What is a Company Limited by Guarantee? Complete UK Guide for 2025

30 May, 2025 · 8 min read

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Explore what is a company limited by guarantee and learn if this flexible, non-profit structure is the right fit for your organisation.

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What is a Company Limited by Guarantee?
Is it a good choice?
When should you register as CLG?
How does it work?
How to register a CLG in the UK
How does a CLG compare to other UK company types?
Can you switch from a CLG to a Limited Company by Shares?
Closing thoughts

A Company Limited by Guarantee (CLG) is a special type of company in the UK used mainly for non-profit purposes. Unlike traditional companies that issue shares and aim to generate profits for owners, a CLG focuses on reinvesting surplus income into its core mission.

If you're starting a charity, sports club, community group, or membership organisation, this structure could be exactly what you need.

This guide explains everything: what a CLG is, who should use it, how it differs from other types of companies, how to register one, and the benefits and responsibilities involved.

What is a Company Limited by Guarantee?

A Company Limited by Guarantee is a type of incorporated business in the UK that doesn’t have shareholders or share capital.

Instead, it has members known as guarantors. These members agree to contribute a nominal amount (usually £1) if the company winds up.

This format is often used by charities, community interest groups, trade associations, residents’ associations, and professional bodies.

The main goal of a CLG is to serve a purpose, such as education, community development, advocacy, or sport, rather than to generate profit for distribution.

A CLG can still make money, but the profit must be reinvested into the organisation’s activities. It has its own legal identity, meaning it can enter into contracts, own property, and hire employees in its own name.

Is it a good choice?

A CLG offers a clear and flexible structure for non-profits that need legal recognition and limited liability without becoming share-based businesses.

It’s ideal in the following scenarios:

You are setting up a charity or social enterprise that will apply for grants and public funding.
Your organisation is run by members or volunteers, and profits are not intended for personal gain.
You want the credibility and legal recognition of an incorporated company.
You need limited liability protection for members and directors.

On the other hand, if you intend to grow a business through investment, plan to offer equity to founders or shareholders, or aim to distribute profits as dividends, this model will not suit your needs.

CLGs are also a good stepping stone for charitable organisations that later want to register with the Charity Commission, as they already meet many of the legal and governance requirements.

🗒️ Note:

In some cases, CLGs can be used for non-charitable purposes (e.g., trade associations), though they are most common among non-profits and charities.

Examples of Companies Limited by Guarantee

Some of the UK’s most recognised institutions operate as CLGs. These examples demonstrate how varied and influential CLGs can be:

British Red Cross – Provides humanitarian aid and emergency response services.
The National Trust – Protects historic places and green spaces across the UK.
Network Rail – Maintains the railway infrastructure in Great Britain.
PGA European Tour – Oversees professional golf competitions in Europe.
The Law Society of England and Wales – Represents solicitors and governs professional standards.
Friends of the Earth UK – Campaigns for environmental protection and sustainability.
Open University Students Association – Offers representation and support for distance learners.

These organisations often handle millions of pounds in funding and assets, yet operate with a focus on mission rather than profit. This structure gives them long-term stability and public trust.

When should you register as CLG?

A CLG is the right choice if your organisation:

Exists for public or community benefit
Needs to employ people or lease property
Intends to apply for funding from local councils or national bodies
Will have members or a board that makes decisions collectively
Plans to become a registered charity

This format is also popular for residential property management companies, where leaseholders act as members and make decisions about shared facilities.

Still unconvinced?

If you are unsure about your future growth plans, a CLG offers a flexible model that can evolve with you.

You can start as a small, informal group and scale into a registered charity with employees and complex operations – all within the same structure.

What it can’t do is support shareholder ownership or dividend payments.

If that’s important to your plans, a different structure, such as a Company Limited by Shares or a Community Interest Company (CIC) with shares may be more appropriate.

How does it work?

In a CLG, the main decision-makers are the guarantors and the directors. Here’s how the model operates:

Guarantors are members who agree to contribute a small, fixed amount (typically £1) if the company is wound up. They do not have shares, but they usually have voting rights.
Directors manage the daily operations of the company. They can be paid or unpaid, depending on the organisation's policies and legal status.
Articles of Association define how decisions are made, how meetings are held, and how profits are used. These must align with the non-profit mission.
Profits and Surpluses must be used to support the company’s stated objectives. They cannot be distributed to guarantors.

A CLG is governed by its Articles of Association, which act as the rulebook for how it functions. These articles cover key issues like:

Who can become a member
How members vote and make decisions
How directors are appointed and what powers they have
How meetings are held
What happens to company assets if the organisation winds up

A CLG can trade, raise funds, and even own subsidiaries. However, all income must be used to promote its stated objectives. If a CLG breaches this rule, it could face legal consequences and lose public funding.

How to register a CLG in the UK

Setting up a Company Limited by Guarantee in the UK involves several legal steps. Here’s how to do it:

Step 1: Choose a company name

Your name must be unique, not offensive, and must follow Companies House naming rules. If you plan to register as a charity, avoid names that are misleading or imply profit-making.

Company name

Step 2: Decide on the company’s purpose

Draft clear objectives that reflect your non-profit aims. These will go into your Articles of Association. If you’re applying for charity status, your purposes must be exclusively charitable and provide public benefit.

Step 3: Appoint Directors and Guarantors

You must have at least one director and one guarantor. The same person can hold both roles, although it's common for charities or larger groups to have several of each.

Step 4: Prepare your governing documents

Memorandum of Association: A legal statement signed by all initial members showing intent to form the company.
Articles of Association: The internal rules of your organisation. You can use model articles or write your own, especially if applying for charity status.

Step 5: Register with Companies House

Submit your application online or by post. You’ll need:

Chosen company name
Details of directors and guarantors
Registered office address
Memorandum and articles
Statement of guarantee

Step 6: Register for Corporation Tax with HMRC

Even if your organisation is unlikely to pay tax, you must register with HMRC within 3 months of starting to trade or becoming active.

Step 7: Apply for Charity Status (Optional)

If your company has charitable purposes and annual income over £5,000, you can apply to the Charity Commission for registered charity status. This provides access to tax reliefs and funding, but adds extra oversight.

How does a CLG compare to other UK company types?

Here’s a breakdown of how a CLG compares with other UK company types.

1. CLG vs Company Limited by Shares (Ltd)

Purpose: A CLG exists to reinvest income into its mission; a company limited by shares is designed to generate profit for its shareholders.
Ownership: CLG has guarantors; Ltd has shareholders who own portions of the company.
Capital raising: A CLG cannot issue shares; Ltd companies can sell shares to raise funds.
Profit use: CLG profits are reinvested; Ltd companies distribute profits as dividends.
Suitability: CLGs suit non-profits, charities, and community groups; Ltd companies are suitable for startups and commercial businesses.

2. CLG vs Community Interest Company (CIC)

Purpose: Both focus on community benefit, but CICs may distribute limited profits to investors.
Regulation: CICs are regulated by the CIC Regulator and Companies House; CLGs are regulated by Companies House and, if charitable, the Charity Commission.
Profit distribution: CLGs reinvest all profits; CICs may return some profit to investors under a capped model.
Credibility: CLGs, especially if charitable, tend to attract more trust from donors and funders.

3. CLG vs Unincorporated Association

Legal identity: A CLG has a legal personality; an unincorporated association does not, making members personally liable for debts.
Protection: CLGs offer limited liability; unincorporated associations do not.
Formality: CLGs require formal registration and reporting; unincorporated groups are easier to set up but offer fewer protections.

Can you switch from a CLG to a Limited Company by Shares?

You might wonder what happens if your organisation’s goals shift and you want to operate commercially. Can a Company Limited by Guarantee (CLG) become a Limited Company by Shares (Ltd)?

The short answer: There is no direct conversion!

Under UK law, there is no mechanism that allows a CLG to directly convert into a company limited by shares. These are two different legal structures, and there’s no statutory procedure to change one into the other while keeping the same registration.

What can you do instead?

If you want to transition from a CLG to an Ltd company:

Register a new company as a private limited company through Companies House. This will be a completely separate legal entity.
Move the business activities, contracts, and assets from the old CLG to the new Ltd company. Once everything is moved over, you can close the CLG by following the appropriate procedure through Companies House.

Points to consider:

The new company will receive a new company number and will be treated as a new legal entity.
You’ll need to notify HMRC, update bank accounts, and re-register for Corporation Tax and other services.
If you want to reuse the same company name, consider renaming the original CLG before registration, or wait to dissolve it first.

This process can be complex and may require legal advice, especially if you have liabilities, large assets, or long-term contracts.

Closing thoughts

Most small businesses start with a private limited company, but non-profits and purpose-driven organisations benefit from the clarity and trust that a CLG provides.

And if you’re ready to start your company, registration can be done in minutes.

ANNA offers a simple, hassle-free way to register a Limited Company and open a business account at the same time. It's quick, easy, and in many cases, completely free, depending on the support plan you choose.

ANNA’s Basic Plan (£19 + VAT one-off) includes company registration with no extra Companies House fee and access to a business account with no monthly charges – ideal for lean startups.
If you need ongoing compliance support, the Essential Plan (£119/year + VAT) includes managed Companies House filings, tax assistance, and a debit card.
For more complex businesses, the Total Support Plan (£395/year + VAT) offers a Prime London registered office address, same-day mail scanning and forwarding, complete tax support (PAYE, VAT, Corporation Tax), and free local and international payments.

ANNA also provides a full suite of add-on services including:

VAT and PAYE registration
Confirmation statement filing
Director management and share management services
Company cancellation cover
Virtual office address in London with mail forwarding

You can register your company in just three steps:

Choose your company name and check its availability.
Enter your business and director details.
Submit the application and receive your incorporation certificate—often within hours.

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