Commercial Applications
What is a company limited by guarantee?
Joint Stock Company
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A company limited by guarantee is a type of registered company in which the liability of every member is limited to the amount which he had undertaken to contribute, if necessary, to the assets of the company at the time of winding up. This amount, called the guarantee, is specified in the Memorandum of Association of the company. The amount of guarantee may differ from member to member.
Such a company may or may not have share capital. If the company has share capital, every member is liable to pay the amount unpaid on the shares held by him in addition to the amount of guarantee. The guaranteed amount is in the nature of reserve capital which can be called upon only at the time of winding up. The Articles of Association of such a company must state the number of members with which the company is registered.
This type of company is generally formed to promote art, literature, sports, education and other non-business activities. Members are admitted on payment of admission and subscription fees.
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