Private company limited by guarantee

In British and Irish company law, a private company limited by guarantee (LBG) is an alternative type of corporation used primarily for non-profit organisations 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.[1] It is often believed that such a company cannot distribute its profits to its members but (depending on the provisions of the articles) this is not actually true.[2] Converting a limited company to a Community Interest Company (CIC) removes this doubt entirely, as CICs feature an asset lock which prevents the extraction of profits. However, a company limited by guarantee that distributes its profits to members (nor CICs) would not be eligible for charitable status.

Until 1981, it was possible in the United Kingdom to form a company limited by guarantee with share capital.[3]

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.

Common uses of companies limited by guarantee include clubs, membership organisations, including students' unions, residential property management companies, sports associations (such as the PGA European Tour), workers' co-operatives, other social enterprises, non-governmental organizations (NGOs) and charities (such as Oxfam), and at least one political party (the UK Independence Party[4]). The railway infrastructure provider Network Rail, domain name registry Nominet UK, England and Wales Cricket Board and IXPs LINX (London Internet Exchange), and LONAP (London Access Point) are also companies limited by guarantee. Australia also has companies limited by guarantee, Cricket Australia being one example. One of the largest companies limited by guarantee is Bupa, the healthcare company, which has 10.7 million customers in more than 190 countries and which employs more than 52,000 people around the world.[5]

When incorporating multi-stakeholder organisations, this form is sometimes preferred over the industrial and provident society because company law allows multiple classes of member with separate voting constituencies.

Under section 5 of the Companies Act 2006, new companies cannot be formed as a company limited by guarantee with a share capital.

See also

References

  1. ↑ companylawclub.co.uk, Retrieved 23 March 2014
  2. ↑ Hannigan, B. (2003). Company Law. Oxford University Press. ISBN 978-0-406-91356-2.
  3. ↑ Companies House, England and Wales, guidance notes
  4. ↑ UK Independence Party: constitution and Companies House registry entry
  5. ↑ http://www.bupa.com/investor-relations/financial-information/financial-statements-and-presentations

External links

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