This structure is designed to protect the personal assets of members while allowing them to participate in the organization’s governance and decision-making processes. Typically, these companies do not have share capital and do not distribute profits to members, instead reinvesting any surplus back into the organization’s activities.
Company Limited by Guarantee Example
For example, a community sports club organized as a Company Limited by Guarantee would have its members agree to pay a nominal amount (like £1) if the club goes bankrupt, ensuring that their personal finances are not at risk while they enjoy the benefits of club membership and contribute to its operations.