Define: Limited By Guarantee

Limited By Guarantee
Limited By Guarantee
Quick Summary of Limited By Guarantee

Limited by guarantee refers to a type of legal structure commonly used by non-profit organisations, charities, and social enterprises. In this structure, the liability of the members or owners of the organisation is limited to a predetermined amount that they agree to contribute if the organization is unable to meet its financial obligations. Typically, members of a company limited by guarantee agree to contribute a nominal amount, often set at £1 or a similarly nominal sum, in the event of the organisation’s insolvency or winding up. This structure offers a degree of protection to the personal assets of the members, as their liability is restricted to the amount of their guarantee. Limited by guarantee entities are governed by company law and must comply with relevant regulations regarding governance, reporting, and taxation.

Full Definition Of Limited By Guarantee

The members of a registered company (see: Registered company) that is limited by guarantee have their liability limited to the amount they guarantee. Unlike a company that is limited by shares (see: Limited by shares) the guarantee need not be paid in advance, but only if the company becomes insolvent. This form of limitation is not available to new companies, but there are some such companies still in existence. They are all public companies; private companies limited by guarantee have become private companies limited by shares with zero share capital.

Related Phrases
No related content found.
Disclaimer

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 29th March, 2024.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

  • Page URL:https://dlssolicitors.com/define/limited-by-guarantee/
  • Modern Language Association (MLA):Limited By Guarantee. dlssolicitors.com. DLS Solicitors. March 29, 2024 https://dlssolicitors.com/define/limited-by-guarantee/.
  • Chicago Manual of Style (CMS):Limited By Guarantee. dlssolicitors.com. DLS Solicitors. https://dlssolicitors.com/define/limited-by-guarantee/ (accessed: March 29, 2024).
  • American Psychological Association (APA):Limited By Guarantee. dlssolicitors.com. Retrieved March 29, 2024, from dlssolicitors.com website: https://dlssolicitors.com/define/limited-by-guarantee/