Private Company Limited by Guarantee

Private Company Limited by Guarantee FAQs

What is a private company limited by guarantee?

A company limited by guarantee is an alternative type of company used mainly for non-profit organisations.

What are the main features of a Company Limited by Guarantee?

• It does not usually have a share capital or shareholders but instead has members who act as guarantors.
• The guarantors give an undertaking to contribute a nominal amount (typically very small) in the event of the winding up of the company.
• It is often believed that it cannot distribute its profits to its members but (depending on the provisions of the articles) this is not actually true.
• A company limited by guarantee that distributes its profits to members would not be eligible for charitable status.
• A limited by guarantee must include the suffix "Limited" in its name, except in circumstances specifically excluded by law. One condition of this exclusion is that the company does not distribute profits.

What are the most common uses of guarantee companies?

• Clubs
• Membership organisations, including students' unions
• Sports associations
• Workers' co-operatives
• Other social enterprises
• Non-governmental organizations (NGOs)
• Charities (such as Oxfam)

Are companies limited by guarantee suitable for commercial enterprises?

No. Under section 5 of the Companies Act 2006, new companies cannot be formed as a company limited by guarantee with a share capital.

Can you form Section 60 companies?

Section 60 companies are companies without the word 'Limited' at the end of the company name. We cannot currently form these companies.