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
- 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).
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.
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 [email protected].