Guarantee Company Formation & Non-Profit Company Incorporation in the UK:
UK non-profit company formation and guarantee company registration for the formation of a limited company has never been easier. Company
limited by guarantee registration with a full set of company documents for as little as
£91.00. We have a
guarantee companies formation service to suit everyone's needs, please see below.
Coddan Companies Formation Agent LTD: packaged online company formations for occasional users, with payment by credit card or wire transfer.
Your not for profit company limited by guarantee will be registered in just a few hours using our online incorporation system, simply select the package that suits your requirements and call 0800 081 1510 with you company name, delivery address and payment details. We will also need to know the "Objects" for you company to include them in the Memorandum of Association.
A company limited by guarantee is normally incorporated for non-profit making functions. The company has no share capital. A company limited by guarantee has members, rather than shareholders, the members of the company guarantee/undertake to contribute a predetermined sum to the liabilities of the company which becomes due in the event of the company being wound up. It cannot distribute its profits to its members, and is therefore eligible to apply for charitable status if necessary.
Guarantee companies are useful for non-profit organisations that require corporate status. This means that its profits are not distributed to its members but are retained to be used for the purposes of the guarantee company. Of course this does not mean that the guarantee company cannot make a profit, as indeed it is almost paramount that it can and does so. These companies are normally used for non profit making or charitable causes, the memorandum and articles of association state the general objects of the company, prohibit the payment of dividends to members and if the company is wound up all assets must be transferred to another organisation with similar objects or to a charity.
Are there special rules for charitable companies? Under section 68 of the
Charities Act 1993, a charitable company whose name does not include the word 'charity' or 'charitable' must state the fact that it is a charity on all the documents listed under question 2, in all bills it sends and on any conveyances it executes. Section 68 does not require a charitable company to include the word 'charity' or 'charitable' in its name. The Charities Act 1993 does not apply to charitable companies registered in Scotland but the same rule applies to Scottish companies under section 112(6) of the
Companies Act 1989.
We can register your company in with Memorandum and Articles of Association suitable for registration as a charity. If you do not want to register as a charity we can form the company with less restrictive Memorandum and Articles of association. Charities have specific restrictions on paying Trustees (Directors) salaries and also restrict some commercial activities such as borrowing. These issues can be avoided by using the memorandum and articles that we have specially drawn up. Whichever format suits you does not affect the price.
A company limited by guarantee is an alternative type of incorporation used primarily for non-profit organisations that require corporate status. We prepare and electronically submit new UK guarantee company registrations (formations) as soon as we receive your instructions. To form a guarantee company we need certain information as set out in the online order form. Incorporations can be completed within 24 hours. A company limited by guarantee is a registered company having the liability of its members limited by the Memorandum to such amounts as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up.
Our team of professionals has the experience to set up your guarantee company quickly and efficiently. Our
e-formation service eliminates the need to complete Forms (to appoint the directors and secretary), making the process of forming a company even easier and quicker. With our new online electronic company formation system, we take you through each step of your company incorporation process as quickly and as simply as possible. Our specialist knowledge and vast experience enable us to provide a fast, efficient, and professional service, and one which a great many businesses have been founded and built upon to date. Once you have completed our
online order form and your new guarantee company is in the processing stage of being registered at Companies House you will receive an order acknowledgement from us by email. You can add your directors and secretary before formation. This is absolutely FREE.
Documents we send you via email for the electronic E-Quick Formation Package (£91.00) are: Certificate of Incorporation - in PDF format, Memorandum & Articles of Association, First Minutes of Directors meeting, Registers of Members, Directors and Secretaries- in Word format. We have feature-complete solutions with prices designed to put the £££ in your pocket!
Commonly the "Companies Limited by Guarantee" are not setup to make profit for the directors, where as directors / investors of a
"Company Limited by Shares" receive a share of company profits. "Company Limited by Shares" is obliged to use the word 'limited' in its name and on its stationery but "Companies Limited by Guarantee" may apply for an exemption. We offer a choice of guarantee company registration packages to suit your practice requirements. We do not cut costs on expertise and quality but still maintain a cost effective pricing structure.
The company limited by guarantee is a special type of company available to non-profit making organisations and charities. Instead of buying shares, anyone who wants to be a member signs a form agreeing to pay a sum of money (for example £1.00, £5.00, £10.00) if the company goes into insolvent liquidation (is bankrupt and has to be dissolved). This form is called the 'guarantee' and because members' liability is limited to the sum they each guarantee, then the company is said to be 'limited by guarantee'.
The guarantee is legally binding while the guarantor remains a member and for one year after he or she ceases to be a member. Unlike unincorporated associations and trusts, the company has a separate legal existence from its members. This means that, in its own right, it can employ people, own property, enter into contracts and sue or be sued in the courts. The day-to-day business is run by the directors, who are also defined in law as charity trustees if it is a charitable company. The directors may call themselves a management committee, an executive committee, board of trustees or board of directors. Charitable companies are bound both by the Companies Acts and the Charities Act, so they must send their annual accounts and annual returns to Companies House and to the Charity Commission.
The Guarantee Company's Constitution:
Guarantee companies have a special form of constitution called a Memorandum and Articles of Association. The first part the Memorandum of Association sets out: the objects and powers of the company. The amount of the guarantee each member must give. Restrictions on the use of the income and assets of the company (because it is a charity). A statement that, if the company is wound up (dissolved), any remaining assets will be given to some other similar charitable body. The second part the Articles of Association: describes the management structure. Sets out the rules for meetings, accounts and finance. States the criteria for membership, the voting rights of members and the powers and duties of the directors.
The Charity Commission has produced a model Memorandum and Articles of Association for a charitable company. It is called GDI and is available free from the Liverpool office of the Commission. There is also a free booklet (CC22) from the Commission called Choosing and Preparing a Governing Document which gives information on when to become a company, rather than an unincorporated association or trust.
Guarantee Company Members and Directors Protection from Personal Liability:
The ordinary members of a company - that is, those who have signed guarantees, will only be liable for the maximum amount they have guaranteed if the company goes into insolvent liquidation. The directors, however, can be made liable for a company's losses or debts in a number of ways: dishonestly dealing with the company's property or money. Cheating the company's creditors or clients (I and 2 are known as fraudulent trading). Negligent actions or decisions (or negligent failures to act or take decisions) which lose the company's money or assets. Carrying on activities which are not permitted by the company's objects or powers clauses and cost the company money or waste its resources (known as committing 'ultra vires' acts).
Carrying on the company's business and running up further debts when it has become obvious that the company is in financial difficulties and should be wound up as soon as possible (known as 'wrongful trading"). Signing a form or agreement to act as a guarantor for a debt owed by the company. Acting while disqualified as a director or charity trustee. If directors use their position as directors for secret personal gain, then they may be made to repay to the company the profits made from this abuse of power.
How to Incorporate a Non-Profit Company?
A company comes into being when it is registered at Companies House. To register, you need to submit: signed, witnessed and dated Memorandum and Articles of Association. A Form giving details of the people who will be the first directors and company secretary and signed by them to show they have agreed to this. A Form which is a sworn statement by a director or the secretary that the company has been formed for a lawful purpose, the paperwork is in order, and those who have signed to become the directors are aged 18 or over and are not barred by law from being directors. If the company does not want to have the word 'limited' in its official registered name, a third Form which is a sworn statement by a director or secretary that the company qualifies as a charity. Only charitable companies are permitted to drop the word 'limited' from their names.
The Rights of Guarantee Company Members:
These are set out in the Articles of Association. All members have the right to be notified of and attend general meetings of the company, and to vote at these meetings if the Articles give them voting rights. In most charitable companies, the members attend the Annual General Meeting to receive the audited accounts, appoint the auditors for the next financial year, hear the directors' annual report and financial report and vote in the Committee for the following year. Under company law, members have the right to remove a director from office by calling a general meeting with at least 28 days' notice in writing to all members and directors. At this meeting, the director concerned has the right to put their case, either verbally or in a written statement. If the voting members then pass a resolution to remove them by a simple majority (51%), then they must stand down.
The same type of resolution and rules must be used if an auditor is to be removed. Company members (whether or not they can vote at meetings) have the following additional rights: to be given a copy of the Memorandum and Articles of Association at a maximum cost of 5p. To inspect the Register of Members on reasonable notice during normal office hours. To call an Annual General Meeting if the directors refuse or fail to do so (as long as members with 5% of the voting rights sign a request to the Company Secretary to call the meeting). To call an Extraordinary General Meeting if the directors refuse or fail to do so, if members with 10% of the voting rights sign a request to the
Company Secretary to call the meeting. To receive a copy of the audited accounts and annual report at least 3 weeks prior to each AGM. To be protected against 'unfair prejudice' that is, from being harmed or oppressed by directors' actions or failures to act, where the members concerned are in a minority. To sue on behalf of the company, individual directors who misuse their powers or fail in their duties and cause the company to lose money or resources as a result.
The Duties of Guarantee Company Directors:
Charitable companies must have at least three director/trustees. The duties of company directors are very similar to those of charity trustees. They include: acting in good faith and in the best interests of the company's members and the charity's beneficiaries. Taking the same degree of care in managing the company's finances, assets and affairs as a reasonably prudent business person would take in respect of their own business. This includes taking professional advice when needed and making decisions as a body. Keeping the account books in such a way that they can be audited or examined each year.
Arranging for an independent audit, if required, and presenting the audited accounts and financial statements to the members at each annual general meeting. Producing an annual report and filing the annual accounts and annual returns each year at Companies House and the Charity Commission. N6 filing the accounts late can result in an automatic fine of at least £100 and as much as £195.000, depending on degree of lateness. Supervising and managing the company's employees and voluntary workers properly, and making sure they give regular reports on their work to the committee.
Complying with employment and health and safety law, and making sure the organisation is properly insured, accountable to funders and has plans and strategies in place for its work. Filing the accounts with Companies House and the Charity Commission within 10 months after each year-end. Maintaining the 'statutory books' - that is, the Register of Members, the Register of Directors and Company Secretaries and the Register of Charges - secured loans made to the company. Keeping proper minutes of meetings, both general meetings and directors' meetings. Making sure that company law is complied with when giving notice of and holding meetings. Notifying Companies House of changes in directors or company secretaries within 15 days after each change
The Role of the Guarantee Company Secretary:
By law, every company must have a company secretary (or two people acting as joint secretary). This person can also be director but does not have to be. Their role is to carry out the administrative functions required by the
Companies Act and to sign official forms requiring the secretary's signature. Although secretaries can delegate most of their functions to paid or unpaid staff, they cannot delegate the signing of forms. Traditionally, company secretaries perform duties 8 to 12 listed in the last section.
Guarantee Company Law Relating to Meetings:
Annual general meetings (AGMs) need at least 21 days notice in writing to members, which must include copies of any proposed resolutions to be passed at the meeting and copies of the accounts and annual report to be presented by the directors. Extraordinary general meetings (EGMs) need at least 14 days notice in writing to members. The auditors have a legal right to be invited to all AGMs and to any EGMs where their interests may be at stake. When holding general meetings, the directors and secretary must be aware of company law in relation to passing resolutions (making decisions). Most resolutions require only a simple majority vote. There are, however, two types of resolution which need a 75% majority vote to be passed:
Special resolutions - that is, any decision to alter the Memorandum and Articles of Association, change the company's name, dispense with appointing auditors if the company has been dormant throughout the whole of a financial year, ratify a previous 'ultra vires' act committed by the directors (see the section above on protection from personal liability) or to wind up a company that is not insolvent extraordinary resolutions - that is, any decision to wind up the company because it is insolvent or is heading for insolvency or to dispense with auditors after the first AGM because the company is likely to remain dormant for some time.
Under the
1989 Companies Act, a new way of passing resolutions was introduced. This is called a written resolution and it enables companies to make decisions without having to convene a meeting. The resolution is circulated to all voting members who must each sign agreeing to it. It can be on separate sheets as long as the wording is the same on each sheet. It is only valid if carried by a 100% majority vote of all members entitled to attend and vote at a general meeting. It is really only useful for straightforward decisions where no discussion is needed and when holding a meeting is going to be very difficult or impossible. Also, the larger the company's membership, the less practical it is to circulate written resolutions.
Alternatives to Becoming a Non-Profit Company:
These include: incorporating the board of trustees only. The charity itself remains unincorporated and the trustees still have personal liability for debts. The advantage is that they do not have to change signatories on legal documents if the trustees change. Appointing the Official Custodian for Charities Land Holding Service to hold a leasehold or freehold property. The effect of this is the same as incorporating the trustees, and avoids the charity having to appoint and change 'holding trustees'.
Good financial controls: prudent financial management through careful budgeting and supervision of spending is the cheapest and most effective form of insurance against personal liability.
Liability insurance. These protect trustees against claims by third parties. All employing organisations must take out employer's liability insurance and should also take out public liability insurance if they hold or manage buildings or deal directly with the public in any way. Organisations offering advice or
counseling will need professional indemnity insurance. Trustee liability insurance may also be an option, but there are strict limitations on this.
