Companies Limited by Guarantee (CLG) — Companies with Limited Liability by Guarantee in Ireland

Key Characteristics:

1. Limited Liability by Guarantee: Companies Limited by Guarantee (CLG) are companies where members do not own shares but agree to contribute a specified amount (guarantee) in the event of the company’s liquidation. The guarantee amount is outlined in the company’s governing documents and is typically small. This structure is most often used by organizations that do not seek to make a profit.

2. No Shares or Shareholders: Unlike companies limited by shares (LTD), CLGs do not have shareholders or issue shares. Instead, the company has members who agree to be financially responsible within the bounds of the guarantee. These members do not receive dividends or shares in the company, making this form ideal for non-profit organizations.

3. Non-Profit Activities: CLGs are commonly used for charitable and non-profit organizations, sports clubs, professional associations, and educational foundations. These companies operate not to generate profits, but to achieve specific social or charitable goals. Any surplus income is typically reinvested into the organization and not distributed to members.

4. Minimum Member Requirements: In Ireland, a CLG requires at least one member to be formed. However, most CLGs have more members, especially larger associations or foundations.

5. Minimum Director Requirements: A CLG must have at least two directors. Directors must be individuals, not companies. If the CLG does not have a resident company secretary in Ireland, it must provide a bond of €25,000 or appoint a resident company secretary.

6. Governing Documents: Like other types of companies in Ireland, a CLG must have a Constitution, which outlines the company’s rules and goals. Unlike an LTD, the CLG Constitution clearly states that the company will not distribute profits to its members.

7. Financial Reporting and Taxation: CLGs are required to file annual reports and financial statements with the Companies Registration Office (CRO). While CLGs are not established for profit, they may be subject to tax if they engage in commercial activities. However, CLGs registered as charities may be exempt from certain taxes.

When to Choose a CLG:

1. Non-Profit Organizations: CLGs are an ideal structure for organizations that do not seek to make a profit. These can include charities, foundations, associations, professional unions, educational institutions, and religious organizations.

2. Sports Clubs and Associations: Sports clubs and organizations that operate in the interest of their members often use the CLG structure, as this form protects members from personal liability for the company’s debts and ensures transparent management.

3. Charitable Foundations and Community Organizations: CLGs are suitable for organizations that operate on donations or grants and need to ensure proper oversight of how the funds are used.

Advantages of Registering a CLG in Ireland:

1. Limited Liability for Members: As with an LTD, CLG members are only liable up to the amount of their guarantee, protecting their personal assets from any claims against the company in the event of liquidation.

2. Transparency and Reliable Management: CLGs are required to submit annual reports and financial statements, which ensures transparency in management and compliance with legal requirements.

3. Tax Exemptions: CLGs registered as charities may be eligible for exemptions from income tax and other taxes.

Disadvantages of a CLG:

1. No Profits for Members: CLGs cannot distribute profits among their members. This restriction makes them unsuitable for commercial enterprises but ideal for non-profit purposes.

2. Administrative Obligations: Like all companies in Ireland, CLGs must maintain accounting records, file reports with the CRO, and comply with all legal requirements, which can be challenging for smaller organizations.

Suitable For:

• Charitable Organizations: CLGs are an excellent structure for charitable foundations and organizations that aim to work for the public good rather than generate profit.

• Professional Associations: Professional unions and organizations that seek to represent their members’ interests often choose the CLG structure.

• Community and Sports Clubs: Sports clubs and organizations that aim to protect their members from liability and maintain transparent management.

Example:

• Charitable Foundation: Many charitable foundations in Ireland choose the CLG structure because it allows them to attract donations without distributing profits among members, and they can qualify for tax exemptions.

In conclusion, Companies Limited by Guarantee (CLG) are an ideal structure for non-profit organizations, sports clubs, charitable foundations, and associations in Ireland, where limited liability for members and control over the company’s activities are essential for achieving public or charitable goals.