What does the term “Limited by Guarantee” mean?

What does the term “Limited by Guarantee” mean?

December 25, 2019

A Company Limited by Guarantee means a private company that does not have shareholders or share capital. It has members called guarantors that undertake to contribute should the company need it. It cannot distribute its profits and these are generally reinvested back into the company.

Section 26 of the Company and Allied Matters Act Cap C20 LFN 2004 (CAMA) provides that where a business is formed for promoting commerce, art, science, religion, sports, culture, education, research, charity or other similar objects, and the income and property of the company are to be applied solely towards the promotion of its objects and no portion thereof is to be paid or transferred directly or indirectly to the members of the company except as permitted by this Act, the company shall not be registered as a company limited by shares, but may be registered as a company limited by guarantee.

 

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