Company limited by guarantee meaning Hong Kong

Company Limited by Guarantee Meaning

A company limited by guarantee has no share capital. Its members' liability is limited to the amount they agree to contribute if the company is wound up. Each member acts as a guarantor, not a shareholder. The company is prohibited from distributing profits to its members.

This structure serves non-profit bodies: charities, trade associations, clubs, and professional societies. Unlike a company limited by shares, a guarantee company cannot issue shares. It has no shareholders. Its constitution sets out each member's guarantee, typically a nominal sum such as HK$1.

Guarantee Company Hong Kong

A guarantee company is incorporated in Hong Kong under the Companies Ordinance (Cap. 622). File the application with the Companies Registry on Form NNC1G, accompanied by Form IRBR1 for business registration. The Registrar issues a Certificate of Incorporation. The Inland Revenue Department issues a Business Registration Certificate.

The company must have at least one director, a company secretary, and a registered office in Hong Kong. Its articles of association must state the company is limited by guarantee and has no share capital.

Non Profit Company Structure Hong Kong

For non-profit organisations in Hong Kong, a company limited by guarantee is the standard corporate structure. It has no share capital and cannot pay dividends. This suits entities pursuing a purpose rather than generating profit for owners.

A member's guarantee is called upon only if the company is wound up while insolvent. The guarantee amount is stated in the articles of association and is typically a small fixed sum.

Company Limited by Guarantee vs Shares

The key difference lies in the nature of the members' interest. A company limited by shares has shareholders who own equity and may receive dividends. A company limited by guarantee has no owners in that sense. Its members are guarantors with no financial stake.

A company limited by shares is the standard trading vehicle. A company limited by guarantee is used where the entity does not seek to distribute profits and where a share capital structure is unnecessary.

Hong Kong Company Formation Guarantee

Forming a guarantee company in Hong Kong follows the same incorporation process as a company limited by shares, except you file Form NNC1G instead of Form NNC1. Deliver the articles of association to the Companies Registry. Those articles must comply with the requirements of Cap. 622 for guarantee companies.

The company must also appoint a designated representative for the Significant Controllers Register and maintain statutory registers at its registered office.