Introduction to this document

Statutory model articles for
private companies limited by guarantee

If you are setting up a not-for-profit organisation, a company limited by guarantee may be the form for you. The statutory model articles set out a template for the rules governing your company.

What is a company limited by guarantee?

A company limited by guarantee is a form used by not-for-profit organisations such as charities, clubs and associations. It is structured and run like a private company limited by shares, and has to abide by most of the same rules. The difference is that rather than being having a share capital and shareholders, they have members. Instead of using their profits to pay dividends to shareholders, they plough them back into the company or use them for a similar purpose.

In a company limited by guarantee, the members’ liability is limited to an amount stated in their articles. This is usually a token amount of £1. The idea is to protect those who take on the responsibility of running an organisation for the benefit of others. The company is its own legal person, meaning it can enter into contracts, hold a bank account etc. without the individuals having to take on this risk.

Why do you need model articles?

The Companies Act 2006 requires all companies to have articles of association, including companies limited by guarantee. Essentially, the articles are an agreement between the company and its members setting out how it should be run. They consist of the rules and procedures that need to be followed when making decisions, as well as the roles, rights and liabilities of those involved in the company.

There is a statutory model for each of the three types of company (private limited by shares, private limited by guarantee, and public) in the Companies (Model Articles) Regulations 2008 (SI 2008/3229). The model articles for companies limited by guarantee are different to those for companies limited by shares, setting out the members’ guarantee and doing away with the provisions relating to share capital.

Companies are free to draft their own articles from scratch, but most adapt the model to suit their needs. If you don’t specify which articles your company uses, it is assumed that the statutory model applies.

Other options

Not-for-profit organisations can take other forms. Community Interest Companies and Community Benefit Societies are alternative incorporated vehicles. Or a less formal approach may suit, in which case an unincorporated vehicle such as an unincorporated association or a co-operative would be more appropriate.