If you are setting up a company with the Companies Registration Office, it’s important to choose the best legal structure to meet your business requirements.
For companies being registered in Ireland and the UK, two common types are the Company Limited by Guarantee (CLG) and Private Company Limited by Shares (LTD).
In this article we cover the differences between LTD and CLG company types; breaking down their key features and purposes, to help you decide which is right for your business.
What is Company Limited by Shares?
In the Company Limited by Shares (LTD) structure, a share capital (which is the value of the company) is divided into ownership portions known as ‘shares’.
Some companies with this structure only have one share, which hasn’t been divided. This share is 100% of the share capital, and the sole shareholder owns the entire business. When a company has more than one share, ownership of the company will be separated into equal portions (shares), with each share being a percentage of the company. The shareholders who buy these shares will own part of the business. Profits can be distributed to shareholders in dividends.
In Ireland, the minimum number of shareholders in a Private Company (LTD) is one, and the maximum number is 149. In the UK, there is no maximum number of shareholders for a Private Company (LTD).
LTD companies will have a Memorandum & Articles of Association – essentially a constitution set out in a document – which specifies the rules that govern a company, as well as the limited liability of shareholders.
An Irish Private Company (LTD) must have a minimum of one director. If there is only one director, the company is obligated to appoint a secretary. LTD companies with more than one director may appoint one of the directors as the company secretary. The company remains a separate legal entry that is distinct from its shareholders and directors.
What is Company Limited by Guarantee (CLG)
Unlike an LTD company, a Company Limited by Guarantee (CLG) in Ireland has no share capital. This type of company is typically used for charities, societies, trade associations, non-governmental organisations (NGOs), sports clubs and other non-profit companies.
A CLG company has neither share capital nor shareholders. Instead, they appoint members as guarantors. Members guarantee to make a nominal contribution (typically €1) in the event that the company winds up.
Rather than being distributed to shareholders, any surplus income received by a CLG must be reinvested in the purpose of the organisation. The Memorandum & Articles of Association requires an objects clause that clearly specifies this purpose. There are also responsibilities and rights of members that are outlined in this constitution.
CLGs are governed by their members, who hold voting rights and contribute to decision-making. Members have specific rights and responsibilities, outlined in the company’s constitution. Becoming a CLG gives a non-profit organisation a democratic structure that allows members to have a say in decision making and governance, and play a part in keeping the organisation aligned with its core purpose and objectives.
Similar to a Private Company LTD and its shareholders, CLGs will provide limited liability protection to members. This ensures that the members’ personal assets are protected from any debts incurred by the CLG.
Charities that are CLGs can apply to the Charities Regulator for charitable status under the Charities Act 2009. This status offers advantages such as tax exemptions on income and property, and may enhance the credibility of a CLG, which can help them to secure funding.
The process of forming a CLG falls within the Companies Act framework, and includes; preparing a Memorandum and Articles of Association (constitution), filing documentation, appointing directors and appointing officers.
Ltd vs CLG Company Ireland
Now we’ve provided an overview of these two common company types in Ireland and the UK, let’s compare their features 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 organisation |
| 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 organisation 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) |
Selecting either a Company Limited by Shares (LTD) or a Company Limited by Guarantee (CLG) will provide your organisation with corporate legal protection and limited liability. However, in order to meet compliance requirements and align with your organisation’s purpose, it is important to make the right choice between these two legal structures.
