A private corporation limited by guarantee is a type of business arrangement that is mostly used by non-profit organisations, societies, cooperatives, social corporations, community initiatives, affiliate organisations, and charities.
Set up to support financial, charitable, community-based, or other non-commercial purposes, usually guarantee businesses maintain any surplus income for reinvestment or use it to promote the business's non-profit goals rather than allocate profits to members. A corporation limited by guarantee has an identity that is legally independent of its members, unlike unincorporated organisations. This means properties and other assets can be kept in the name of the enterprise, the enterprise may enter into contracts and hire people. Limited liability also helps to shield the company members from personal responsibility for the company's debts.
In many respects, a private company limited by guarantee is just like an ordinary private company limited by shares.
Unlike other private micro-enterprise forms, a company limited by guarantee:
- Is incorporated and governed by the House of Companies and subject to the Companies Acts. If the company is charitable, then it will also be subject to charity law and will be regulated by the Charity Commission or the OSCR in Scotland.
While usually, they have to use the suffix 'Limited' or 'Ltd' in their titles, if the company is set up for other items and does not distribute its income to shareholders, an exception is possible from this provision.
- Includes both a Memorandum of Association and Papers. A company's Articles restricted by guarantee will also include a list of predetermined items that will dictate what the company must do. They would also include a particular provision limiting the transfer of certain income to shareholders, rather than allowing the reinvestment of surplus revenues to further the artifacts of the company.
- Must have an address for registered office based in the country of incorporation
- Should have its annual reports registered