What is the meaning of a company limited by guarantee?

Company limited by guarantee is also termed as Guarantee Company. In a simpler term, it’s a company without any shareholders but it is owned by members called guarantors who agrees to pay a nominal amount in the event of company’s being wound up. It’s a specific form used for non-profit organisation.

What are the benefits of a company limited by guarantee?

Benefits

• A company limited by guarantee is a distinct legal entity from its owners, and is responsible for its own debts.
• The personal finances of the company’s guarantors are protected.
• ‘Limited’ status builds trust and confidence amongst clients and investors.

What is a company limited by guarantee is most suitable for?

A company limited by guarantee is suitable for anyone who wants to set up and operate a social enterprise or a non-profit organization. On the other hand, limited by shares companies are not an appropriate model for not-for-profit charities or organizations.

What is a UK company limited by guarantee?

In British, Irish and Australian company law, a company limited by guarantee (CLG) is a type of corporation used primarily (but not exclusively) for non-profit organisations that require legal personality. One condition of this exclusion is that the company does not distribute profits.

What is a company limited by guarantee in Australia?

A company limited by guarantee is a common company structure used for not-for-profit and charitable organisations in Australia that reinvest any surplus (profit) towards the organisation’s purposes.

What is a company limited by guarantee in Kenya?

A company limited by guarantee is a distinct legal entity from its owners, and is responsible for its own debts. The personal finances of the company’s guarantors are protected. They will only be responsible for paying company debts up to the amount of their guarantees.

Does a company limited by guarantee pay tax?

A company limited by guarantee is just a limited company, but with the obvious difference to the usual company entity of there being no share capital. But this is not a blanket exemption, and the status of being limited by guarantee does not, of itself, allow a company to escape the liability to corporation tax.

Can directors of companies limited by guarantee be paid?

Company limited by guarantee that prohibits the payment of profits to members, requires any surplus assets on winding up to be given to charity and prohibits the payment of salaries or fees to its directors.

What are the disadvantages of a company limited by guarantee?

Disadvantages

• There will be costs and expenses to set the company up and administer it.
• There are ongoing filing requirements at Companies House, and someone will need to take responsibility for this.
• It can be difficult to keep track of members who may move to a new house or otherwise can’t be contacted.

Can a company limited by guarantee pay dividends?

Members cannot receive dividends, and will usually be involved due to their commitment to the company’s objectives, rather than to benefit financially. The balance sheet of a company limited by guarantee will be the same as that of a company limited by shares, apart from the fact that it will have no share capital.

Can a company limited by guarantee pay its directors?

Company limited by guarantee that prohibits the payment of profits to members, requires any surplus assets on winding up to be given to charity and prohibits the payment of salaries or fees to its directors. …

Can a company limited by guarantee have one member?

In a company limited by guarantee, there are no shareholders, but the company must have one or more members. Just as in a company limited by shares which may have different classes of shares, it is possible to have different classes of members in a guarantee company.