Company Limited By Guarantee
A Company Limited by Guarantee is a company without shareholders or shares. This type of entity is typically used by social enterprises and is controlled by members, who guarantee a nominal sum of money to the company in the event of its becoming insolvent or winding up.
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FAQs
A Company limited by guarantee is a company registered solely for promoting an objective and these kinds of companies are not profit based. The name must end with Limited by Guarantee or Ltd/Gte. An example of registration that must be limited by guarantee is a university. The objectives are solely for promotion of art, science, education, religion, commerce, research amongst others.
A company limited by guarantee is not required to have a share capital; instead, the members are called guarantors and are expected to agree to a particular amount to be guaranteed to be paid upon the company winding up. A company limited by guarantee cannot be formed for the sole purpose of making profit.
A guarantee is a fixed sum of money that a guarantor must pay when setting up the company. It serves as a form of assurance that certain conditions will be met. For example, if the company becomes insolvent or breaks a certain law, then the guarantors must pay the guarantee.
There is no maximum limit set by CAMA but it states that each member shall guarantee to pay a sum not less than 10,000 naira.
- The first process is to apply for consent for name reservation and registration of the company to the registrar of the Corporate Affairs Commission. Under this, you would need to submit the two proposed names, directors and secretary of the company, objectives of the company, amount members guarantee to pay in the event of winding up.
- Application to the Attorney General of the Federation for authorization to register the company within 30 days. The AG shall approve where there are no objections or where there is no reasonable cause to refuse the application, and where no decision is made within 30 days, the promoters shall – Place an advertisement in 3 daily National Newspaper for 28 days inviting the public to object if any.
- Approval by the Commission.
Yes, a director of the company can be a guarantor as well but it is not mandatory for a guarantor to be a director.
A Company Limited by Guarantee is typically set up for non-profit purposes, which is the similarity. The difference is that a company limited by guarantee can carry on business as long as any profit generated by the company is reinvested and used for promoting its non-profit activities but Incorporated Trustees cannot do anything business related.
No, this is impossible as CAMA states that upon winding up of the company, the remaining assets shall be transferred to a company with similar objects.