What is Company Limited By Guarantee (CLG)
What You Need to Know About Company Limited by Guarantee?
When a business entity operates as a ‘not-for-profit’ or charitable organisation, a company limited by guarantee, also known as CLG, is the best option to go for. A company limited by guarantee is owned by guarantors who undertake to pay an agreed amount of money towards the company’s liabilities. Some examples of the common types of organisations that form as a CLG include charities, property management companies, trade associations, educational or professional bodies, resident associations and sports clubs.
In contrast to a company limited by shares, a CLG does have not a share capital and therefore is not required to raise money for the purposes of return to its members. Instead, it is formed to carry out a specific purpose. Any money raised is invested back into the business for the promotion of the non-profit objectives of the business, while still offering the benefit of a separate legal entity and limited liability.
The name of the company ends with a suffix ‘Company Limited by Guarantee’ or ‘CLG’ unless they qualify for exemption to add this suffix. This is normally the case of the companies involved in promotion of purposes like education, religion, science, arts or commerce.
Lets Learn Why Should You Form a Company Limited By Guarantee?
- A company limited by guarantee offers the advantage of limited liability as in the case of a company limited by shares. This means that the entity has a legal identity separate from its guarantors, and the guarantors are not responsible for any liabilities in excess of the amount of guarantee they have agreed to provide;
- A CLG can buy and sell in the name of the organisation. Similarly, it can carry out legal proceedings in its own name;
- A CLG is the form of company preferred by a group of people joining hands for a shared purpose. So, if you wish to operate a business as a charity or non-profit venture and re-use all the profits to further the aims of the business, then a company by guarantee is the best choice.
Setting Up a Company Limited by Guarantee
A CLG is easy to set up through a company formation agent like us. We can offer advice and support on all aspects of forming your Company Limited by Guarantee in Ireland. Before you apply for registering a CLG, lets make yourself aware of the features and basic requirements of a CLG:
- It must have a constitution including a memorandum and article of association;
- It must have a minimum of two directors;
- It does not have a share capital but a limited liability;
- In the event that the company is wound up, the liability is subject to a minimum of €1 and not more than the agreed amount;
- It is able to claim exemption from audit;
- It must submit the financial statements along with the annual return every year.
Any questions about setting up your CLG? Fusion Formations has the answers to all your queries. Get in touch today.