The Companies Act 2014 provides for several different types of companies including limited companies, unlimited companies, companies with a share capital and those without. This blog considers the key features of Companies Limited by Guarantee (“CLG”).
The CLG type company is governed under Part 18 of the Companies Act 2014 (“The Act”) and should not be confused with the Designated Activity Company Limited by Guarantee which is governed under Part 16 of the Act.
1) The Companies Act 2014 and the Company’s Constitution
The CLG is governed by Part 18 of the Act, however, the main body of company law which applies to the CLG is the law applicable to private companies limited by shares (“LTD”). The CLG is subject to the same laws as an LTD except where they have been disapplied, modified or supplemented by Part 18 of the Act.
A CLG has a constitution which is made up of a memorandum of association and articles of association. Unlike an LTD which is the most common form of company in Ireland, the CLG has a memorandum of association with an objects clause. As a result, the Company has the capacity to do any act or thing stated in its objects.
2) Limited Liability with no Share Capital
The members of a CLG have limited liability but the company does not have a share capital. In the event of a winding-up, the members will be liable for an amount not exceeding that which is specified in the company’s constitution. As a consequence, the company is limited by the guarantee which the members undertook to pay in such an event.
CLG companies are generally utilised by charities, management companies and clubs such as sports and social clubs. A key reason why these types of organisations choose to incorporate as a CLG is because the company type affords its members limited liability without the need to hold an economic interest in the company.
3) Officers and Members
A CLG must have the following:
• A minimum of two directors that are natural persons;
• A Company Secretary, which may be a natural person or a Corporate body and may also be one of the directors of the company;
• A minimum of one member. There is no maximum number placed on membership by the Act but the constitution of the CLG must specify the number of members with which it is to be registered.
It is important to note that although the Act lays down a minimum of one member, one company secretary and two directors, a CLG may incorporate additional regulations into its articles of association. For example, a CLG’s constitution may specify that the company can only have a maximum of 10,000 members or it may stipulate that a director of the company cannot act as the company secretary. It is always advisable to review both the Act and a company’s constitution when considering any such matters.
4) Company Name
The name of a CLG must either end in "Company Limited by Guarantee" or "Cuideachta faoi Theorainn Ráthaíochta" unless the company has been granted an exemption. Not-for-profit companies which fulfil certain criteria may apply for the right to dispense with the suffix at the end of its name.
5) Annual Compliance
A CLG is required to file statutory financial statements in the Companies Registration Office together with its annual return. If eligible, a CLG company can claim an exemption from auditing its financial statements or claim the dormant company audit exemption. However, an audit is required if at least one member objects to availing of the exemption. A CLG which is formed for charitable purposes may be able to claim an exemption to only file an auditor’s report in the Companies Registration Office. CLGs with more than one member are unable to dispense with the holding of an Annual General Meeting.
This blog is not an exhaustive summary of the CLG type company. If you wish to incorporate a company, it is recommended that you seek professional advice. With 35 years experience in the company incorporation and company secretarial section, Corplaw is well placed to assist you with any queries you may have.
Looking to Form a Company?
Corplaw offer a full range of company secretarial services from company formation to dissolution. Talk to our team today to assist you with your tailored services or view the range of services here.