What’s different about a company limited by guarantee?

Share this post

A business limited by guarantee does not have shareholders or share capital – except in a few legacy companies founded in 1981 or earlier. Alternatively, it has guarantees – popularly referred to as 'owners' – whose legal responsibility is limited to the amount of guarantee they agree to contribute to the company's debts.

This guarantee, which applies if the firm is unable to pay bills or is wound up, is most often nominal: the most common amount of guarantee is £ 1. Hence the responsibility of individual members is strictly limited, except in cases of fraud or negligence. Any person or corporate body can be a guarantor member of an undertaking limited by guarantee. The organisation must have at least one member, and there is no maximum limit unless otherwise specified in the company's articles of association.

Most membership associations known as guaranteed-limited companies have 1,000s of members, far more than the share-limited average corporation. The organisation would need a mechanism to admit new members unless membership is absolutely closed.

The guarantor members of a limited company exercise overall control over the company by guarantee, in much the same way as the shareholders, control a limited company by share.

Companies House shall be informed of the first representatives of a corporation limited by guarantee. Following that, however, there is no need to disclose any changes in membership or new members' identities to Companies House. That said, maintaining an up-to-date list of members, which should be available for review, remains a prerequisite for the organisation.

© 2020, RTRSupports Limited. All Rights Reserved.