If your voluntary, charitable, social enterprise or community organisation has a fairly substantial turnover, employs staff, owns or occupies premises (or aspires to do these things) and you wish to limit the personal liability of management committee members then you may wish to consider registering as a Company Limited by Guarantee.
The Company Limited by Guarantee model is the type of company normally chosen by voluntary organisations, charities, social enterprises and community groups because:
With the Company Limited by Guarantee model, the incentive for members to become involved is not profit, but commitment to the objects of the organisation.
A Company Limited by Guarantee can be formed by a group of people (Steering Group) who wish to set up a new organisation, or by the committee of an existing, constituted organisation. An Organisation/ Steering group aiming to become a limited company must submit a Constitution to Companies House. For more information on constitutions see our Guide to Constitutions. The Constitution needed for Companies Limited by Guarantee consists of two parts:
SCVO publishes a Model Memorandum & Articles of Association on its website (www.scvo.org.uk) which can be adapted to meet the needs of individual groups - CVS Fife can help with the adaptation process. Most legal firms will also create Memorandum & Articles of Association for a fee. Companies House has a range of guidance booklets on forming a new company available on its website: www.companieshouse.gov.uk
A Company Limited by Guarantee can become a Registered Charity provided that all its objects are charitable and there are no clauses within its memorandum & Articles of Association that do not comply with Charitable Law. The Office of the Scottish Charity Regulator (OSCR) will require you to submit a number of documents, including your Memorandum & Articles of Association, so it can assess your application for Charitable status.
Likewise, a Registered Charity can become a Company Limited by Guarantee; OSCR has a fast-track process for this if the Charity concerned does not propose to change its aims and objectives and has the power within its existing Constitution to wind up the organisation and transfer any assets over to the new company. See the OSCR website for further information: www.oscr.org.uk
The decision on whether or not to apply for Company Limited by Guarantee status should be made on an individual, organisation-by-organisation basis. CVS Fife's development staff members work on the basis of what is best for the individual organisation while advising on this issue.
* It is important to remember that, while CLG does provide some protection for Committee Members/Directors, it only does so if the Board can demonstrate that it has been acting with due care and diligence. Boards that do not meet regularly, fail to scrutinise reports and/or implement financial monitoring may leave themselves open to claims of negligence which CLG status cannot protect them from.