Unlike a company limited by shares, a company limited by guarantee does not have a share capital. Its members are admitted by the company in accordance with its admission rules (if any) and each member “guarantees” the payment of a set amount towards the payment of the company’s debts in the event that the company is wound up. This guarantee applies to each member while they are members and for a period of 12 months after they cease being a member. Unless otherwise requested the guarantee amount inserted into the Acis Constitution will be $10.00.
As the name suggests, this type of company is a public company and, therefore, must comply with the requirements set out for public companies in the Corporations Act 2001. For example:
- the company must have at least 3 directors at all times (two of whom must be an Australian resident);
- the company must have an Australian resident secretary at all times;
- the company is prohibited from distributing dividends to its members;
- the company may be required to have its financial statements audited each year;
- the annual levy imposed by ASIC is $1240.00 (except a charitable purposes only);
- a copy of the company’s constitution and any amendments to it must be lodged with ASIC.
This form of company is commonly used for sporting clubs and not for profit organisations and is the vehicle generally preferred to attain special tax treatment.