Companies Limited by Guarantee are commonly used for non-profit organisations that require a legal corporate status. This form of company is preferred by those who wish to create an organisation for charitable or professional purposes, while simultaneously benefiting from limited liability and a separate legal entity.
Under the Companies Act 2014 a company limited by guarantee can be incorporated with as little as one member and no maximum number of members, although the exact number of members must be confirmed in the Company constitution. A Company Limited by Guarantee must appoint a minimum of two directors however there is no maximum number.
Companies Limited by Guarantee do not have a share capital and there is no requirement for the members of the company to provide funds to the organisation. A possible disadvantage in forming a company such as this, particularly in relation to charitable causes, is the costs associated with maintaining compliance with company law regulations. These costs should be considered before incorporating a Company Limited by Guarantee.
Members involved in companies such as these are largely protected from liability should the company be wound up in the future. A Company Limited by Guarantee remains as a separate legal entity from its members, this allows for property to be bought and sold in the company name. In the event of any court proceedings, the company can bring or defend itself against a legal case. In addition, due to its status as a separate legal entity, a Company Limited by Guarantee will continue to exist despite changes or the death of members.
Types of Organisations that may benefit from incorporation as a Company Limited by Guarantee:
- Educational Associations
- Sports Clubs
- Residents Associations
- Professional Societies
- Volunteer Groups
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