A private limited company can be limited by shares or limited by guarantee. Shareholders are the beneficial owners of companies limited by shares. This type of company is usually set up with a view to making a profit to distribute to shareholders in relation to their shareholdings.
Guarantors, on the other hand, are the owners of companies limited by guarantee, who agree to pay a sum of money (a guarantee) toward company debts if the business is unable to meet its financial obligations. This type of company is usually set up by non-profit organisations whose members do not take any of the profits for themselves.
Who can be a guarantor of a limited company?
A guarantor can be a person or a corporate body. Any person who wishes to be a company guarantor must be in a financial position to pay the amount of their guarantee. A guarantee is a legally binding document. 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
A guarantor is the owner of a limited company. A director is appointed by guarantors to manage the day-to-day activities and finances of a company. Guarantors have overall control of a company. They agree to:
- Form the company.
- They decide on the aims and objectives of the business.
- They can appoint and remove directors.
- They decide what powers to grant to the directors.
Guarantors will only make decisions about significant matters that go beyond the scope of the directors’ powers, rather than everyday matters and general management decisions.
All private companies limited by guarantee require a minimum of one guarantor and one director. Whilst these roles are legally distinct for the purpose of company formation, it is possible for just one person to hold both positions, provided he/she meets the legal requirements to be both a company director and guarantor. Alternatively, a company can be owned and managed by multiple guarantors and directors.
Register a company limited by guarantee today
Rapid Formations provides online registration with Companies House in just 3 working 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 address services in London and Glasgow, including a registered office service, a service address and a business address with mail forwarding.