Limited by Guarantee
A company limited by guarantee is an alternative type of company offering limited liability and is used by not-for-profit organisations, such as a club, sports association, society, workers’ co-operative, or membership organisation.
A company limited by guarantee usually does not distribute profit to its members and it has guarantors rather than shareholders.
Who would use this type of company
A company limited by guarantee is an appropriate business structure for those who wish to form a separate legal entity to raise money and promote the services and aims of the company. By forming a company for these purposes, the individual members (guarantors) can protect their personal finances and are only liable for the amount stated in their guarantees.
Key features and benefits
- There are no shares or shareholders in this type of company, instead it has guarantees and guarantors.
- It enjoys limited liability, which protects the personal finances of the guarantors. They are not responsible for the debts of the company, as they are only liable for the amount of their guarantees.
- It has ‘limited’ status and therefore adds transparency and credibility to the company.
The legal requirements – a not-for-profit company
- It must be registered with the Registrar of Companies in the UK (Companies House).
- At least one guarantor and one director is required to form this type of company, although both positions can be held by the same person.
- It must have a registered office, the details of which are made available to the public.
- A Memorandum of Association is required, and should include the company’s details, objects (aims), liability guarantees and any clause of non-profit distribution.
- Articles of Association are necessary, and they should stipulate how the company will be run and the regulations it must follow.
- Details of all guarantors and directors must be filed with Companies House and held in the public register.