Companies Limited by Guarantee - The Constitution

1. Memorandum of Association - the aims and powers

2. Articles of Association - the rules and procedures

A constitution has four elements:

• Name of Organisation
• Objects, Powers and Area of Benefit
• Procedures and rules for running the organisation
• Dissolution

This form of company is similar in some ways to a conventional company limited by shares. Its operations are governed by the Company Acts, and it has a Board of Directors.

However, instead of shareholders it has members, and instead of buying shares and receiving dividends they offer a guarantee - usually a nominal £1 - as the limit of their liability.

Since there is also generally a provision that assets of the company can only be passed to a similar company if it is wound up, there is no way to distribute profits for private gain.

Founders and supporters of the Company can be sure that any surpluses are either ploughed back into the company to meet its objectives, or distributed for charitable purposes.