Setting Up an RTM Company: Formation, Prescribed Articles and the Obligations That Outlive the Claim

Most of the decisions you would normally make when forming a company are made for you when the company is a right to manage company. The Commonhold and Leasehold Reform Act 2002 dictates the company type, regulations prescribe the articles word for word, and the statute even decides who is entitled to be a member, including, eventually, your freeholder. What the law leaves to you is everything after incorporation. Formation takes an afternoon and £100; running the company properly lasts decades.

What follows is the company itself: forming it, the prescribed articles as amended in 2025, membership and directors' duties, and the compliance and tax obligations that continue for as long as the company holds the right. Whether RTM is the right move for your block is a separate question, answered in our guide to the right to manage. The statutory notice procedure that takes a formed company through to the acquisition date has its own walkthrough in our RTM process and timeline page.

What an RTM company is required to be

Section 73 of the Commonhold and Leasehold Reform Act 2002 (s.73) specifies what an RTM company is, and it leaves no room for design choices:

• A private company limited by guarantee. Not a company limited by shares. There are no shareholders and no share capital; members instead guarantee a nominal sum, £1 under the prescribed articles, payable only on a winding up.
• An objects clause naming the premises. The articles must state that the company's object, or one of its objects, is the acquisition and exercise of the right to manage the specific premises.
• One company per building. A company cannot be an RTM company for premises if another company already is, for the same premises or for premises containing or contained in them (s.73(4)).
• Never a freeholder. If the freehold of the premises is ever transferred to the company, it stops being an RTM company at the moment the transfer is executed (s.73(5)).

The guarantee structure matters more than it first appears. Because there are no shares, nobody owns a stake that can be sold, inherited or charged, and no member can build up a controlling holding: membership follows the flats. The £1 guarantee is also the ceiling of a member's liability if the company is wound up.

One check before you incorporate anything. If your block already has a residents' management company named in the leases, that company is not an RTM company and cannot become one: it is a party to the leases with its own obligations, while the RTM company is a separate vehicle incorporated for the claim. Search the Companies House register against the building address first, because s.73(4) allows only one RTM company for the premises, and a dormant RTM company formed by a previous committee that ran out of steam will block yours until it is dealt with.

The prescribed articles: SI 2009/2767, amended in 2025

Ordinary companies choose their articles of association. RTM companies do not. The RTM Companies (Model Articles) (England) Regulations 2009 (SI 2009/2767) set out the articles in a schedule, and regulation 2 does two decisive things: the articles of an RTM company "shall take the form, and include the provisions, set out in the Schedule", and those provisions have effect for an RTM company whether or not the company adopts them. If you register bespoke articles that conflict with the prescribed ones, the prescribed provisions win. There is no negotiating with them, which at least removes an entire category of drafting cost and dispute.

The prescribed articles were amended with effect from 3 March 2025 by the RTM Companies (Model Articles) (England) (Amendment) Regulations 2025 (SI 2025/130), in force alongside the wider right to manage reforms commenced that day. The amendment inserts a definition of "lease" (a long lease within sections 76 and 77 of the 2002 Act) and substitutes article 33(3)(f) and inserts a new sub-paragraph (g) in the voting rules. Under the substituted article, a landlord member who holds no other voting entitlement gets one vote, and the votes exercisable by landlords are capped at one third of the votes exercisable by qualifying tenants. That cap is the practical answer to the question every participating leaseholder asks when they learn the freeholder is entitled to join the company: the landlord can be in the room and can vote, but landlord votes can never outweigh the members who claimed the right. File the current version, and cite the articles as SI 2009/2767 as amended by SI 2025/130.

Incorporation step by step, and what it costs

Incorporation is the easy part of the whole project. The steps:

1. Choose a name. "[Building name] RTM Company Limited" is the convention and makes the company's purpose obvious on the register, though the 2002 Act does not force the letters RTM into the name. Normal company-name rules apply: it cannot be the same as an existing registered name and cannot use sensitive words without permission.
2. Settle the registered office and registered email address. The registered office must be a real address where documents can be served; a director's flat in the building works, as does an accountant's or agent's address if nobody wants their home on the public register. Companies also need an appropriate registered email address, a requirement added in March 2024.
3. Appoint the first directors. Usually two or three of the leaseholders driving the claim. One director is the legal minimum, but a single-director RTM company concentrates all the risk and all the workload on one neighbour, which rarely survives contact with a contested claim.
4. List the first members. The subscribing members are the qualifying tenants participating at the outset. Membership will grow as the participation notices go out; by the time the claim notice is served, the members must include qualifying tenants of at least half the flats.
5. File the prescribed articles. The SI 2009/2767 schedule, as amended by SI 2025/130, not a standard formation-package template. Some online formation systems only offer standard limited-by-guarantee articles; a filing with the wrong articles is legally overridden by the prescribed ones, but cleaning up the register afterwards is avoidable work.
6. Incorporate and pay the fee. Digital incorporation costs £100, paper filing £124, per the Companies House fee schedule (verified August 2026).

On top of the £100, the realistic budget lines are a formation agent's fee if you would rather not file yourselves (RTM-specific packages cost more than a standard formation because of the prescribed articles), a registered office service if needed, and the £50 annual confirmation statement fee from year one onward.

Membership and directors: neighbours with statutory duties

Section 74 of the 2002 Act (s.74) fixes who is entitled to membership, in two phases. Before the right is acquired, the members are the qualifying tenants of flats in the premises. From the acquisition date, landlords under leases of the whole or any part of the premises are also entitled to join, and that includes your freeholder. Refusing the freeholder membership after acquisition is not an option the articles give you; the protection is the 2025 voting cap described above, not exclusion.

Directors of an RTM company are directors in the full Companies Act 2006 sense. The general duties in sections 171 to 177 apply exactly as they would in a trading company: act within the powers, promote the success of the company for the benefit of its members, exercise independent judgment, exercise reasonable care, skill and diligence, avoid conflicts of interest, and declare interests in proposed transactions. Three of those carry particular weight in a building where the directors are also the customers:

• Conflicts are structural. Every director is also a leaseholder who pays the service charge the company sets. That is inherent to the model and not a breach in itself, but decisions that favour the directors' own flats (their roof repaired first, their preferred contractor) are where the success duty and the conflicts rules start to bite.
• Care, skill and diligence has a floor. A volunteer director who leaves everything to a managing agent is still responsible for supervising that agent, and a director with actual expertise is judged with it: the retired surveyor on the board is held to a surveyor's standard.
• The company's counterparties are real. Contractor disputes, employment issues if the company employs a caretaker, health and safety for the common parts and the building insurance all sit with the company, and the directors answer for them.

The realistic exposure is smaller than that list sounds. Directors who act honestly, take advice where the board lacks expertise, document decisions and keep the filings current are well protected by the company's separate legal personality, and directors' and officers' cover is inexpensive. The exposures that crystallise are failures of administration rather than judgment: accounts not filed, the register not maintained, the company struck off. Which brings us to the calendar.

The compliance calendar that outlives the claim

Acquiring the right to manage takes months. Holding it takes filings, every year, forever. This is the part of the project nobody warns the volunteer directors about. RTM companies lose the right far more often to missed paperwork and a registrar's strike-off than to anything a tribunal decides. The annual calendar for a typical RTM company:

Obligation	Deadline	Fee	If missed
Annual accounts (dormant or micro-entity)	9 months after the financial year end (first accounts: 21 months after incorporation)	None	Automatic penalty: £150 up to 1 month late, £375 at 1 to 3 months, £750 at 3 to 6 months, £1,500 beyond 6 months; doubled if late two years running
Confirmation statement	At least once every 12 months, within 14 days of the end of the review period	£50 digital (£110 paper)	No civil penalty, but it is an offence and the classic trigger for the registrar to begin strike-off
Corporation tax return (only if HMRC requires one)	12 months after the end of the accounting period	None	HMRC late-filing penalties starting at £100
Registers and registered office	Ongoing: PSC register, register of members and directors, current registered office and email address	None	Offences for the company and officers; service of documents at a dead address goes unanswered

The penalty bands are the current Companies House figures for private companies, verified August 2026, charged automatically with no discretion for "we are only a residents' company". The doubling rule deserves emphasis for RTM boards, because the typical pattern is a burst of energy in the claim year followed by drift, and a £150 penalty in year three quietly becomes £300 in year four.

The strike-off consequence matters most. For a normal dormant company, being struck off for non-filing is an inconvenience. For an RTM company it is existential: during a claim, strike-off and insolvency events mean the claim is treated as withdrawn (section 87 of the 2002 Act), and after acquisition the right lives in the company, so dissolution hands management back to the freeholder until the company is restored to the register, a process that costs far more than a decade of confirmation statements. Two filings a year is the entire price of keeping the right.

A practical fix that works: put both filing dates in the managing agent's or accountant's diary, not just a director's. Boards change; the calendar should not depend on the one neighbour who remembers.

Service charge money is not company money

The service charges leaseholders pay are not the company's income. Contributions paid by tenants of two or more dwellings are held on a statutory trust under section 42 of the Landlord and Tenant Act 1987, and HMRC's own manual on flat management companies (TSEM5710) treats the fund as trust property held for the contributing leaseholders, taxed under trust rules, not company rules.

The practical consequences, in the order they should happen after the acquisition date:

• A separate bank account. Service charge funds sit in a designated trust or client account, not the company's own account. If a managing agent collects the charges, the agent holds them in a client account on the same trust basis. Mixing trust money with the company's own £50-a-year running costs is what makes an RTM company's accounts impossible to reconcile later.
• Two sets of accounts. The company's statutory accounts filed at Companies House report the company's own position, which for most RTM companies is almost nothing: no income, no assets beyond perhaps a float, often dormant. The service charge accounts, prepared for the leaseholders, report the trust fund: demands raised, money spent on the building, the reserve balance. Conflating the two produces statutory accounts that overstate the company and service charge statements nobody can reconcile.
• Trust income has its own tax rules. Interest earned on the service charge fund is trust income. It is charged at the basic rate rather than the special trust rates, and from 6 April 2024 trusts with income of up to £500 do not need to report or pay tax on it at all (TSEM5710). For most blocks, reserve fund interest sits under that de minimis in most years.
• Leaseholders keep their information rights. Leaseholders can require facilities to inspect the accounts, receipts and other documents behind the service charge under section 22 of the Landlord and Tenant Act 1985, and can ask the First-tier Tribunal under section 27A whether a charge is payable and reasonable. Both rights run against the RTM company once it manages the block. The gateway to a section 22 request is the section 21 summary of relevant costs, and there is a citation trap in section 21 worth knowing before anyone opens the Act at you: legislation.gov.uk displays a replacement section 21 substituted by the Housing and Regeneration Act 2008, which reads as a power to make regulations rather than a right to a summary, but that substitution was commenced only so that regulations could be made and none were ever made, so the original summary right is the provision in operation. The in-force section 22(1) confirms it, because it still cross-refers to "such a summary as is referred to in section 21(1)". The block that spent years demanding the freeholder's receipts is now the party that has to produce them, a role reversal explored from the challenging side in our service charge disputes guide.

This is also why the statutory accounts are usually dormant or near-dormant even when the block's finances are busy: a six-figure major works programme can pass entirely through the trust fund while the company's own filed accounts stay a few lines long. That is the two-account model working as designed, not concealment.

Corporation tax: why the answer is usually nil, and when it is not

An RTM company is within the charge to corporation tax like any other company, but a compliant one typically has little or no liability, for three stacked reasons:

1. Service charge money is trust money. As above, it is never the company's income in the first place, so it cannot be its taxable profit.
2. Member transactions are mutual. A body cannot make a taxable profit trading with its own members: the mutuality principle, set out in HMRC's Business Income Manual at BIM24000, which states plainly that a mutual trader is not liable to tax on profits arising from the mutual trade. Sums flowing between an RTM company and the leaseholder members it exists to serve sit inside that principle.
3. Dormancy can be agreed. A company with nothing taxable happening can be treated as dormant for corporation tax, in which case HMRC does not require annual returns. Note the two dormancy tests are separate: dormant for corporation tax (nothing chargeable) and dormant for Companies House accounts (no significant accounting transactions) are different questions with different consequences, and an RTM company can be one without the other.

What actually creates a corporation tax exposure is non-mutual income: money from outside the membership. The recurring examples are interest (above the trust's £500 de minimis, or any interest the company earns on its own money) and third-party income such as a telecoms mast licence, an advertising hoarding or fees charged to non-members. An RTM company that starts receiving that kind of income must tell HMRC it has become active within three months of the start of the accounting period in which it happens (Finance Act 2004 s.55), file returns and pay tax on the non-mutual slice; the mutual slice remains outside the charge.

One planning note for boards tempted to make the company "earn its keep": every pound of third-party income buys a compliance obligation for a company whose entire design goal is to have none. Weigh the mast licence against the accountancy fees and the loss of dormant status before signing.

A worked year one and year two: ten flats, one company

Bola chairs the steering group for ten leaseholders in a converted warehouse block who decide to take over management. Six flats participate initially, and all figures in this example are illustrative. The company side of their project looks like this:

• Month 1. Warehouse Court RTM Company Limited is incorporated online for £100, limited by guarantee, with the SI 2009/2767 articles as amended by SI 2025/130 attached. Bola and two neighbours are the first directors; the six participating leaseholders are the first members. The registered office is the accountant's address.
• Months 2 to 8. The claim runs its statutory course of notices through to the acquisition date. Two more leaseholders join as members along the way. The company itself does nothing financially: no income, no transactions beyond the incorporation fee the participants funded personally.
• Acquisition date. The company opens a designated trust account for service charge money and signs the managing agent's contract in its own name. What the outgoing landlord or agent has to hand over on that date, and in what order to ask for it, is the handover checklist in our RTM process guide.
• Year one filings. The confirmation statement is filed for £50. The first accounts are due 21 months after incorporation; because the company's only transaction was the incorporation fee and everything since has run through the s.42 trust account, the accountant files dormant company accounts. The freeholder exercises the s.74 right to join as a member; with eight qualifying-tenant members, the 2025 articles cap landlord votes at one third of the votes exercisable by qualifying tenants, so nothing shifts in practice.
• Year two. The service charge accounts for the trust fund show £28,000 demanded, £24,500 spent and a growing reserve, circulated to all ten leaseholders under their LTA 1985 information rights. The reserve fund earns £310 of interest (illustrative), under the £500 trust de minimis, so nothing is reported. The company's own statutory accounts remain dormant, the £50 confirmation statement is filed on time, and HMRC has agreed dormancy for corporation tax. Company-level running cost for the year: £50 plus the accountant's modest fee.

The claim was the dramatic year. Every year after it is the table above, repeated, and the block's real financial life happens in the trust fund, not the company.

Agents, insurance and the edge cases

The managing agent. Self-managing a block is a second job, so most RTM companies appoint a professional agent. The company is the contracting party, the agent reports to the board, and the agent's client account holds the trust money. What changes with RTM is who the agent answers to.

Insurance. Buildings insurance becomes the company's responsibility from the acquisition date, recoverable through the service charge in the usual way. Directors' and officers' cover for the volunteer board is a separate, inexpensive policy and a sensible standing item.

VAT. Rarely an issue. The company's own income is usually nil, so the £90,000 registration threshold is never approached, and service charge money held on trust is not the company's turnover. The edge cases arise where a company employs staff directly and recharges, or supplies services beyond the leases; a board in that territory should take advice first.

Not an investment vehicle, ever. An RTM company holds no property, makes no profit and cannot hold buy-to-lets, and under s.73(5) it stops being an RTM company the moment the freehold is conveyed to it. Owning the freehold means collective enfranchisement through a separate vehicle; holding rental property in a company means an ordinary limited company. The RTM company does one job.

The wider reform picture. The right to manage reforms that reshaped this area (the 50% non-residential limit, the costs regime, tribunal-first disputes, the amended articles) have been in force since 3 March 2025, but they are one commenced slice of a largely uncommenced Act. Our Leasehold and Freehold Reform Act 2024 in-force ledger tracks what is actually law today against what is still waiting.

Getting the company side right from the start

The RTM claim gets the attention, but the company is what the block lives with. Form it correctly (limited by guarantee, prescribed articles in their current 2025 form, £100), put the two filing dates in a diary that survives changes of director, open the trust account on day one and keep the two sets of accounts apart, and the company will cost £50 a year and no drama. Two filings a year, and the right the block fought for stays where it is. If your building is at the formation stage, or holds the right and has never had its accounts, dormancy and trust arrangements reviewed, an accountant who deals with flat management and RTM companies can put the structure on rails in a single sitting.