Jennifer Adams explains what Companies Limited by Guarantee are, how to prepare the accounts and what needs to be submitted to the authorities.
On reading AccountingWEB’s Any Answers it would appear that not many accountants have come across ‘Companies Limited by Guarantee’ (CLG) in their working life, explains Jennifer Adams.
When they do, they are unsure as to what they are, how to prepare the accounts and what needs to be submitted to the authorities. This article therefore tries to answer those queries in one.
What are Companies Limited by Guarantee?
Companies Limited by Guarantee are an alternative form of company entity to the usual one of share capital; its members being guarantors rather than shareholders.
Charities (eg Oxfam), sports associations (eg the England and Wales Cricket Board), Clubs, membership organisations, residential property management companies.
Why be a Company Limited by Guarantee?
- A legal entity in its own right, contracts are undertaken in the name of the company thereby protecting the liability of the individual members, who may only be involved voluntarily. Such contracts include the usual employment contracts, contracts for the purchase of goods as well as for the purchase of property
- CLG members are required to comply with the same legal rules and regulations as other limited companies
The difference between companies limited by shares v guarantors
- The main difference is that the liability of shareholders is limited to the amount unpaid on the shares; whereas the liability of guarantors is limited to the amount of any outstanding guarantee...
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- Removal of word ‘Limited’
- Company administration matters
- Distributing profits/commercial status
- Accounts and tax position
- Community Interest Companies (CIC)
‘Mutual’ trading companies
Jennifer Adams FCIS TEP ATT (Fellow) is Consulting Editor of AccountingWEB and is a professional business author specialising in corporate governance and taxation. She runs her own accounting and consultancy business with offices based in Surrey and Dorset.