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Company Limited by Guarantee

Company Limited by Guarantee

A company that is limited by guarantee means that it is structured differently, with members being shareholders so that they act as guarantors. Many charities, clubs, residential property management companies and sports associations are managed under this structure. When a business is a Company by Limited Guarantee, it is a legal entity where contracts are drawn up in the name of the company. Each contract will safeguard liability for each of the members. The CLG contract may include other contracts such as employment or the procurement of goods and property. Members of the company are also bound by the same legal regulations and rules which apply to a regular limited company.

Due to the complexity of the Company Limited by Guarantee, it is important to have the right advisors to provide financial guidance.

If the company goes into liquidation, the personal assets of individual members cannot be seized to cover the debt. However, this protection can only be applied if the management team can demonstrate that the company has acted with due care and diligence.

Managers should meet regularly to prepare and analyse financial reports. Accounts and other information should be submitted promptly to HMRC and Companies House in order to protect themselves from negligence claims. The framework for this type of company allows any business, even a small enterprise, to grow without any restrictions. The requirements from HMRC and Companies House are exactly the same as they would be for a company which is limited by shares. As a result the costs associated with accounting are very similar.

A Company by Limited Guarantee requires specific advice from a qualified and experienced accountant. If you are thinking of setting up this structure as part of a new business venture, it is advisable to seek advice beforehand. An accountant will help you set the business up in the right way, safeguard everyone’s interests and provide advice and guidance going forward. The Accountancy Network can help you find the most suitably qualified accountant to help you with the issues associated with a Company by Limited Guarantee.