Company Limited by Guarantee vs Public Company Limited by Shares

Company limited by guarantee vs public company limited by shares: if you are struggling to decide between incorporation as a company limited by guarantee or a public company limited by shares, it may be a good idea to get in touch with the Coddan team. We have been providing this type of advice for a number of years, and they will be able to empower you to make an informed decision that relates to your precise needs. While there are a number of similarities between the two set-ups, there are also a number of significant differences that can be advantageous in different situations.

Both of these company startups are suitable for charitable organisations and community interest groups, and each system has a legal framework in place to limit the overall liability of members in the event of accrued debts. For a company limited by guarantee, there is a drafted agreement that states that members will be responsible for settling any bad debts - but the maximum liability may be up to a nominal value, such as £1. For a company limited by shares, the shareholders are only responsible for making full payment for the actual shares, and this action is the extent of their responsibilities. In a regular company situation, the liability could have a severe effect on the financial commitments of individual directors. Public company requires to have two directors and one secretary, and the share capital of £50.000 and the quarter of it needs to be fully paid before you can start your business. 

If there is going to be a need for ongoing fundraising, there may be a stronger case to opt to form as a company limited by shares. Individual investors can purchase shares in the company, and there can be a legal agreement in place to specify the extent of the dividend that may be payable in the event of the company turning a profit. This can actually be a sort of compromise between investing for profit and investing to benefit a community project - such flexibility may be more difficult to obtain within a company limited by guarantee. Please note, that you cannot convert a public company into a non-profit company.

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