Limited by guarantee

What is a company limited by guarantee in Zimbabwe?

In Zimbabwe, a company limited by guarantee is a company without shareholders or shares. Typically used by non-profits and charities, this type of company is controlled by guarantors (members), who guarantee a nominal sum of money to the company in the event of its becoming insolvent or winding up. Profit is used to achieve the company’s objectives, rather than being paid to members.

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 in a Company Limited by Guarantee in Zimbabwe?

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 in Zimbabwe?

Registering a company limited by guarantee requires at least one guarantor and two directors and there is no upper limit unless the articles of association states otherwise. The same people can hold both positions, or you can appoint different people to the roles.

Can a guarantor 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. A limited by guarantee provides financial protection to people who run a charity, community project, or some other form of non-profit venture. By operating through a company, members have limited personal liability for the debts of the enterprise. Additionally, some funding bodies and charity regulators require charities and non-profits to be registered as a company.

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?

The requirements of registering a company limited by guarantee when you register with us are:

1. A unique company name (i.e., not identical or too similar to the name of another registered company)
2. Objectives of the company
3. Guarantors information i.e. names and addresses
4. Physical and postal address of the company
5. Company directors and secretary information i.e. name(s) national identity number, nationality and address

How do I register a Company Limited by Guarantee?

To set up a limited by guarantee company, you need to file your company documents with the Registrar of Companies to incorporate the Company. You can do this through us, using our tailor-made Limited by Guarantee package, which costs US$300.00.

As a licensed Deeds, Companies and Intellectual Properties (DCIP) consultant, our experienced team is on hand to provide help and advice throughout the registration process and beyond. Once approved, you will receive copies of your new company documents and you can begin trading at any point thereafter.

For more information on setting up a company, please see our support pages to discover the Steps to Registering a Company and Required Information to Form a Company, or contact our customer support team on 077 470 9378 .

Can I set up a company company limited by guarantee for a charity or non-profit?

A limited by guarantee company structure is commonly used for running charities and other non-profit bodies (e.g., community projects, social enterprises, clubs and societies) who need corporate status or whose organisers require limited liability protection. However, whilst a company limited by guarantee is a legal requirement for charitable companies, it is just one of many options for other types of non-profit enterprises.

Can I use a limited by guarantee company for a commercial (for-profit) business?

Limited by guarantee companies are not prohibited from distributing their profits to members, so it is possible to set up a limited by guarantee company for a commercial (‘for-profit’) business. However, if you want to keep company profits as personal income, it would be best to set up a limited by shares company, which is specifically designed for profit-making businesses.

Can limited by guarantee companies issue shares?

Limited by guarantee companies cannot issues shares and they do not have shareholders. This limits their ability to fundraise, because they cannot issue shares in exchange for investment capital, which is why companies limited by guarantee are more suited to non-profits and charities.