Companies limited by guarantee

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.

Registration requirements

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 working 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 working 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.

By Rachel Craig at Rapid Formations – Follow Rachel on Google +

6 Comments

  1. Hi
    We have recently switched from an unincorporated charitable institution to a company limited by guarantee and also to a registered charity.
    Is there a legal requirement to switch over bank accounts because they are assets even though the name is identical?
    Thanks

    • Dear Sir
      We would advise that you inform a bank about any corporate changes however you should read your bank’s Terms and Conditions or speak to your account manager to clarify bank’s procedures. Unfortunately we are not able to advise on such matters as different banks have different rules.
      Best regards,
      Rapid Formations Team

  2. Good Afternoon

    We are looking at setting up an Institute to represent a very specialist area of engineering. The structure we had in mind was a Scottish registered CLG (we have an address for the registered office). We envisage the CLG becoming a registered charity in Scotland (but not immediately). We also believe that there is a reasonable chance that we could ‘merge’ with another charity at a future date. For these reasons we believe that a SCIO is not the best option but rather a CLG then register as a charity (even at the expense of some extra administration).

    We are aware of the sensitivity of using “Institute” in the title (which is essential) and would ask – what information/support documentation would you require in this instance to set up the CLG with the word Institute?

    Can you also confirm the timescale required to complete the CLG with costs.

    Kind regards

    Bill

    • Hi Bill,

      Sounds like an exciting venture you are planning!

      To use the word ‘Institute’ in your company name, you will need to include a letter with your application that clearly explains why you believe your company/organistaion deserves to be classed as an institute. You will also need to include other documentation from relevant, independent/professional bodies in your field to support your case. Your application will be reviewed by the Secretary of State at Companies House, so we have no control over the outcome.

      The cost of our CLG formation package is £29.99 +VAT (see here: https://www.rapidformations.co.uk/compare-packages/). We can also provide you with a Scottish registered office, service address and business address if required.

      It should only take you about 5 – 10 minutes to complete your application form, if you have all of the required information to hand. Once it has been submitted to us, we will quickly review it for any obvious errors and then send it via secure software filing to Companies House. Ordinarily, it takes around 3 hours for applications to be processed and approved by Companies House, but it may take longer due to the sensitive company name – I would advice submitting your application as early as possible on a weekday morning.

      I hope this information has been helpful, but please do get back in touch if you want to ask anything else or need help during the company formation process.

      Best wishes and good luck,

      Rachel Craig

  3. Good afternoon,

    I am making enquirers about forming a social enterprise could you please provide a quote for the following including any yearly fees:

    *Company formation (limited by guarantee)
    *Registered office address
    *Directors address &
    *Business address.

    Kindest regards

    Bunmi

    • Hi Bunmi,

      Thank you for your message. The total cost for registering a limited by guarantee company with a registered office, one director’s service address and one business address is £206.99 + VAT. This is the price for using our London address. If you wish to use our Scottish address instead, the cost would be £181.99 + VAT.

      Here is a breakdown of these prices and the costs of renting the address services each year:

      1. Our limited by guarantee package is suitable for setting up a social enterprise and it costs £29.99 + VAT
      You can find out more about this package and what it includes here: https://www.rapidformations.co.uk/compare-packages/

      2. We have two registered office addresses – one in London, which is suitable for companies registered in England and Wales; and we have one in Glasgow, which is suitable for companies registered in Scotland. The London address costs £49.00 + VAT per year. The Glasgow address costs £39.00 + VAT per year. You can renew this address service every year for the same price.

      You can find our more about this address service here: https://www.rapidformations.co.uk/additional-services/london-registered-office/

      3. Our director’s service address facility is also available in London or Glasgow. Your service address does not have to be in the same country as your company, so you can use either location. The London address costs £29.00 + VAT per year. The Glasgow address costs £24.00 + VAT per year. You can renew your service address every year at the same price. https://www.rapidformations.co.uk/additional-services/service-address/

      4. Like the other two addresses, the we provide a business address service in London and Glasgow. You can use either one, or you can use both if you want to establish a presence in London and Scotland. The London address costs £99.00 + VAT per year. The Glasgow address costs £89.00 + VAT per year. You can renew the address service every year at the same price. https://www.rapidformations.co.uk/additional-services/business-address/

      If you have any more questions or need help setting your company, you can contact us on +44 (0)20 7871 9990. Alternatively, you can speak to one of our company registration specialists between the hours of 08:30-17:30 using our live chat service, which is located on the bottom right-hand side of our website.

      I hope this information has been helpful.

      Best wishes,

      Rachel Craig

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