Limited by Guarantee

A company limited by guarantee is a common structure used for charities and not-for-profit organisations.

When a company is incorporated, it becomes a separate legal entity, distinct from its members. This means the company can enter into contracts, hold assets, and operate in its own name.

How it works

Unlike a company limited by shares, this structure does not involve shareholders. Instead, it has members who agree to contribute a fixed amount (typically £1) if the company is wound up. This guarantee amount is set out in the company’s Articles of Association.

Designed for charities and not-for-profits

A company limited by guarantee is the standard structure for organisations intending to operate as charities or on a not-for-profit basis i.e. sports clubs, and trade associations.

Profits (or “surpluses”) are generally reinvested to support the company’s objectives and not distributed to members.

If incorporating as a Charity the company’s constitution must clearly state that it has been established for charitable purposes in order to meet the requirements of the Charity Commission and Companies House.

Charity registration guidance

If you intend to apply for charitable status, we recommend submitting your draft Articles of Association to the Charity Commission for review before incorporation. This can help identify any required amendments early, streamline the registration process, and reduce the risk of delays.

Articles of Association

The Articles of Association are a key legal document that set out how a company is run. They govern the relationship between the owners (members) and those responsible for managing the company (directors, or trustees in the case of a charity).

What they cover

The Articles typically deal with:

Charities and trustees

In a charitable company, the directors are also the charity trustees. The Charity Commission defines trustees as those responsible for controlling the management and administration of the charity, regardless of their title. In many cases, the members and trustees may be the same individuals.

Why they matter

The Articles are fundamental to how your organisation operates. If they are unclear or poorly drafted, this can lead to disputes, operational difficulties, or even legal action in the future.

Our approach

We ensure that your Articles of Association are carefully drafted to reflect your structure, clearly define roles and responsibilities, and minimise the risk of future issues.

Use of “Limited” in a Company Name

In certain circumstances, a company may apply to omit the word “Limited” from its name. This is often relevant for organisations intending to operate as charities.

When exemption applies

To qualify for this exemption, a company must:

Ongoing requirements

Once an exemption is granted, the company must continue to meet these conditions. The Articles of Association cannot be amended in a way that would breach them.

Our guidance

We can advise on whether your organisation is eligible for exemption and ensure your governing documents are drafted to meet the necessary requirements.