Companies Limited by Guarantee are usually non–profit organisations such as charities, clubs and associations.
Their emphasis is normally concerned with the provision of a service for the benefit of the public or a specific section of it. Whilst a company limited by guarantee might actively seek to maximise its revenues through donations, subscriptions or sponsorships, it would also seek to apply such funds in relevant projects.
In situations where a company limited by guarantee has more income than expenses, the excess is referred to as a surplus and not a profit.
As there is an absence of shareholders in this kind of organisation, distribution of any surplus to members of the company would not occur. Instead such excesses would be stored and used in future projects which the company engaged in.
Companies limited by guarantee do not have shareholders as normal trading business entities do. They consist, instead of guarantors or members who agree to indemnify the company in the event that it is unable to repay any of its outstanding debts.
The amount which is guaranteed is usually £1 per member and their liability would be limited to this sum.
Unlike companies limited by shares, the objects of this type of entity are commonly more specific. They might typically specify the kinds of activities and areas which the company is allowed to engage in.
For example, an objects clause might specific that the organisation can not purchase materials from a certain country which they believe commits human rights violations or who is not known for its environmental friendly approaches.