International Pole Sports Federation
International Pole Sports Federation

Not For Profit Information

What Company Limited by Guarantee?

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. Where an organisation is likely to enter into contracts it may need the benefit of limited liability to protect its Board of Trustees and its members, who may be involved on a voluntary basis. The following are examples of these contracts

  • Employment contracts
  • Purchasing land, buildings or property
  • Contracting with service or product providers
  • Contracts with fund raisers

A guarantee company provides a clear legal identity. This provides the ability for the company to own property in its own name and a democratic structure where its participants are required to adhere to the strict laws and regulations governing limited companies generally.

 

What are the differences between a company that is limited by guarantee and a company that is limited by shares?

A guarantee company does not have shares. The members of the company do not own the company but are the decision makers for the company. This means that the profits of the company cannot be distributed to the members through dividends and that they do not have any claim upon the assets of the company. The members of the company may appoint Directors often called 'Trustees', who are given the responsibility for creating and implementing policies for the company. The Directors also enjoy limited liability, provided that they have not acted negligently, or fraudulently, and have not allowed the guarantee company to continue trading when it was insolvent (this is known as "wrongful trading"). 

 

What is the constitution of the company? 

The constitution of the company limited by guarantee is the Memorandum & Articles of Association. The Memorandum sets out the objects of the company and the powers of the company may be exercised to meet these objects.

 

The Articles of Association state when meetings of the company will be held and proceedings of the meetings. They also state the voting rights of members, number of trustees and the powers of the trustees. The Articles also include the procedures for appointing and retirement of members and trustees. This is a brief overview to provide an understanding of the constitution of the Internationa Pole Sports Federation

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