Close Menu
UK Liquidators

What is a company limited by guarantee?

Low-Cost Liquidation
100% Confidential
Stop HMRC & Creditor Pressure
Partner-led Service

Understanding a private company limited by guarantee

A company limited by guarantee has guarantors rather than shareholders, and isn’t usually established to make a profit. It’s a legal structure that offers protection from financial liability to the individuals involved in the company.

Any profits that are made aren’t distributed in the same way as a company limited by shares. They may be retained for future use by the company, for example, or used to market and promote the organisation’s work or purpose.

What type of organisations are limited guarantee companies?

These are just a few examples of organisations that might choose the limited by guarantee corporate structure:

  • Non-profit organisations
  • Charities
  • Sports clubs
  • Trade and other associations
  • Schools and colleges
  • Community groups

Worried about your Bounce Back Loan?

If you are a limited company director worried about how you are going to repay your Bounce Back Loan, we are here to help. As licensed insolvency practitioners we can talk you through your options when it comes to repaying your outstanding Bounce Back Loan, as well as handling all negotiations with creditors on your behalf. Call our team today on 0800 063 9262 .

What is the structure of a company limited by guarantee?

Members of a company limited by guarantee are called ‘guarantors.’  They can be individuals or corporate bodies, but their names and details are included on the register at Companies House.

Directors are appointed, and they run the company in the same way as a company limited by shares, although the overall purpose is very different. The financial liability of members is limited by the pre-set guarantee value, which is often £1, and a ‘statement of guarantee’ from each member is lodged with Companies House on formation.

Requirements for establishing a company limited by guarantee

  • Registering with Companies House
  • Providing a registered office address
  • Using Standard Industrial Classification (SIC) codes, which identify the type of activities the company undertakes
  • Appointing at least one guarantor and one director, although one person can combine these roles
  • Providing details of People with Significant Control (PSCs) – these are typically directors and guarantors
  • Developing a Memorandum and Articles of Association
    - The Memorandum details each member of the company, and the fact that they have agreed to become members
    - The Articles of Association set out the regulations and rules by which the company will operate, typically including the powers held by directors and a dispute resolution procedure

What are the benefits of setting up a limited guarantee company?

  • The company is a separate legal entity and members benefit from limited liability to the level of the pre-set guarantee. Consequently, they don’t have to worry about personal liability for any future company debts.
  • The limited guarantee structure improves credibility and instils confidence in stakeholders. If the organisation needs external support, for example, the status conveys a professional and stable organisation with a defined purpose.
  • There’s no hierarchy within the company based on shareholding, as is the case with companies limited by shares. Each member is equal in standing to the others, and has equal rights.

Start your online liquidation today

If you have decided liquidation is the right option for your limited company, you can take the first step and begin the process online using our online portal. Starting the process is quick, simple, and can be done at a time that suits you. Your information will be submitted to your local UK Liquidators insolvency practitioner who will be with you every step of the way. Click here to start your company’s liquidation online.

Are there any disadvantages to forming a company limited by guarantee?

Potential disadvantages could include:

  • The requirement for members to file annual accounts and returns with Companies House and HMRC, as well as notify Companies House of any changes to the registered address of guarantors/directors
  • The annual costs of running a company limited by guarantee are higher than those of a voluntary organisation
  • The requirement to keep proper accounting records and file statutory accounts and returns may become onerous

A key feature of a company limited by guarantee is its separate legal status, which offers protection to members. Essentially, it is responsible for its own debts in the majority of cases. An example of when a director or guarantor may become financially liable for the company’s debts includes where misdemeanour has taken place, such as misappropriation of funds.

UK Liquidators can provide more information on this, and companies limited by guarantee in general. Please contact our expert team to arrange a free, same-day consultation – we work from offices throughout the UK.

Jonathan Munnery
Insolvency & Restructuring Expert

If you are considering liquidation for your limited company, taking advice from a licensed insolvency practitioner can help you understand your options.

Is liquidation the right option for you?

Take our 60 second test and find out

Company health risk assessment
Types of liquidation available
Alternatives to liquidation
Understand your next steps
60 Second Liquidation Test
Pages related to Understanding a private company limited by guarantee
Shareholders Meeting
Can a 50-50 shareholder put a company into liquidation?
Director Back Work
Can I be a director again after my business folds?
Liquidator Investigating The Company
Can I be investigated if my company goes into liquidation?
Did you know?
Are you eligible to claim Director Redundancy?
As a Limited Company Director you may be entitled to claim Director Redundancy - Average UK claim is £9,000*.
Ready to Liquidate?
Express Liquidation Service
Ready to start liquidating today? Complete the form and a member of our team will be in touch.
Please note: By completing this form you are not liquidating your company
Contact the UK Liquidators Team

If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.

  • Free initial consultation
  • Strictly confidential
  • Fully licensed insolvency practitioners
  • Local office support
  • Named case handler throughout
Logo Tma
Logo Business Recovery
Logo Cse
Logo Iip

Looking for immediate support?

Complete the below to get in touch

100% Free & Confidential Advice

This site uses cookies to monitor site performance and provide a more responsive and personalised experience. You must agree to our use of certain cookies. For more information on how we use and manage cookies please read our PRIVACY POLICY