The limited by guarantee company structure is most often used by charities and non-profit organisations. Consequently, members do not usually receive a share of the company’s profits. Instead, surplus income is reinvested in the business for the purposes 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 benefit of their shareholders.
Who can be a guarantor of a limited company?
A guarantor can be an individual person or a corporate body (e.g. another company). 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 to pay a fixed sum of money in certain circumstances. 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 have ultimate control 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 if the company is unable to pay its debts and liabilities
- 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 one person (or multiple people) to hold both position at the same time.
Register a company limited by guarantee today
Rapid Formations provides online registration with Companies House in under 24 hours. Our limited by guarantee company formation package with Model articles of association is ideal for non-profit organisations like sports associations, cooperatives, social clubs, and membership organisations.
We also offer a range of professional company addresses in London and Glasgow, including a Registered Office Address, Service Address, and Business Address with mail forwarding.
