1. Key Benefits of This Structure

✔ Limited Liability Protection:

• Since COCOO Ltd is a separate legal entity, any court costs orders or other liabilities incurred in litigation should not affect COCOO Charity or you personally.
• This is one of the primary benefits of incorporating a limited company as a trading arm.

✔ Regulatory Compliance:

• Many charities use trading subsidiaries to carry out non-charitable activities (such as litigation) without risking the charity’s tax-exempt status.
• As long as the trading subsidiary is operated properly and separately, this aligns with charity law principles.

✔ Risk Containment:

• If COCOO Ltd goes insolvent due to court costs orders, the charity (COCOO Charity) is not automatically liable, unless specific actions (e.g., improper funding, guarantees, mismanagement) compromise separation.

2. Potential Risks and How to Strengthen the Structure

A. Risk of “Piercing the Corporate Veil” (Holding COCOO Charity Liable)

🔹 Risk: Courts can sometimes “pierce the corporate veil” and hold the parent (COCOO Charity) liable if:

• COCOO Ltd is merely a “sham” or “alter ego” of COCOO Charity.
• There is no real separation (e.g., shared bank accounts, no independent decision-making).
• The subsidiary is used to circumvent legal responsibilities (i.e., deliberately avoiding costs orders).

🔹 Solution:
✅ Ensure Clear Legal and Financial Separation

• Maintain separate bank accounts for COCOO Ltd and COCOO Charity.
• Have a proper trading agreement between COCOO Ltd and COCOO Charity.
• Ensure that COCOO Ltd has its own directors and governance separate from the charity.
• Keep formal records of board meetings and decisions to demonstrate independent operation.

B. Directors’ and Trustees’ Responsibilities

🔹 Risk:

• If trustees of COCOO Charity also sit on the board of COCOO Ltd, they must ensure no conflicts of interest.
• If COCOO Ltd becomes insolvent, any personal guarantees given by trustees or directors could expose them personally.

🔹 Solution:
✅ Have a Clear Memorandum of Understanding (MoU) & Conflicts of Interest Policy

• Ensure COCOO Ltd follows its own corporate governance framework.
• Set up a conflicts of interest policy for trustees and directors.
• Appoint at least one independent director to COCOO Ltd’s board to reinforce independence.

C. Funding and Cash Flow Between COCOO Charity & COCOO Ltd

🔹 Risk:

• If COCOO Charity directly funds COCOO Ltd, there must be a proper agreement to avoid tax and regulatory issues.
• UK charity law restricts charities from subsidizing private trading subsidiaries unless it is a loan or investment with proper repayment terms.

🔹 Solution:
✅ Use Loans, Not Grants

• If COCOO Charity provides funding, structure it as a loan at arm’s length.
• Charge interest to show that the charity is not unlawfully subsidizing the subsidiary.

✅ Ring-fence Charity Assets

• The charity should avoid guaranteeing COCOO Ltd’s debts, as this would put charitable funds at risk.

✅ Use Gift Aid to Move Profits Up to COCOO Charity

• If COCOO Ltd makes a profit, it can gift aid its taxable profits to COCOO Charity, reducing corporation tax liability.

D. Court Costs and Insolvency Risk

🔹 Risk:

• If COCOO Ltd loses multiple cases and cannot pay court costs, it may be liquidated.
• If COCOO Ltd is seen as undercapitalized (i.e., it has no real financial backing), courts may hold the charity responsible.

🔹 Solution:
✅ Ensure COCOO Ltd Has Sufficient Assets to Cover Its Own Liabilities

• COCOO Ltd should have some assets or capital to cover court costs.
• Avoid transferring liabilities back to COCOO Charity.

✅ Use Litigation Insurance or After-the-Event (ATE) Insurance

• This can cover legal costs in case of a loss, reducing risk.

3. Alternative Ways to Improve the Structure

1️⃣ Consider a Holding Structure

• Instead of COCOO Charity directly owning COCOO Ltd, you could create an intermediate holding company (COCOO Holdings Ltd).
• This would provide an additional layer of protection, making it harder for claimants to reach COCOO Charity’s assets.

2️⃣ Use a “Hybrid” Structure with a Community Interest Company (CIC)

• A CIC is a limited company with a social purpose.
• Unlike charities, CICs have more freedom in trading activities.
• This might give COCOO Ltd more credibility in court, while still being separate from COCOO Charity.

3️⃣ Register COCOO Ltd in a Low-Liability Jurisdiction

• In some cases, setting up COCOO Ltd in a different jurisdiction (e.g., Ireland, the Isle of Man, or the Cayman Islands) can provide further liability protection.

Conclusion

Your proposed structure is fundamentally sound, but there are key areas that need to be strengthened to ensure:

• COCOO Charity is protected from legal and financial liabilities.
• COCOO Ltd is properly capitalized and structured to withstand legal risks.
• Regulatory compliance is met (charity law, tax rules, and corporate governance requirements).