Company limited by guarantee
A company limited by guarantee is a type of incorporated legal structure that may be suitable for some Victorian not-for-profit organisations (see Choosing the right legal structure).
The process of setting up a company limited by guarantee is set out in the Corporations Law Act 2001 (Cth). This Act also sets out what your organisation must do to maintain its status as a company limited by guarantee.
The government body responsible for regulating the incorporation companies limited by guarantee is the Australian Securities and Investments Commission (ASIC). If a company limited by guarantee is also a charity, it will need to comply with the requirements of the Charity regulator Australian Charities and Not-for-Profit Commsision (ACNC).
*NOTE* Companies have traditionally reported to their incorporating regulator, the ASIC. Companies that are registered as charities will transition to reporting to the ACNC throughout 2013-2014. The information on this page has not yet been updated to reflect these changes. For more information about these changes go to the PilchConnect information page on the ACNC here.
This page provides information on setting up (incorporating) a group as a company limited by guarantee. The information on this website is intended as a guide only, and is not legal advice. If you or your organisation has a specific legal issue, you should seek legal advice before making a decision about what to do.
What is a company limited by guarantee?
A company limited by guarantee is a type of incorporated legal structure that is suitable for some Victorian not-for-profit organisations (see Choosing the right legal structure).
In a company limited by guarantee, the members of the company have limited liability. The members agree in writing (known as a ‘guarantee’) to pay a nominal amount (usually $20 - $100) to the property of the company. If the company is wound up, the liability of the members is limited to the nominal amount that they have guaranteed.
What laws apply to companies limited by guarantee?
Companies limited by guarantee are set up under the Corporations Law Act 2001 (Cth). They are a type of public company and they have to comply with the laws in the Corporations Act that apply to public companies. Companies limited by guarantee must include the words 'Limited' or 'Ltd' after their name (but many not-for-profit groups may be eligible for an exemption from this requirement).
Companies limited by guarantee often have a constitution (a document which sets out the rules governing the internal affairs of the organisation - previously called a Memorandum and Articles of Association). However, the Corporations Act also includes some provisions (known as 'replaceable rules') which can be used to govern a company in the absence of a tailored constitution.
Unfortunately, the Corporations Act is a complex piece of legislation and the provisions that apply to companies limited by guarantee are scattered throughout the Act (and Regulations).
How do we set up a company limited by guarantee?
We recommend that your organisation seek professional help from a lawyer, accountant, qualified company secretary or some other professional with experience setting up not-for-profit companies. At least initially, your organisation may also need someone with experience to advise you on the requirements for running a company limited by guarantee. This is not only because the law in this area is quite detailed, but also because the penalties that ASIC imposes for non-compliance with the law are quite significant.
It is worth getting some professional advice at the start, on issues such as:
- the drafting of a constitution with
- whether your company may be a special purpose company and under the Corporations (Review Fees) Regulations 2003 (Cth) eligible for reduced ASIC fees;
- whether your company is able to apply for an exemption from having to have the word 'Limited' in its name.
This could save your organisation a lot of time, cost, administrative headaches (and possible legal issues) further down the track.
In the future, PilchConnect hope to develop legal information resources to assist those wanting to learn more about setting up a company limited by guarantee. In the meantime, we have included some links to relevant websites, for those wishing to find out more information about setting up a company limited by guarantee.
Remember, groups that are registered as charities, or will seek to be reigistered as charities, must apply to ASIC for registration, but will be regulated in many respects by the ACNC on an ongoing basis.
Legislation
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This is the legislation that governs the setting up and running of a company limited by guarantee (as well as other types of companies).
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There are a number of Corporations Regulations covering various topics.
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This is a link to the legislation that regulates charities in Australia.
Australian Securities and Investments Commission (ASIC) - Incorporating regulator for companies
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This is a link to ASIC's homepage - information about setting up can be found in the 'For Companies' section although much of this information has been written for different types of companies (like private, for profit companies).
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This ASIC overview page provides an outline of the requirements for setting up a company limited by guarantee.
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This ASIC overview page provides an outline of the requirements for setting up a company limited by guarantee as a special purpose company (to get reduced fees).
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This ASIC page provides basic information on what is required to register an incorporated asssociation under the Corporations Act.
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This ASIC page provides basic information on the process for registering a company. It is not specifically written for not-for-profit companies.
Australian Charities and Not-for-profit Commission (ACNC) - Charities regulator