Proposals are being considered that could create Britain's first full student union company. The plans are raising fears that autonomy could suffer at the hands of a university parent corporation.

A report has recommended that the University of Central England students union becomes a company limited by guarantee and a full subsidiary of the company of the university.

Sabbatical officers at the Birmingham university would become directors of the new company, although the university parent company would retain a "golden share" allowing it powers to intervene, particularly in the event of any financial impropriety.

The report, produced by a three-strong panel chaired by Tom Caulcott, former Birmingham City Council chief executive, recommends that a separate trading subsidiary of the student union company is created to run campus bars, catering, shops and entertainments. These exist at other universities.

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The report says: "We recommend that a new students union should be formed, which would be a company limited by guarantee, with charitable status, and would be a subsidiary company of the university. The executive of the students' union would be the directors of the company and the president would additionally be chief executive and chairman."

It continues: "The university should have a reserve power under which it could intervene in the activities of the student union should those activities threaten the university with unacceptable developments, particularly in terms of financial consequences."

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Union president Stephen Harrison-Mirfield has welcomed much of the report, particularly as it advises - as a first step - that the union abandons its current executive-dominated structure in favour of a students representative council (SRC). This is something the union had been seeking anyway.

But Mr Harrison-Mirfield said that there was some concern at the apparent free hand the university would enjoy under the proposed system to determine what constituted "unacceptable developments" and therefore when it could intervene. "We are suspicious of the proposal that we should become a company. It raises issues of the union's autonomy. However, it is a skeleton report, leaving us with a lot of thinking to do to fill in the gaps."

The student union has produced a 12-page response to the report that stops short of rejecting the limited company idea outright, but recommends that "the student union should always work as an independent structure of the university".

Nick Gash, NUS general manager, said that while existing student union structures had flaws, it was difficult to see, at this stage, how a student organisation could also operate as a limited company.

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Mr Gash said: "The jury is out on this but we are starting from the perspective that if it ain't broke, don't fix it. We are not saying a knee-jerk 'no' but are talking to lawyers in an attempt to resolve the situation."

Peter Knight, vice chancellor of the UCE, said that the union was already, in effect, a subsidiary of the university since the union's articles of constitution had to be approved by the university board.

The report will go for consideration to the university board at the end of this month and it is expected that, if approved, the newly incorporated student union could be up and running by July.