A company limited by guarantee (CLG) is a type of
company
A company, abbreviated as co., is a Legal personality, legal entity representing an association of legal people, whether Natural person, natural, Juridical person, juridical or a mixture of both, with a specific objective. Company members ...
where the liability of members in the event the company is
wound up
Liquidation is the process in accounting by which a company is brought to an end. The assets and property of the business are redistributed. When a firm has been liquidated, it is sometimes referred to as wound-up or dissolved, although di ...
is limited to a (typically very small) amount listed in the
company's articles or constitution. Most have no
share capital
A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. ''Share ...
, although rare exceptions exist.
The form originated in the United Kingdom, and now exists under the
company law
Corporate law (also known as company law or enterprise law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corp ...
of the Australia, Bermuda, Gibraltar, Hong Kong, Gambia, and Ireland, and in the Canadian provinces of
Alberta
Alberta is a Provinces and territories of Canada, province in Canada. It is a part of Western Canada and is one of the three Canadian Prairies, prairie provinces. Alberta is bordered by British Columbia to its west, Saskatchewan to its east, t ...
and
Nova Scotia
Nova Scotia is a Provinces and territories of Canada, province of Canada, located on its east coast. It is one of the three Maritime Canada, Maritime provinces and Population of Canada by province and territory, most populous province in Atlan ...
. It previously existed in New Zealand.
It is used primarily but not exclusively by
non-profit organisation
A nonprofit organization (NPO), also known as a nonbusiness entity, nonprofit institution, not-for-profit organization, or simply a nonprofit, is a non-governmental (private) legal entity organized and operated for a collective, public, or so ...
s (including charities) that require
legal personality
Legal capacity is a quality denoting either the legal aptitude of a person to have rights and liabilities (in this sense also called transaction capacity), or the personhood itself in regard to an entity other than a natural person (in this sen ...
. Other uses include
mutual insurance
A mutual insurance company is an insurance company owned entirely by its policyholders. It is a form of consumers' co-operative. Any profits earned by a mutual insurance company are either retained within the company or rebated to policyholders ...
companies and quasi-governmental bodies.
Characteristics
In the UK, a company limited by guarantee can distribute its
profit
Profit may refer to:
Business and law
* Profit (accounting), the difference between the purchase price and the costs of bringing to market
* Profit (economics), normal profit and economic profit
* Profit (real property), a nonpossessory inter ...
s to its members, if allowed by its
articles of association
In corporate governance, a company's articles of association (AoA, called articles of incorporation in some jurisdictions) is a document that, along with the memorandum of association (where applicable), forms the company's constitution. The ...
. However, in Australia this is not allowed.
In many countries, a company limited by guarantee must include the suffix ''Limited'' in its name; alongside
private companies limited by shares.
Until 1981, it was possible in the United Kingdom to form a company limited by guarantee with a share capital, although the number of these companies remaining is very small.
Not-for-profit uses
Some uses of companies limited by guarantee include
clubs and membership organisations, including
students' unions
A students' union or student union, is a student organization present in many colleges, universities, and high schools. In higher education, the students' union is often accorded its own building on the campus, dedicated to social, organization ...
, residential property management companies, sports associations, such as the
PGA European Tour
The European Tour, currently titled as the DP World Tour for sponsorship reasons, and legally the PGA European Tour or the European Tour Group, is the leading men's professional golf tour in Europe. The organisation also operates the European ...
,
co-operatives
A cooperative (also known as co-operative, coöperative, co-op, or coop) is "an autonomy, autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned a ...
, other
social enterprise
A social enterprise is an organization that applies commercial strategies to maximize improvements in financial, social and environmental well-being. This may include maximizing social impact alongside profits for co-owners.
Social enterprises ha ...
,
non-governmental organization
A non-governmental organization (NGO) is an independent, typically nonprofit organization that operates outside government control, though it may get a significant percentage of its funding from government or corporate sources. NGOs often focus ...
s and charities (especially larger charities, such as
Oxfam
Oxfam is a British-founded confederation of 21 independent non-governmental organizations (NGOs), focusing on the alleviation of global poverty, founded in 1942 and led by Oxfam International. It began as the Oxford Committee for Famine Relief ...
), and at least one
political party
A political party is an organization that coordinates candidates to compete in a particular area's elections. It is common for the members of a party to hold similar ideas about politics, and parties may promote specific political ideology, ...
(the
UK Independence Party
The UK Independence Party (UKIP, ) is a Eurosceptic, right-wing populist political party in the United Kingdom. The party reached its greatest level of success in the mid-2010s, when it gained two members of parliament (both through defect ...
).
The form is also often used by organisations with some kind of national coordinating function. Examples in the UK include the domain name registry
Nominet UK
Nominet UK is currently delegated by IANA to be the manager of the .uk domain name. Nominet directly manages registrations directly under .uk, and some of the second level domains .co.uk, .org.uk, .sch.uk, .me.uk, .net.uk, .ltd.uk and .plc.uk.
...
,
England and Wales Cricket Board
The England and Wales Cricket Board, aka ECB, is the Sports governing body, national governing body of cricket in England and Wales. It was formed on 1 January 1997 as a single governing body to combine the roles formerly fulfilled by the Test ...
and
IXP
Internet exchange points (IXes or IXPs) are common grounds of IP networking, allowing participant Internet service providers (ISPs) to exchange data destined for their respective networks. IXPs are generally located at places with preexistin ...
s LINX (
London Internet Exchange
The London Internet Exchange (LINX) is an Internet exchange point (IXP) providing peering to over 950 different autonomous systems (ASNs). Established in 1994 in London, LINX operates IXPs in London, Manchester, Scotland, and Wales in the ...
) and
LONAP
The London Access Point (LONAP) is a London-based Internet exchange point (IXP) founded in 1997 as a membership organisation and currently has over 200 members, making it the second largest IXP in the UK and around the 15th largest IXP in the wo ...
(London Access Point). Examples elsewhere include
Cricket Australia
Cricket Australia (CA) is the governing body for professional and amateur cricket in Australia. It was originally formed in 1905 as the 'Australian Board of Control for International Cricket'. It is incorporated as an Australian Public Company ...
and the
World Wide Fund for Nature Hong Kong.
In the UK, some quasi-governmental organisations are incorporated as companies limited by guarantee, a government department or minister having ultimate control. The
Financial Conduct Authority
The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom. It operates independently of the UK Government and is financed by charging fees to members of the financial services industry. The FCA regulates financi ...
and
Network Rail
Network Rail Limited is the owner (via its subsidiary Network Rail Infrastructure Limited, which was known as Railtrack plc before 2002) and railway infrastructure manager, infrastructure manager of most of the railway network in Great Britain. ...
(the railway infrastructure provider) are examples.
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 84,000 people around the world.
A number of professional services providers are structured as private companies limited by guarantee in which the members that provide
client-facing services are the individual constituent firms using a common brand. The company limited by guarantee typically does not itself provide
client-facing services. The
Big Four accountancy firms (Deloitte, Ernst & Young, KPMG, and PriceWaterhouseCoopers) are each organized using this structure.
Some law firms also use this structure to establish an internationally branded presence. For example, the Anglo-Canadian law firm of
Gowling WLG, formed in 2016, is structured as an English private company limited by guarantee (named Gowling WLG International Limited), in which the two
limited liability partnership
A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit aspects of both partnerships and corporations. In an LLP, each partner is n ...
s of Gowling WLG (Canada) LLP and Gowling WLG (UK) LLP are members and provide legal services; the structure is similar to the
Swiss Verein
A Swiss association ("" in German, "" in French, "" in Italian) is a type of corporation in Swiss law. It is similar to the Anglo-American voluntary association. Unlike in Germany, a Swiss association does not need to be registered in order to ...
structure used by several other major international law firms. In another example, the Anglo-American law firm of
Womble Bond Dickinson is similarly structured, with two limited liability partnerships of Womble Bond Dickinson (UK) LLP and Womble Bond Dickinson (US) LLP being the members and providing
client-facing services.
References
External links
UK Office of Public Sector Information: Companies Act 2006
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Privately held companies
Social economy in the United Kingdom
Types of business entity
Companies of Northern Ireland
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de:Aktiengesellschaft (Vereinigtes Königreich)#Private company limited by guarantee