If you are looking to start a charity or a non-profit organisation, you may consider setting up a Public Company Limited by Guarantee (CLG). Here are details of what makes up a CLG.

A CLG is a separate legal entity. It is a company and is separate from the members of the company. As a legal entity, it can be sued and sue, enter into contractual agreements and own properties in its name. As it is limited by guarantee, the liability of the members is limited by the Constitution of the company to the amount that the members agree to undertake to contribute to the assets of the company in the event that it is wound up. This guaranteed amount is usually nominal. Most CLGs set the amount per member to $1.

There is no share capital as the members are not required to pay any capital to set up the company. Thus there are no shareholders of the company. Only members. There will still be a director and a secretary of the company. Since there is no share capital, the company is a public company as only a company having share capital can be a private company.

The Constitution of the CLG if the document that binds the company and members. It will state the number of members to be registered with the CLG. As CLGs are non-profit or charitable in nature, this would usually be stated in the constitution. The Constitution will state that the liability of the members is limited and that each member undertakes to contribute a maximum amount specified to the assets of the company in the event of the company being wound up while he is a member or within one year of him ceasing to be a member. This is the guaranteed amount.

CLGs are used for non-profit organisations that require a company status. A CLG is used for trade associations, charities, societies, religious organisations, clubs or other charitable non-profit setups that would like to limit their liabilities. Since the income of the CLG will be used solely towards the promotion of the purpose of the CLG, it cannot pay out profits in the form of dividends and bonuses to its members. There may be a provision in the company’s constitution that states that in the event of the CLG winding up, any assets left after settling its debts should be distributed to other institutions with a similar purpose as the CLG or to a registered charity.