Public Co. By Guarantee
A public company limited by guarantee is most often formed by non-profit organisations such as sports clubs, workers’ co-operatives and membership organisations, whose owners wish to have the benefit of limited financial liability.
A public company limited by guarantee does not have any shares or shareholders (like the more common limited by shares structure) but is owned by guarantors who agree to pay a pre-defined amount of money towards company debts.
Generally, the guarantors will have no profits distribution as they will instead be re-invested to help promote the non-profit objectives of the public company limited by guarantee. If any profits are distributed to the owners, then the company will forfeit its right to apply for a charitable status.
- A public company limited by guarantee is a distinct legal entity from its owners, and is responsible for its own debts.
- The personal finances of the company’s guarantors are protected. They will only be responsible for paying company debts up to the amount of their guarantees.
- The status of ‘Limited’ will help to build the trust and confidence amongst clients and investors. This type of professional credibility is valuable and can help a company achieve its objectives more effectively.