Companies limited by guarantee

Generally, companies comprise 2 main types: proprietary (private) and public companies – see section 112 of the Corporations Act – either of which may be limited or unlimited.

Limited public companies may be limited through the issue of shares or limited by guarantee – s.112(1).

A company limited by guarantee is most usually one formed as a non-profit trading entity, following the principle of having members’ liability restricted to an amount they each personally guarantee.

Public Company Requirements

As a public company, one limited by guarantee must generally adhere to the Act’s requirements for public companies, including requiring:

  • A constitution
  • At least 3 directors
  • A Company Secretary
  • Annual accounts audited, lodged with ASIC and provided to members
  • An Annual General Meeting.

Other sections of the Act also apply to such companies, such as s.254SA which prohibits paying a dividend to members.

Removal of “Limited” from Name

Under s.150 a guarantee company may apply to ASIC (using Form 432 “Application to Approve Registration of a Company Name Without the Word ‘Limited’”) for the word “Limited” to be omitted from its name – if its constitution:

  • Requires it to pursue charitable purposes only and to apply its income to those purposes; and
  • Prohibits the company paying fees to directors and making distributions to its members.

ASIC Regulatory Guide 50 provides more guidance on omitting the word “Limited” from company names.

Contributions in a Winding-up

Under s.518 in a liquidation of a company limited by guarantee a member need not contribute more than the amount the member has undertaken to contribute to the company’s assets if the company is wound up.

*Originally written by Company Secretary, an Australian virtual company secretary service.

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