A company limited by guarantee is an alternative type of incorporation used primarily for non-profit organizations that require corporate status. A guarantee company does not have a share capital, but has members who become guarantors instead of shareholders. The guarantors give an undertaking defined in the Articles to contribute a nominal amount towards the winding up of the company in the event of a shortfall upon cessation of business.
A guarantee company cannot distribute its profits to its members, and is therefore eligible to apply for charitable status if necessary. Common uses of guarantee companies include clubs, membership organizations, sports associations and charities.
Key Points
Non-profit corporate entity – assets or financial surplus cannot be distributed to members
A Guarantee Company is not owned by its members and cannot be transferred by its members for value – it has no share capital
Suitable for clubs, membership organizations, sports associations etc
Can apply for charitable status
Members have limited liability
Can be incorporated in most circumstances within days
Some input required from client to establish main objects if required or objects can be unrestricted
Ordering a Guarantee Company Charge for incorporating a company limited by guarantee is slightly higher than that for a standard company limited by shares due to the additional work required in ensuring the company’s articles of Association are correctly drafted. Orders can be placed online on our usual order pages as with any other company.
