Company Limited By Guarantee And Its Uses

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In British and Irish company law a company limited by guarantee LBG is an alternative type of corporation used primarily for nonprofit organizations that require legal personality. A company limited by guarantee 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. A company limited by guarantee can distribute its profits to its members if allowed to by its articles of association but then it would not be eligible for charitable status.

Limited companies can convert to a Community Interest Company CIC which feature an asset lock which prevents the extraction of profits like a private company limited by shares. A company 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.

Until 1981 it was possible in the United Kingdom to form a company limited by guarantee with share capital under Section 5 of the Companies Act 2006. New companies cannot be formed as a company limited by guarantee with a share capital. When incorporating multi stakeholder organizations this form is sometimes preferred over the industrial and Provident society because company law allows multiple classes of member with separate voting constituencies.

Common uses of companies limited by guarantee include clubs membership. Organizations including students unions, residential property management companies, sports associations such as the PGA European Tour, workers cooperatives, other social enterprises, non-governmental organizations NGOs and charities such as Oxfam and at least one political party the UK Independence Party. The railway infrastructure provider network rail, domain name registry nominate UK, England and Wales Cricket Board and IX P’s links, London internet exchange and L o na P London access point are also companies limited by guarantee.

Australia also has companies limited by guarantee, cricket Australia being one example. As for commercial enterprises, one of the largest companies limited by guarantee is Bupa the healthcare company which has 32 million customers in more than 190 countries and which employs more than 84 thousand people around the world. The Anglo Canadian law firm of gowling wlg formed in 2016 is structured as an English private company limited by guarantee in which the limited liability partnerships of gowling wlg Canada LLP and gowling wlg UK LLP are members and provide legal services. The structure is similar to the Swiss Ferren structure used by several other major international law firms.

Posted in Accounting.