Companies Limited by Guarantee

We can incorporate for you in the UK a Private Company Limited by Guarantee.

A company limited by guarantee does not usually have a share capital or shareholders, instead it has members who act as guarantors. The guarantors give an undertaking to contribute a nominal amount, typically £1 in the event of the winding up of the company.

Advantages of Companies Limited by Guarantee

The biggest benefit of incorporating a company limited by guarantee, is that those managing the company are not personally liable for any debts the organisation may incur.

  • They have legal identities separate from its members
  • Individual members are almost totally protected against liability
  • They can buy and sell property in the name of the organisation
  • Companies are generally democratic organisations - they have a membership
  • The majority of voluntary organisations do not have to have the word limited in their title

Flat Management Companies

Where there are multiple tenants a Flat Management Company is normally used to protect the interests of the leaseholders. We can either incorporate the flat management company for you as a Limited Liability company or Limited by Guarantee company.

A Flat Management Company has its Memorandum and Articles of Association specially drawn up to allow the company to own, manage and administer a freehold property, which is normally divided into several dwelling units or flats, with each leaseholder owning a share in the company.

When a property is divided into a number of flats, each flat owner usually has a lease of their own flat but they may also hold shares in a management company that owns the freehold (or lease) of the entire building. Normally, the company's constitution will say that shareholders who sell their flats must also transfer their shares to the new owners. This ensures that, at any given time, the limited company represents the interests of all the current flat owners.

Some limited companies do not have shares and are instead 'limited by guarantee'. If your company is limited by guarantee, it means that the members have agreed to contribute to the assets of the company if it is wound up. In this guide, the terms 'shareholder' and 'member' mean the people who own the company.

Reasons for a limited company

One reason why residents of a block of flats would have a company is to own the freehold or 'head lease'. Freehold gives outright ownership of the property to the company. A 'head lease' is a lease granted directly to the company, who may in turn grant subleases of the property (or parts of it) to the flat owners. The company is also often used for collecting cash for carrying out repairs and maintenance to common parts of the property. Often it is a condition of buying a flat that the buyer becomes a member or shareholder of the company.

Another reason why a company would be set up is so that leaseholders of flats can exercise their right to manage the building they live in. The right to manage must be exercised through a limited company set up for that purpose.