What is Limited by Guarantee Company?

A limited by Guarantee company is also referred to as a 'not-for-profit' or 'charitable organization,' this applies to the fact that the parties concerned are not extracting the company's income as shareholders would in a limited company. Every benefit that the company generates is reused for the goodwill of the company. A Guarantee-limited company has a somewhat similar structure to a share-limited company, as it has directors named to oversee the day-to-day operation of the company. 

You may also appoint a company secretary if necessary. A guarantee-based corporation is much like a normal private company with small shareholdings. It is registered with Companies House, its accounts and an annual report must be registered annually and it has directors. One big difference is that it doesn't have any share capital or shareholders, just members who own it. 

Members are not shareholders

 There are no more shareholders of a company limited by guarantee, but for the company must have one or more members. The shareholders should be allowed to attend general meetings and vote, subject to any special clauses of the company's papers, and in most companies, this means they may appoint and dismiss the directors and have full power over the company.

A number of clubs are working on that basis. The members meet at the Annual General Meeting and elect a committee on their behalf to administer the club and adhere to the rules in the constitution of the club.

Unless the club is a business, the same rules will apply and will be laid down in the articles of the organization. In addition, the rules of company law relating to general meetings, resolutions, etc. in ordinary share companies refer to undertakings restricted by guarantee.

Much as there may be different classes of shareholders in a company limited by shares, there may be different classes of members within a guarantee company.

For example, there might be non-voting members or members who in some other way have restricted rights. For example, in a sports club, there might be junior members (those under a certain age) who are unable to vote or social members who pay a lower fee but are unable to use the sports facilities.

Director

As a private corporation, a company limited by guarantee must have at least one owner. Many of the businesses that guarantee it has plenty. Any other title can be assigned to the directors, such a committee, the board of directors, trustees, or governors. Whatever title they may be granted, they are, in fact, directors of that company if they are in day-to-day charge of the business they are.

Their powers may depend on the terms of the articles of that particular company, but they are usually granted very specific management powers. These rights are exercised on the directors individually, just as in a corporation limited by shares, as they sit as a board and pass motions for the management of the company.

No shareholdings

The fact that a limited company can not have a share capital limits its fund-raising ability precisely because it is unable to sell shares to those who support it and join it. For this reason, some ventures that are not fundamentally profit-motivated are known as share-limited companies.

Since there are no shareholders, it is not possible to own a limited partnership by contract in the manner in which its owners own a partnership with a share capital. This is owned by the owners of the guarantee firm, in the same way as shareholders own a shared firm, but they have no equity or other assets in the company that they can sell to another.

Not for benefit

A business limited by guarantee is not forbidden by the Companies Act or any other statute from transmitting its profits, although it is uncommon for limits to be imposed on income distribution in papers of the business.

These limits will typically apply both to profits when the company is operating and to the distribution of assets when the company is wound up (after paying creditors). Such limitations are strengthened in many cases, but by no means all, by a ban on the payment of wages or fees to the directors.

Permit of getting 'Limited' at the end of the name

If it is set up for such items, a not-for-profit corporation limited by guarantee may be exempted from having the term 'Limited' (or 'Ltd') at the end of its name; May include promoting commerce, literature, research, education, religion, charity, or any occupation.