Limited by Guarantee Package

A private company Limited by Guarantee (LBG) is an alternative type of limited company which is used mainly for non-profit organisations. This means that all of the money that is generated by this type of company is kept within the business or used to promote its non-profit purpose and activities.

It usually has neither any share capital nor shareholders. Instead its members act as guarantors who undertake to contribute a nominal amount (typically very small) in the event of the company being wound up.

A company which is limited by guarantee can distribute its profits to its members, if this is allowed by its articles of association, but then it would not be eligible for charitable status. There is nothing to prevent someone setting up this type of company to run a profit-making business in which the guarantors will keep the profits, but a limited by shares structure would make more sense for that purpose.

Companies that are Limited by Guarantee are most commonly used for:

• Clubs
• Membership organisations, including students' unions
• Sports associations
• Workers' co-operatives
• Other social enterprises
• Non-governmental organizations (NGOs)
• Charities

Our Limited by Guarantee package includes:

• Digital Certificate of Incorporation
• Digital set of Memorandum & Articles of Association
• Digital Company Register
• Digital Guarantor Certificate
• Digital Incorporation Minutes

Articles of association

During the application process our system will let you choose one of the following options regarding your company’s Articles of Association:

• Standard Articles. These articles should be used by default. They are suitable for a club, sporting association, community project, workers' cooperative or membership organisation.
• Charity Articles. These articles are for registering a charity in the form of a private company which is limited by guarantee.
• Flat Management Articles. Use this to register what is sometimes called a “Right to Manage” or “Flat Management” company, which allows residents jointly to run a property, e.g. a block of flats.
• Edit Model Articles. You can edit our model articles according to your needs. Please note, however, that you may need to seek legal advice on how to do this.
• Custom Articles. This option will let you upload your own bespoke articles if they are already prepared.

Exemption from using the word "Limited" or "Ltd" in a company name

In accordance with section 60 of the Companies Act 2006 there are certain circumstances in which limited companies may omit the word ‘Limited’ or ‘Ltd’ (or the Welsh equivalents). This applies only to a private company which is limited by guarantee.

A private company that is limited by guarantee can apply to be exempt from the requirement to include "limited", "ltd", or the Welsh equivalents "cyfyngedig" or "cyf", from its name provided that the articles of association:

• state that the objects of the company are the promotion or regulation of commerce, art, science, education, religion, charity or any profession incidental or conducive to any of those objects
• require its income to be applied in promoting its objects
• prohibit the payment of dividends, or any return of capital, to its members
• require all the assets that would otherwise be available to its members generally and transferred on its winding up – either to another body with similar objects or to another body with charitable objects.

You can apply for exemption from using the term 'limited' at the end of your company’s name while you are filling in your application to register it on this website. Either use your own Articles or edit our model Articles to include the objects of your company that meet the requirements, above, for such exemption.

To claim exemption after registration/incorporation, a company that is limited by guarantee must complete Companies House form NE01.

Use of the words “Association”, “Benevolent”, “Federation”, “Foundation”, “Society” or “Trust” within the name of a company

For a company to be allowed to use any of the words above its Articles should include objects that reflect the specific purpose of the company and a non-profit distribution clause, which provides that any profits should be used to further the objects of the company and not paid to the members as dividends. In most instances the Articles should also include a one member, one vote clause.

This package allows clients to upload their own Articles or download and edit our model Articles so that they comply with Companies House requirements in order to use the above “sensitive” words that are laid out above.

How to set up a charity

Should you wish to set up a charity then you must first decide what type of charity structure you require. There are 4 main charity structures:

• Charitable Incorporated Organisation (CIO). You can create a CIO by registering with the Charity Commission. You do not need to register it with Companies House.
• Charitable company Limited by Guarantee. When registering your charitable company you should specify that it will be limited by guarantee, and not limited by shares.
• Unincorporated Association.
• Trust.

Register a Charitable Company Limited by Guarantee

A charity need not be registered as a company unless limited liability is sought in order to protect its members. If such protection for its members is desired, however, then the organisation should be registered at Companies House as a company which is limited by guarantee.

Once the charity is registered/incorporated at Companies House it may need to be registered also as a charity with the Charity Commission in England and Wales or else with the Office of the Scottish Charity Regulator (OSCR) in Scotland. In order to meet the requirements of the charity regulators it is commonplace for 3 members (known as trustees) to be appointed. Certain provisions must also be included in the articles of association that state the exclusively charitable aims of the company and the restriction of any profit distribution to its members.

We provide Model Charity Articles which you can edit and insert your company's objects. Alternatively, you can use your own Articles. We recommend that all clients who want charity status for their company follow the Charity Commission's or OSCR’s guidance on how to draft charitable objects: https://www.gov.uk/government/publications/example-charitable-objects .

Use of the word “Charity” in a Company Name

The Companies Act considers “Charity” to be a sensitive word. Companies House will allow its use as part of the company’s name only if they are provided with a letter of no-objection from the Charity Commission in England & Wales, the OSCR in Scotland or the Charity Commission for Northern Ireland (within Northern Ireland). The company name should be clearly stated in full within the letter.

Alternatively, should you wish to change the name of your company then you will need to provide proof that your company is registered as a charity with the relevant organisation in the part of the United Kingdom in which your company is registered/ incorporated.

To set up a charity we recommend that you seek further advice from an accountant, lawyer or business advisor.

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