Companies limited by guarantee
Under a company structure, not-for-profit organisations or charitable organisations will generally be registered as public companies that are limited by guarantee. Registration of a company creates a legal entity separate from its members. The company can hold property and can sue and be sued.
A company limited by guarantee is a specialised form of public company designed for non-profit organisations. The term company limited by guarantee refers to what occurs in the winding up of this type of company. The members of a company limited by guarantee must specify the amount they are willing to contribute to the property of the company on its winding up and this will determine or limit the liability of the company’s members.
Companies are registered under the Corporations Act 2001, which is Commonwealth legislation administered by the Australian Securities and Investment Commission (ASIC). A company's registration is recognised Australia-wide.
How to register a company - ASIC website
A company limited by guarantee may also be registered without the word 'Limited' in its name. This is only possible if its constitution contains all of these conditions:
- it requires the company to pursue charitable purposes only, and to use its income for promoting those purposes
- it prohibits the company making distributions to its members and paying fees to its directors
- it requires the directors to approve all other payments the company makes to directors.
Advantages of a company limited by guarantee:
- all the advantages of an incorporated association
- the ability to carry on business outside South Australia.
Disadvantages of a company limited by guarantee:
- it's more expensive to register than an incorporated association
- compliance with the requirements of the Corporations Act is more expensive and onerous than compliance with the Associations Act.