I’ve seen a lot of people asking why the Reform UK Party is registered as a limited company here in the UK and how this compares to the way other political parties are structured.
To save me having to comment on multiple social media posts I thought I’d put everything together here in one handy place.
So let’s take a look at how the mainstream parties operate, a real-world example of what that means, how the Reform Party UK Limited operates and what that means going forward now that they have 5 MPs.
How Do “Traditional Parties” Operate?
When I refer to “Traditional Parties” think of The Conservatives, Labour, The Liberal Democrats etc.
These mainstream parties have been operating for a while, The Conservatives since 1834, The Labour Party since 1900, The Liberal Democrats since 1988 and The Greens since 1990.
Despite the wildly differing length of times they have been running, they all operate in a similar manner: as an “unincorporated association”.
What Is An Unincorporated Association?
An unincorporated association is a group of people who are joined together for a common cause that operate on a non-profit basis and have a legally binding relationship between members and the organisation.
An unincorporated association could be a variety of entities:
- A local football club association that raises money for kit, league fees and match costs
- A residents association that wants to raise money to provide and maintain playground equipment
- An amateur dramatics society that want to put on plays and will be raising funds to cover the cost of scripts, props, costumes, the venue etc.
You can see what they all have in common: they are working towards a mutual goal and that any money raised will be used to directly benefit the cause at the heart of the organisation.
With all of the above examples, you would need a committee to help run the day-to-day organisation operations, make payments, do paperwork, apply for grants etc.
In an unincorporated association, the members choose the committee and these are usually elected at an Annual General Meeting (AGM). This gives individual members a say in the direction of the association, how it’s run and who runs it.
How Does An Unincorporated Association Work?
Depending on the complexity and history of the organisation, they may operate on an ad-hoc basis, making decisions as they come up, or they may run under a defined charter or constitution that provides a framework for how the association can operate.
If this sounds a bit confusing, let me give you a real-world example:
I used to be the secretary of a local sports club for a few years. The club was responsible for maintaining the facilities used by the Football and Cricket clubs as well as areas that could be rented out by members of the public.
Our members (players in the Football and Cricket clubs) had the ability to nominate people into committee positions: Chairman, Treasurer, Secretary, Fundraising Secretary etc.
We had a constitution that set out:
- The minimum number of positions that had to be filled to form a committee (it was 3: Chairman, Treasurer and Secretary)
- Whether these positions could be filled by the same person (they could not)
- How we could spend money (it had to go into certain equipment linked to the sports club)
- Minimum amounts to be kept in an emergency fund and what that emergency fund could be used for
- How often the committee had to meet and when an AGM had to be held
- Lots of other boring things about paperwork retention, trusts and who owned what etc.
If this sounds like a lot for a small sports club, it is but if you want to apply for grants from organisations like The F.A or English Cricket Board you quite often need to provide proof of a formal constitution to show that you are a legitimate organisation.
How Does This Relate To Political Parties?
Much like our sports club, a political party has a set constitution it must abide by which states things like
- How membership funds can be used
- How you set the membership price and how much it can be increased each year
- Who is eligible to be a member
- How often the committee meets
- Criteria for being eligible for a committee position
- Criteria for becoming party leader
I’m sure you get the picture.
Essentially a constitution means that the members know exactly what is and is not appropriate for the party to be doing, how often they can have a say in matters via meetings/conferences/AGMS and, perhaps most importantly, the criteria for electing or replacing a party leader.
Any money made through donations and membership fees must be used to directly benefit the association either in general running costs (salaries for admin staff, costs for rent, equipment etc.), given to candidates for printing campaign materials etc. or used for the general benefit of the organisation within rules set out in the constitution.
Members of a political party run as an unincorporated association also have the right to adopt a party manifesto – a set of pledges made by a party that they will run on during an election campaign.
If a party leader fails to give adequate reasons why they have not met manifesto pledges, that can trigger a vote of no confidence.
What Is A Limited Company?
In the UK, anyone can set up Private Limited Company with Companies House as long as the name is unique and you pay the filing fee (there’s also criteria around fraud but that’s outside the scope of this article).
A limited company separates the people operating the company from the company itself.
As an example, let’s say you operate as a plumber and are classed as a “sole trader” – in other word’s you’re self-employed and working for yourself. You get to keep all the money that the business made which is great. The problem is that if your business accrues debt you will be personally liable for that debt.
If the plumber sets themselves up as a limited company, any profits belong to the company and must be drawn as salary or dividends (this can get a bit complicated so I’m simplifying it here) and any debt accrued belongs to the company and not the individual. So if your limited company got into financial trouble, the banks couldn’t come after your house in order to repay the debt but if you’re a sole trader they could.
With a Limited Company, if someone leaves the company itself will still carry on operating unless it is wound down (also known as being dissolved).
In this way, a limited company is similar to an unincorporated association in that it’s the association responsible for any debt accrued rather than any one individual and if the association Chair, or committee leaves, the Association itself would still continue to operate.
Who Owns A Limited Company?
A limited company can be owned by an individual or multiple people.
If more that one person is involved, ownership is usually divided out in the form of shares based on how much money each owner has put in but shares can also be given without putting money in to the business – for example you want an expert in a certain field you might give them a chunk of shares as a sweetener to join the company.
A limited company can dish out shares to anyone it wants and there are a variety of different share types which are too complicated to go into here[1]Rapid Formations: A guide to limited company shares but what you need to know for the purposes of this article is that Nigel Farage controls 53% of Reform shares and Richard Tice owns 33% with the rest split between the CEO and Treasurer [2]Financial Times: Reform UK’s unusual structure with Nigel Farage in the middle.
Why Is The Reform UK Party A Limited Company?
As we’ve seen above, being a limited company insulates Nigel Farage, Richard Tice and other party members/directors from any debts accrued. It also separates the party’s financial dealings away from the Owners/Chair/Directors which provides more transparency when it comes to what money is being put into and taken out of the company.
So basically the limited company is keeping Reform Party UK Limited business separate from any other businesses Farage (and others) are involved in while ensuring he won’t personally be liable for any costs/penalties the company itself accrues.
The Real Reason It’s Reform Party UK LTD
Finances aside, what’s the real reason Reform is a limited company and not an unincorporated association?
To put it simply: Power.
With a political unincorporated association the leader of the party is chosen by the members.
More importantly, the leader of the party can be removed by the members through a vote of no confidence.
Reform Party UK Limited’s majority shareholder is Nigel Farage so he has ultimate say over how the party is run, what their policies are and who is placed in what position.
Because Farage classes Reform Party UK Limited as an “entrepreneurial political start-up” they are not bound by the same rules as a constitutionally led unincorporated association meaning members cannot vote him out as party leader, suggest polices or even vote on who is in positions such as Chair or Treasurer.
Depending on the source, Reform as somewhere between 65,000[3]TheTelegraph: Reform UK reaches 65,000 members – up nearly two thirds in a month and 115,000[4]Independent: Why Nigel Farage’s Reform is a company and not a party – and what that means members and Farage has admitted that the limited company “entrepreneurial political start-up” model may not be sustainable in the long run.
Farage also eschewed the term “manifesto” stating that people associated that word with “lies”[5]Guardian-Series: Farage launches election ‘contract’ promising to tackle ‘population explosion’, preferring to call his election pledges a “contract”. The members had no say in the “contract” and it was developed purely by Reform leadership.
It’s also worth noting that if Farage had got into power and failed to deliver on his “contract”, party members would be unable to hold him to account unlike the leader of an party run as an unincorporated association.
Comparison With Traditional Party Memberships
According to the House of Commons Library[6]House of Commons Library: Membership of political parties in Great Britain, this was the current state of the party membership as of 2022:
Labour:
Members: 432,000
Standard Membership Fee: £68.52 a year (£5.71/month)[7]The Labour Party Website Membership Page
Conservatives
Members: 172,000
Standard Membership Fee: £39 a year[8]The Conservative Party Website Membership Page
Liberal Democrats
Members: 74,000
Standard Membership Fee: £15 a year[9]The Liberal Democrats Website Membership Page
SNP
Members: 72,000
Standard Membership Fee: From £12 a year (£1/month)[10]The SNP Membership Page
Green Party
Members: 54,000
Standard Membership Fee: £60 per year (£5/month)[11]The Green Party Membership Page
Plaid Cymru
Members: 10,000
Standard Membership Fee: £60 per year (£5/month)[12]The Plaid Cymru Membership Page
Reform Party UK Limited
Members: 65,000 (approximate – waiting on official figures)
Standard Membership Fee: £25 per year (no monthly plan available)[13]The Reform Party UK Limited’s Membership Page
How Can Reform Get Away With This?
There’s nothing they’re really “getting away with” here.
There isn’t anything in UK law that defines how a political party has to be structured. They’re generally structured as unincorporated associations as that’s the way it’s always been done.
The only thing that someone needs to do in order to introduce a new political party in the UK is have them approved by the Electoral Commission – which Reform Party UK Limited did.
Is it illegal? No.
Is it the proper way to run a political party? Also no.
If Reform Party UK Limited wants to expand their membership and gain more seats they will have to move into a more mainstream political way of operating by giving their members a vote and introducing a manifesto that they will be accountable for.
Until then it’s going to be interesting to keep an eye on the company’s finances (their next set of accounts for the year ending December 2023 needs to be published by the 30th of September 2024[14]Companies House: Reform Party UK Limited, what their entries are on the MPs Register of Interests (which hasn’t been updated yet) and how they may restructure the party in the future.
What do you think?
Does operating as a limited company offer Reform Party UK Limited more flexibility to operate as a political entity than the traditional unincorporated association model?
Or do you think operating as a limited company doesn’t provide enough accountability of party leadership?
Let us know in the comments below.
Katy is the editor-in-chief of FlippingHeck.com a blog about Self-Improvement, Productivity and Small Business Tips. When she’s not working, she enjoys gaming, making music and Reviewing Things.
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