Limited company guarantors, also known as ‘members’, can be individuals or corporate bodies. Whether they become members during or after incorporation, a guarantor of a limited company is essentially an owner of the organisation. They have ultimate control of the company, they delegate powers to the company directors, and they commit to pay a fixed sum of money (a guarantee) to the company if it can’t meet its financial obligations. This financial ‘guarantee’ establishes the guarantor’s limited liability to the company.
responsible for usually set up by charities and nonprofits, whereas limited by shares companies are set up by commercial enterprises.
The limited by guarantee company structure is most often used by charities and non-profit organisations. Consequently, members do not receive any of the company’s surplus income. Instead, these ‘profits’ are reinvested in the company for the purpose of furthering its mission and activities. This is in contrast to the limited by shares company structure, which is typically used by commercial (for-profit) enterprises that aim to maximise profits for the personal benefit of shareholders.
Who can be a guarantor of a limited company?
A guarantor can be an individual (‘natural’) person or a corporate body. Anyone who wishes to be a guarantor of a limited company must be in a financial position to pay the amount of their guarantee.
A guarantee is a legal agreement. Therefore, guarantors must fulfil this financial obligation if and when required. The value of most guarantees is £1 per member.
Difference between a guarantor and director
Guarantors are the owners of companies limited by guarantee. Directors are appointed by guarantors to manage day-to-day activities and finances on their behalf. Generally, a guarantor of a limited company is responsible for:
- forming the company (if they become a member during the incorporation process
- deciding the aims and objectives of the business
- appointing and removing company directors
- determining directors’ powers (i.e., what they are authorised to do)
- paying the value of their guarantee upon the request of the company
- making decisions on significant matters that are beyond the scope of directors’ powers
All private companies limited by guarantee require a minimum of one guarantor and one director at all times. Whilst these roles are legally distinct, it is commonplace for the same person or people to hold both positions.
Register a company limited by guarantee today
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