Limited by guarantee

What is a company limited by guarantee?

A company limited by guarantee is a type of business structure, and is most commonly used by non-profit organisations such as sports clubs, societies and charities. The personal assets of its members (guarantors) are protected from being used for company debts, and they are liable only for the amount agreed by their guarantees.

What is the difference between a company limited by guarantee and private limited company?

The main difference between the two company types is that a limited by guarantee company lacks shareholders. Its members are instead those who agree to guarantee a sum of money in the event the company runs into financial difficulty. As such, members usually do not take profits from a company limited by guarantee – not for profit companies are therefore usually limited by guarantee, whilst profit-making companies are usually limited by shares.

What are guarantors?

Guarantors are individuals or other companies that provide a cash guarantee for a limited company in place of holding shares. The guaranteed sum is then used to pay off the company’s liabilities if it is ever wound up.

Who can be a guarantors?

Any individual or company can act as guarantor – there are no statutory restrictions limiting eligibility, however the company’s articles may make its own provisions as to who is acceptable.

How many people do I need to register a company limited by guarantee?

Company registration requires at least one guarantor and two directors.

Can a gurantor also be a director?

Yes, a person can be a gurantor and a director, providing they are aged 16 or over and not an ‘undischarged bankrupt’ or disqualified from holding a directorship role.

Who would register a company limited by guarantee?

Non-profit organisations such as clubs and charities, sports clubs and associations, schools, workers’ cooperatives and student unions usually benefit from this structure.

Are profits paid to the guarantors?

No, in most cases the guarantors are not entitled to receive any profits. Such restrictions will be explicitly stated in the articles of association. Any funds generated will be put back into the business and used for the advancement and promotion of the company’s aims. Any company that does distribute its profits to members will forfeit any right to charitable status.

What are the requirements for registering a company limited by guarantee?

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Mobile: 077 470 9378

Email: info@companies.co.zw

Copyright 2022 © Companies Made Easy