Last updated: 31 August 2026
A company limited by guarantee is a limited company with guarantor members rather than shareholders and shares. It is commonly used by clubs, associations, membership bodies and many non-profit organisations, but it is important not to confuse the legal structure with charitable status.
How does a company limited by guarantee work?
Instead of holding shares, each member gives a guarantee to contribute an agreed amount if the company is wound up and cannot meet its debts. The guarantee is often a nominal amount such as £1, although the amount is set in the company’s constitution.
The company is a separate legal entity and must have at least one director. The members exercise the rights given to them by the articles of association.
Is a guarantee company automatically non-profit or a charity?
No. A company limited by guarantee is not automatically a charity and there is no general rule that every guarantee company is legally prohibited from distributing profits. In practice, many are set up with articles that require income and assets to be applied to stated non-profit, charitable, community or membership purposes.
If charitable status is intended, separate charity-law requirements and registration may apply. The articles should be drafted to suit the organisation’s actual purpose.
Who commonly uses this structure?
- clubs and membership organisations;
- trade and professional associations;
- community and voluntary organisations;
- some charities and social-purpose organisations; and
- organisations that do not need share ownership.
Guarantee company or CIC?
A guarantee company can be used for a wide range of membership and non-profit purposes. A community interest company (CIC) is a specific regulated structure for organisations operating for community benefit and includes a statutory asset lock.
See our CIC formation service if community-interest status is important.
Form a company limited by guarantee in Northern Ireland
Our Belfast team can prepare and submit a company limited by guarantee formation. If the constitution needs bespoke legal drafting or charitable provisions, we may recommend that the wording is reviewed by an appropriate professional before incorporation.
This article is for general information only and reflects the position at the date it was last updated. It does not constitute legal, tax, accounting or other professional advice and should not be relied upon as such. Fees, rules and deadlines may change. You should seek advice from a suitably qualified professional before acting on anything covered here.