Companies limited by guarantee
Limited by guarantee companies are an alternative type of business structure that are normally used by non-profit organisations. They don’t have share capital or shareholders. Instead, they are owned by one or more guarantors, each of whom guarantees a fixed sum of money to the business in the event of insolvency.
Typically, guarantors do not take any profit from the business. All surplus income is put back into the company to achieve its non-profit objectives.
Overview of a limited by guarantee company
- Ideal for non-profit organisations like charities, sports associations, social clubs, co-operatives and membership organisations. Can also be used by commercial businesses but a limited by shares structure is better.
- Must have at least one director (manager).
- Must have at least one guarantor (owner).
- Director and guarantor can be the same person.
- No limit to the number of directors and guarantors the company has.
- No shares or shareholders in this type of company structure.
- Must have a registered office address in the country of incorporation.
- Owners ‘guarantee’ a fixed amount of money to the company. It must be paid if the business can’t pay its debts.
- Guarantors are protected by limited liability. The sum they guarantee is the limit of their liability.
Limited by guarantee companies are set up in exactly the same way those which are limited by shares. You can use the services of an online company formation agent to register a ready-to-trade company in just 3 hours. You can also use Companies House’ Web Incorporation or postal services but these methods of registration do take significantly longer and cost more.
To complete an online application to register a company limited by guarantee, the following information will be required:
- Company name.
- Minimum of one ‘natural’ director aged 16 or above.
- Minimum of one guarantor.
- Service address for each subscriber (guarantor).
- Details of all people with significant control (PSCs) of the company.
- Registered office address in the same country in which your firm is incorporated – England and Wales, Scotland or Northern Ireland.
- SIC code(s) to state the nature of the company’s business activities.
- Memorandum and articles of association.
- Statement of Guarantee.
- Statement of Compliance.
What is a Statement of Guarantee?
To register a company limited by guarantee, the subscribers (a.k.a guarantors) must complete a Statement of Guarantee during the company formation process. This is a statutory requirement under section 11 of the Companies Act 2006. The purpose of the Statement of Guarantee is to outline the circumstances under which the guarantors have to pay their guarantees.
Each subscriber named on the memorandum of association must agree to the following Statement of Guarantee:
I confirm that if the company is wound up while I am a member, or within one year after I cease to be a member, I will contribute to the assets of the company by such amount as may be required for:
- payment of debts and liabilities of the company contracted before I ceased to be a member;
- payment of costs, charges and expenses of winding up, and;
- adjustment of the rights of the contributors among ourselves, not exceeding the specified amount below.
The amount guaranteed by each subscriber will be outlined in the Statement of Compliance. This will set the limit of their financial liability. In most cases, a nominal value of £1 is agreed by each subscriber. This must be paid when requested by the company.
Each subscriber to the memorandum must sign the Statement of Compliance. This shows that they agree to the Statement of Guarantee and the guaranteed sum.
Our limited by guarantee company formation package
Rapid Formations provides a comprehensive online formation package for registering a company limited by guarantee in England and Wales, Scotland or Northern Ireland in just 3 hours. We provide a standard memorandum and articles of association with this package.
The entire application process is completed online. There is no need to sign any paperwork or send documents by post. As soon as Companies House approves your application, we will send you digital copies of your incorporation documents by email. You will also receive paper copies by post within a few days.
We also provide a range of company address services in London and Glasgow, including a prestigious Registered Office Address, a Service Address and a Business Address.