Company limited by guarantee - non-profit organisation

Company limited by guarantee - non-profit...

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I have been approached by a client who is forming a company limited by guarantee.  The main difference between a company limited by guarantee and a company limited by shares, as I understand it, is that the shareholders cannot take out surplus funds in terms of a dividend.  In terms of submitting accounts to Companies House, and HMRC requirements, is there anything specific I should watch out for?  Also, do entities that are not for profit HAVE to have this structure, or could they be limited by shares?

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Euan's picture
By Euan MacLennan
10th Feb 2012 13:36

Misunderstanding

If the directors were personally liable, it wouldn't be a limited liability company.

The only difference between share companies and guarantee companies is the method of funding the capital.  Either you become a member of the company by subscribing money for shares or you give a guarantee to pay in (say) £10 in the event of the company's insolvent liquidation.  They are identical in terms of directors' duties, accounting obligations, etc.

Many guarantee companies are set up in their Articles as not-for-profit companies, but otherwise, there is also no ban on guarantee companies distributing profits to their members.

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Jennifer Adams
By Jennifer Adams
10th Feb 2012 17:42

Check out my article on this subject

I wrote an article entitled 'Companies Limited by Guarantee: get the details right'; last year - 23.08.2011.

You might find it useful.

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