When registering a company with the Companies Registration Office, it is crucial to select the proper legal structure to suit your business needs.
The Company Limited by Guarantee (CLG) and Private Company Limited by Shares (LTD) are the two most prevalent forms of corporations registered in Ireland and the UK.
This article discusses the distinctions between LTD and CLG company forms, dissecting their main attributes and functions to assist you in selecting the best option for your enterprise.
Company Limited by Shares: What is it?
A share capital, or the firm’s worth, is split up into ownership pieces called “shares” in a corporation limited by shares (LTD) structure.
Some businesses with this structure own only a single, undivided share. The lone shareholder owns the entire company, and this share represents 100% of the share capital. When a business has many shares, its ownership will be divided into equal parts, or shares, each of which represents a percentage of the business. A portion of the company will belong to the shareholders who purchase these shares. Dividends from profits may be paid to shareholders.
In Ireland, a Private Company (LTD) can have as few as one shareholder or as many as 149 owners. In the UK, a private company (LTD) can have unlimited shareholders.
LTD companies will have a document called the Memorandum & Articles of Association, which is effectively a constitution that outlines the regulations governing the business and its shareholders’ limited liability.
The minimum number of directors required for an Irish Private Company (LTD) is one. If there is only one director, the business must designate a secretary. However, LTD corporations with many directors can designate one of them as the company secretary. The industry remains a different legal entity from its directors and stockholders.
Company Limited by Guarantee (CLG): What is it?
Unlike an LTD, a Company Limited by Guarantee (CLG) lacks share capital in Ireland. This business is usually used by non-governmental organizations (NGOs), trade groups, sports clubs, charities, and other non-profits.
A CLG business does not have shareholders or share capital. Instead, it designates members as guarantors. Members promise to contribute a small amount (usually €1) in the event that the business closes.
Any excess money a CLG receives must be invested in the organization’s mission rather than given to shareholders. This goal must be expressly stated in the objects section of the memorandum and articles of association. This constitution also specifies the rights and obligations of its members.
CLG members are in charge of making decisions and exercising voting powers. The company’s constitution specifies its rights and obligations. A non-profit organization that becomes a CLG gains a democratic structure that enables members to participate in governance and decision-making processes and helps maintain alignment with its main goals and purposes.
CLG members will have limited liability protection, similar to that of a Private Company LTD and its shareholders. This guarantees that any obligations incurred by the CLG will not affect the members’ personal assets.
Under the Charities Act of 2009, CLG charities may apply for charity status from the Charities Regulator. In addition to providing benefits like income and property tax deductions, this status may boost a CLG’s legitimacy, which could aid in funding acquisition.
The Companies Act forms a CLG and involves the following steps: creating a constitution, completing paperwork, designating officials and directors, and drafting a memorandum and articles of association.
CLG Company Ireland vs. Ltd.
After giving a summary of these two typical business structures in the UK and Ireland, let’s examine their characteristics side by side:
| BASELINE | COMPANY LIMITED BY SHARE (LTD) | COMPANY LIMITED BY GUARANTEE (CLG) |
| Purpose | Commercial activities
|
Non-profit activities, including charitable, social or sporting activities, and trade associations |
| Ownership | Shareholders own the company | Members control the organization |
| Share capital | Shares are distributed to shareholders in the form of dividends | There are no financial distributions among members, and any surplus income is reinvested in the organization to fund its specified purpose |
| Directors | Minimum of 1 | Minimum of 2 |
| Liability of shareholders/members | Liability is limited to any unpaid sum on shares held | Liability is limited to the nominal amount which is paid by each member (usually €1) |
Your company will have limited liability and corporate legal protection if you choose a Company Limited by Shares (LTD) or a Company Limited by Guarantee (CLG). Making the correct decision between these two legal frameworks is crucial if you want to satisfy compliance standards and support your organization’s goals.
If you have any questions, please do not hesitate to contact us.
Giorgi Kurtsikidze
https://gerai.co.ukMy mission is to provide client-focused legal solutions and services through flexible, value-driven approaches by leveraging technologies to anticipate the needs of those existing and potential clients I serve in a manner that adheres to the highest standards of excellence and integrity in the field of Business Law.