Is Company Limited by Guarantee right choice?

A group of employees contribute small amount every month for use when one of them is in need

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I have been approached by a group of employees, who all works for the same employer, to legalise their group so that it is separate legal entity and they can open bank account for the association. They set up a fund to which every member contribute regularly. Main purpose is to use money from the fund to support a member's family to meet funeral costs when he/she dies. Another objective is to contribute to relief efforts by recognised charities in providing help to countries suffering from the aftermath of natural calamities, war etc.

My thought is a company limited by guarantee may be suitable option, but point to clarify is, would the main purpose of providing benefit to a member's family is acceptable as charitable cause? 

It would be great if someone could help me with some suggestions/advise on this query. Thank you.

Replies (4)

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By David Ex
18th Jun 2024 10:17

Friendly society. Not that I’m suggesting I think the proposal is a good idea.

https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm40310

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By paul.benny
18th Jun 2024 11:07

Would I be right that this is a group of Muslim people? I think you may need a lawyer with relevant knowledge and experience to establish a constitution and rules first. The legal form will then follow.

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DougScott
By Dougscott
18th Jun 2024 12:30

They could just remain as an association or be a CIO which might avoid the complications of accounts governed by company law.

However consulting a specialist charity lawyer who you can provide with all the relevant information is a good move and they will help you decide on the best structure and registering with the Charity Commission, which may be required to avoid taxation.

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By jonharris999
19th Jun 2024 07:40

A CLG doesn't need to show anything like the same level of separation from personal interests as a charity. It can do anything legal that is in accordance with its objects. For most CLG's it is simply a simple and effective way of showing the world that no private individual or entity is making a profit, and that if there is a surplus, it is being used to provide additional activity in support of the objects (quickly, if the Directors are sensible enough to want to not pay CT but to provide more activity instead).

That said, like others here I rather feel that a CLG for this situation is a bit of a sledgehammer for a nut. Just have an unincorp assoc or a friendly soc.

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