Company Limited by Guarantee

A company limited by guarantee is an incorporated organisation.  This means that it has gone through the registration process that converts a new or existing business into a corporate body, making it a legal entity in its own right.

With a company that is limited by guarantee, the financial liability of members, including the Management Committee, is usually a nominal amount, should the company face financial difficulties (although it does not protect against fraud, negligence, etc).

A limited company may also be a charity, if its purposes and activities are approved by the Charity Commission for Northern Ireland.  More on charitable status.

Type of organisation:  Company limited by guarantee

Legal Status:  Incorporated

Governing Document:  Memorandum and articles of association

Common Examples:  Large voluntary organisation; community group that owns premises; organisation that employs staff

Key Features

As company limited by guarantee has:

• a legal identity
• the ability to own property in the company’s name
• the ability to enter into contracts (e.g. service delivery agreements, terms and conditions of a grant) in the company’s name
• additional legal requirements (e.g. company law)
• limited liability* (i.e. members only commit to pay a normal amount such as £1 if the company has outstanding debts to meet)

*  Limited liability does not protect the Management Committee or its members against: negligence; acting improperly or dishonestly; failing to comply with statutory requirements (such as employment law); failing to meet obligations under company law or trading without sufficient assets to cover debts, failing to meet terms of a contractual agreement (such as spending grant money on an activity outside that agreed with your funder); etc.

More on liability and legal structures.

When is it appropriate?

A company limited by guarantee is usually appropriate when some or all apply:

• the organisation is to be quite large
• it will have employees
• it will deliver charitable services under contractual agreements
• it will regularly enter into commercial contracts
• it will own property or leasehold land

More on the advantages and disadvantages of different legal structures.

For more information, please download the Company Law Help Sheet.