Company limited by Guarantee is formed for the purpose of promoting commerce, art, science, religion, sports, culture, education, research, charity or other similar objects. The income and property of a company limited by guarantee are to be applied solely towards the promotion of its objects.
The specific features of a company limited by guarantee include:
- The company shall not be registered with a share capital.
- Its name must include the words “limited by guarantee” or its abbreviation Ltd/Gte.
- It shall not be incorporated with the object of carrying on business for the purpose of making profits for distribution to members. Although a company limited by guarantee is allowed to do small business, its profits shall be applied to the attainment of its objects.
- The memorandum of the company shall not be registered without the authority of the Attorney-General of the Federation.
- Each member undertakes to contribute to the assets of the company upon it being wound up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company.
- The total liability of members of the company to contribute to the assets of the company in the event of it being wound up shall not at any time be less than N10,000.00.
- If, upon the winding up of the company, there remains after the discharge of all its debts and liabilities any property of the company, the same shall not be distributed among the members but shall be transferred to some other organizations with similar objects.
Where the object of a company is for promotion of commerce, art, science, religion, sports, culture, education, charity or similar objects and the profits of the business of the company will not be distributed to its members, it is most suitable to register the company as a company limited by guarantee.
But where a company is to be formed for the purpose of maximizing profits for distribution to its members, then such a company should not be registered as a company limited by guarantee but rather be registered as a company limited by shares or unlimited company.