Companies Limited by Guarantee - Essay Example

Charities under this category One of the most frequently used routes for running a not-for-profit business is establishing it as a company limited by guarantee. These companies will not have either shareholders or shares but are members. Under this, members consent in the eve of liquidation or winding up to guarantee a certain sum of money that may be needed to cater to any creditors' demands. Such amount of guarantee will be illustrated in the Memorandum of Association of such companies.

Further, companies, whether limited by guarantee or by shares, have to adhere to the Companies Act of 2006 in the UK. Charities under this category have to register their Memorandum and Articles with the Charity Commission at the time of incorporation (Bloomsbury 2013: 60). Nominet UK is a UK based company limited by guarantee, and it is carrying on UK domain registry business in the UK. Its members cannot have the right to participate in its profit, and anybody can become a member of Nominet UK. The majority of its members are Internet service providers in the UK (Lambert 2012:44).

A private company limited by shares can be incorporated under Scotland, Wales and England laws.” Limited by shares “connotes that the company's shareholders contribute to the company's capital. It connotes that shareholder’s personal assets cannot be attached by the creditors in the event of insolvency or winding up of the company. Creditors can access the shareholders’ share capital amount in the event of winding up only up to the amount invested by them in the company's share capital.

A limited company may be private or public as the private limited company disclosure norms are less flexible than the public company. Due to this reason, a private company is not allowed to issue shares to the general public, and hence, it is not entitled to be listed or traded on a public stock exchange. A UK public company is referred to as PLC or public limited company, and a private company is known as a private limited company and will have a suffix as “LLC”.