Company Limited by Guarantee are basically private limited companies with limited liability for members. This kind of company does not have shareholders. Rather they have members who are guarantors instead of shareholders.
In this kind of company where the members work as guarantors one is required to pay a small sum in case the company winds up its operation. This amount can be really small; even around dollar 1. This amount is most likely mentioned in the Memorandum & Articles of Association of this company. One might wonder why to form a company limited by guarantee. There are many benefits in doing so. These kinds of companies are best for non-profit organisations which are keen to acquire the corporate status. This would ensure that the profits acquired by the company and not given to its members but are rather used for the benefit of the company. However this is no way means that the guarantee company cannot make profit; rather it ensures that it would definitely do so. In fact limited liability is imperative to protect its Board of Trustees who often might be involved on a voluntary basis.
Next one need to understand that there is a major variance between a company that is limited by guarantee and a company that is limited by shares. First and foremost a guarantee company does not have shares. In short the members are not owners of the company; rather they are decision makers. These members have no right to profits and at the same time they cannot claim assets of their company. In such a company directors are often called 'Trustees'. These people, who work for the company limited by guarantee, have the responsibility to create and implement policies for the company. Provided they have not done wrongful trading or performed in a fraudulent way their liability is limited.
The company limited by guarantee’s constitution is limited by guarantee of Memorandum & Articles of Association which sets out both the objectives and powers of the company. When it is the objective of the company to operate as a registered charity it is imperative for it to make its memorandum acceptable to the Charity Commission. The Memorandum clearly needs to display what one needs to pay in case the company is being wound up. The memorandum of the company limited by guarantee also specifies other functional intricacies of the company like when its meetings are likely to be held and procedures of appointment and retirement of members. If you are keen to form a company limited by guarantee but are unsure of what kind of memorandum to follow then the best option is to contact an expert to discuss your situation. It is essential that you select the right type as it may affect you petition for.
Remember it is a must that the memorandum defines the object of the company or what it has set out to do. So make sure that this part is clearly highlighted in this document. If you are keen to register your company limited by guarantee as a charity it is a must that all your objects are essentially charitable. At the same time the objects need to be unambiguous and clearly depict what the organisation intends to do.A company limited by guarantee enjoys many benefits. However it has certain technicalities related to its formation and so it would be best f you could take the help of an expert before you form it.
£45 Bookkeeping services
