Limited By Guarantee Package

A company limited by guarantee is a type of limited company typically used by social enterprises, membership organisations, worker co-operatives, sports clubs, and community centres. Unlike a standard limited company, it has no shareholders or shares. Instead, it has guarantors who agree in advance to contribute a set amount towards company liabilities if the company is wound up. It is a separate legal entity with its own identity, and the personal finances of its guarantors are protected by the pre-agreed limit of liability set at the point of formation.

The key difference is the ownership structure. A company limited by shares has shareholders and shares, while a company limited by guarantee has members, known as guarantors, and a guaranteed amount instead of shares. Companies limited by guarantee are commonly used by membership, non-profit and charitable organisations. How any surplus is used depends on the company's Articles, purpose and any applicable legal restrictions.

A company limited by guarantee is suited to membership organisations, sports clubs, community groups and social enterprises, and it can also be used for a charitable company. If the organisation intends to become a registered charity, its charitable purposes, Articles, and separate charity-registration requirements must also be satisfied.

Yes. A company limited by guarantee can generate a surplus. Guarantors do not usually take profits from the company, and whether distributions are permitted depends on the company's Articles, purpose and any legal or regulatory restrictions that apply. Many non-profit organisations reinvest their surplus, while registered charities must use their income and assets for charitable purposes.

Limited liability means that a guarantor's personal financial exposure is capped at the amount they agreed to guarantee when joining the company. If the company becomes insolvent and cannot meet its debts, each guarantor is only required to contribute up to their pre-agreed guaranteed amount. Their personal assets beyond that amount are protected. This is similar in principle to the limited liability enjoyed by shareholders in a standard limited company, where a shareholder's liability is limited to the value of their shares.

The guaranteed amount is the sum each guarantor agrees to contribute towards the company's liabilities if it is wound up and cannot pay its debts. It is set at the point of formation and establishes the basis of each member's limited liability. In practice, the amount is typically very small, often as little as £1, because its primary purpose is to create the legal structure of limited liability rather than build a financial reserve. The appropriate amount depends on the nature and requirements of your specific organisation.

Members, also called guarantors, are the individuals or organisations who agree to contribute a set amount towards company debts if the company is wound up. Eligibility depends on the company's Articles of Association, which define who can become a member, how members are admitted, and how membership ends. The structure is flexible and can be tailored to suit the specific needs of the organisation. In some cases, other organisations, rather than individuals, can hold membership, depending on what the Articles permit.