Companies Limited by Guarantee - Advantages

The biggest benefit of incorporating a company limited by guarantee, is that those managing the company are not personally liable for any debts the organisation may incur. There are several other benefits.

Companies Limited by Guarantee are normally incorporated for non-profit making functions. The company has no share capital. A company limited by guarantee has members, rather than shareholders. The members of the company guarantee/undertake to contribute a predetermined sum to the liabilities of the company which becomes due in the event of the company being wound up, normally £1. The Memorandum normally includes a non-profit distribution clause and these companies are usually formed by clubs, professional, trade or research associations.

After incorporation the company can be registered with the Charity Commission for charitable purposes.

There are no shareholders in this type of company, and profits are reinvested in the company.

Advantages of Companies Limited by Guarantee:

• They have legal identities separate from its members
• Individual members are almost totally protected against liability
• They can buy and sell property in the name of the organisation
• They can take or defend legal proceedings in its own name
• Companies are generally democratic organisations - they have a membership
• The majority of voluntary organisations do not have to have the word limited in their title
• Registration with The Register of Companies is quick