Companies by Guarantee


A form of firm planned to guard members from liability, but which naturally does not distribute profits to its members and does not divide assets into shares.  Members of a guarantee company are obliged to pay a definite sum of money (a guarantee) if the company is wound up. This amount of money can vary by member according to the amount they have guaranteed to pay, but is typically very small for private guarantee companies and larger for public guarantee companies.


Limited by guarantee companies are often designed by non-profit organisations such as sports clubs, workers' co-operatives and membership organisations, whose possessors wish to have the use of limited financial liability.

A company limited by guarantee does not have any shares or shareholders, just like the more common limited by shares structure but is kept by guarantors who agree to pay a promised amount of money towards company liabilities.

Besides, there will commonly be no profits dispersed to the guarantors as they will in its place be re-invested to help endorse the non-profit objectives of the company. If any profits are circulated to the owners, then the corporation will forfeit its right to apply for a charitable status. These are mostly found in United Kingdom.

A company limited by being guarantee, a guarantee company may also be limited by share capital. If the enterprise has any funds residual from contributions from members, they have to be utilized according to the purpose the guarantee company was formed to undertake, such as funding a museum, and cannot be distributed to members.

Formation of Company by Guarantee

“A company limited by guarantee must have at least one director and one guarantor. A sole individual can assume both positions or there can be multiple directors or guarantors. All the information about them is available on public record.”

“The company must provide details about the registered office address and it should be a complete postal address where the company is situated in the country.”

“Standard Industrial Classification codes should be supplied. These codes inform that what your trading activities will be. The company can have up to four SIC codes.”

“Information about People with significant control should be provided. Usually, the people with significant control are the guarantors and directors of the company.”

“You must complete a Memorandum of Association and adopt Articles of Association during the company formation process. The Memorandum states the name of each owner (guarantor) and their agreement to set up the company and become members. The Articles outlines the rules and regulations the company has to follow. We provide a standard Memorandum and Articles which are suitable for setting up a limited by Guarantee Company.”

Memorandum of Association

  1. The name of the company with (guarantee) ltd.
  2. The province in which the registered office of the company is to be situated.
  3. The liability of the members is limited.

Article of Association

  1. When meetings will be held.
  2. The voting rights of the members, number of trustees and the power of the trustees.


  • A company limited by guarantee is a distinct legal entity from its owners, and is responsible for its own debts.
  • The personal finances of the company’s guarantors are protected. They will only be responsible for paying company debts up to the amount of their guarantees.
  • 'Limited' status builds trust and confidence amongst clients and investors - this type of professional credibility is valuable and can help a company achieve its objectives more effectively.


  • Limitation on trading unless in pursuit of objectives.
  • No profit as it is a non-profit organization.
  • High cost in setting up of the company.
  • Charities should not campaign politically.
  • Obtaining charitable status can take some time.

financial management

November 18, 2018