A company limited by guarantee (CLG) is a type of corporation where the company has no share capital (although rare exceptions exist). Members instead act as guarantors of the company's liabilities: each member undertakes to contribute an amount specified in the articles (typically very small) in the event of insolvency or of the winding up of the company.[1]

The form originated in the United Kingdom, and now exists under the company law of the UK, Australia, Bermuda, Gibraltar, Hong Kong and Ireland, and in the Canadian provinces of Alberta and Nova Scotia (and previously in New Zealand).

It is used primarily but not exclusively by non-profit organisations (including charities) that require legal personality. Other uses include mutual insurance companies and quasi-governmental bodies.

Characteristics

A company limited by guarantee can distribute its profits to its members, if allowed by its articles of association.[2]

Like a private company limited by shares, a company limited by guarantee must include the suffix "Limited" in its name, except in circumstances specifically exempted by law. One condition of this exemption is that the company does not distribute its profits. This is also a condition for a company limited by guarantee that wishes to be a charity.

Until 1981, it was possible in the United Kingdom to form a company limited by guarantee with a share capital,[3] 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, residential property management companies, sports associations (such as the PGA European Tour), co-operatives, other social enterprise, non-governmental organizations and charities (especially larger charities, such as Oxfam), and at least one political party (the UK Independence Party[4]).

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, England and Wales Cricket Board and IXPs LINX (London Internet Exchange) and LONAP (London Access Point). Examples elsewhere include Cricket Australia and the World Wide Fund for Nature Hong Kong.[5]

In the UK, some quasi-governmental organisations are incorporated as companies limited by guarantee, a government or minister having ultimate control. The Financial Conduct Authority and Network Rail (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.[6]

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,[7] Ernst & Young,[8] KPMG,[9] and PriceWaterhouseCoopers[10]) 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 partnerships of Gowling WLG (Canada) LLP and Gowling WLG (UK) LLP are members and provide legal services;[11] the structure is similar to the Swiss Verein structure used by several other major international law firms.[12] 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.[13]

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". companieshouse.gov.uk. Archived from the original on 12 October 2008. Retrieved 23 March 2018.
  4. ↑ UK Independence Party: constitution Archived 2014-05-24 at the Wayback Machine and Companies House registry entry
  5. ↑ "World Wide Fund for Nature Hong Kong 世界自然(香港)基金會".
  6. ↑ "Our employee wellbeing". Bupa - an international healthcare company.
  7. ↑ "Terms of Use".
  8. ↑ "Legal Statement".
  9. ↑ "Governance". 23 August 2022.
  10. ↑ "Network Structure".
  11. ↑ "About the structure of Gowling WLG". Retrieved 24 February 2016.
  12. ↑ Mackrael, Kim (8 July 2015). "Gowlings Law Firm to Combine With U.K.'s Wragge Lawrence Graham". The Wall Street Journal. Retrieved 24 February 2016.
  13. ↑ "Legal Notices".
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