Guarantee Factsheet

/Guarantee Factsheet
Guarantee Factsheet2018-04-16T10:47:25+00:00

Formation of a Company Limited by Guarantee (CLG)

In the past, we have incorporated a number of the above companies for residents associations, community organisations, sports clubs, management companies (in respect of common areas in a development) and voluntary bodies. The over-riding reason in each case  was  the  protection  of  the  individuals  involved  in each body from any liability which might attach to them in an unincorporated body. The main fear was about claims being brought against the organisation and the individuals involved in it.

A Company Limited by Guarantee (CLG), therefore, is the ideal  answer.  But  before  I go any further let me explain the differences between an “ordinary” company (a company limited by shares) and a CLG.

Most businesses when they start trading set up a “company”, and this company is usually a company limited by shares. What this means  is that if the business becomes insolvent then the only assets which the liquidator can use  to  pay off the debts of company are the assets which the company itself owns i.e. debtors, plant, buildings etc but NOT the personal assets of the members. Their liability is “limited”  to  the  amount  of money which  they  put  into  the company, but no more.

A  CLG also affords  it’s members the benefit of limited liability, but  in  a  different  way. Since it does not have a share capital the members can not invest money in the company. Hence CLG’s are mainly used by charitable organisations, residents associations,  sports community organisations etc. When becoming a member of a CLG, each person signs a form  which says that they “guarantee” to pay the sum of (usually) €1.00 in the event of the  company  being  wound up. This is the only money which each member is obliged to pay up, and even then it is only in extreme circumstances.

Therefore, if the company ran out of money or was the subject of a large injuries claim and had to be wound up, the  individual  members  (provided  they  had  not  signed any personal guarantees to banks etc) would not be liable for the debts of the company.

Becoming a member of a CLG is a lot simpler than becoming a member  of an ordinary company. In an ordinary company money has to be paid over, shares applied for, and  minutes  drawn up and share certificates issued. Whereas in a CLG, a simple form saying  that  the  member  “guarantees”  to  pay  €1.00 is all that is required. And when they wish to leave the company, a letter to  the  Secretary  is  all that is required.

You might also note that occasionally Companies Limited by Guarantee apply  to  the Registrar of Companies to delete the words “Company Limited by Guarantee” from the Company’s title. Application is made under Section 1180 of the Companies Act 2014.

Officer/Member Requirements of a Company Limited by Guarantee

A CLG

  • must have a minimum of TWO Directors
  • must have a minimum of ONE member (no maximum number of members).
  • Must appoint a company secretary
  • Company Name must end in “Company Limited by Guarantee” (unless exemption granted under Section 1180 of Companies Act 2014).

Once   the   company  has  been  incorporated,  the  assets  and  liabilities  of  your unincorporated  body  should  be  transferred  to  the  new  company. That is of course presuming  that  there  is  an un-incorporated body in existence and  that  you  are  not starting from scratch.

On an on-going basis you should  be  aware  that a guarantee company is still a company formed under the Companies Act 2014  and  therefore  has  certain  duties and obligations, some of which are as follows:

  • It must keep books of account.
  • It must hold an AGM every year (In the case of a CLG with a sole member they can dispense with holding of physical AGM).
  • It must file an Annual Return in the Companies Office.
  • It must prepare proper accounts, and file them.
  • CLG’s which qualify as “small” may avail of audit exemption (subject to the approval of the members. If one member objects, then the company has to be audited)

Obviously  this  all  involves  a cost, which you must consider before proceeding  with incorporation.

Preparation of Forms:

In order to avail of the Companies Office fast incorporation scheme, we will need the attached questionnaire to be completed and returned to us (this can be returned by email/fax or post).

Once we receive same, we can prepare all the necessary forms and forward to you for signature.

Anti-Money Laundering Identification Documentation:

Please note that in order to comply with the requirements of Anti-Money Laundering legislation, we will require the following for each director of the company:
(a) Copy of Passport, Driving License or other valid photo ID*
(b) Utility bill (eg. ESB, Gas, Bank Statement etc) showing their address (no more than three months old).

Incorporation Process:

When we receive these forms back (along with payment of the relevant fees), we will compile the incorporation papers and then lodge them with the CRO.

We will then write to you confirming this, and send you a copy of the Memorandum and Articles which we have drafted on your behalf.

Providing that all the documents are in order the company will be incorporated in one to five working days from the date which they are received in our offices. (This is guaranteed by CRO.)

When this happens, we will immediately contact you by telephone, e-mail or fax and give you the Registered Number and the Date of Incorporation.

Company Package

Once the company has been incorporated we will dispatch the following documents to you:

  • Certificate of Incorporation
  • Four copies of the Memorandum & Articles of Association
  • Minutes of Directors’ First Meeting
  • Combined Company Register and Minute Book
  • Company Seal
  • First Return form fully completed and ready for signature by the director and secretary of the company.

Should you wish to engage us to form the company on your behalf our fees would be €499.00(incl. VAT), which includes Stamp Duty payable to the Companies Office.

If you would like further information on the formation of a guarantee company, please contact Joanne Browne or Karen Corcoran at CFI on +353 1 664  1111. Or better still you can email us directly at joanne@formations.ie.