Limited By Guarantee (LBG)

What is Limited by Guarantee company?

Kalina Kar

Last Update 7 months ago

Company Limited by Guarantee is usually formed by non-profit organizations. Companies that are incorporated that way include community centres, sports clubs, private member clubs, student unions, and sometimes charities.

LBG company has very similar responsibilities as LTD. Both have to register with Companies House, have Registered Office Address, have all their members listed on the registrar along with their Services Address, and submitting annual accounts and confirmation statements to HMRC.  

The only difference is that limited by guarantee does not have any shareholders or share capital, instead, they have members which are called Guarantors. Guarantor agrees to pay a fixed amount of money to the organization in case of insolvency.
LBG must have at least one director and one guarantor, but one person can hold both positions, exactly the same as in limited by shares. There is no limit to the number of guarantors and directors unless stated differently by Articles of Association.

All profit generated from the business is invested back to the organization to meet its non-profit goals. However, if a part of the profit will be distributed to the guarantors, there must be a clause in your Memorandum and Articles Of Association explaining how it will be shared amongst them.

It is a legal requirement when registering a company limited by guarantee, to sign Memorandum and Articles of Association. 

The Articles will often contain a list of objects, stating what the company will do, voting rights of the members, number of the guarantors, and what rights they have as well as appointing and removing the guarantors.
On the other hand, the Memorandum will state how much money the members of the company will guarantee to pay, in case the company goes into debt.

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