{"id":3852,"date":"2024-02-04T13:14:25","date_gmt":"2024-02-04T12:14:25","guid":{"rendered":"https:\/\/1stattorneys.com\/articles\/?p=3852"},"modified":"2024-12-04T13:31:32","modified_gmt":"2024-12-04T12:31:32","slug":"elementor-3852","status":"publish","type":"post","link":"https:\/\/1stattorneys.com\/articles\/2024\/02\/04\/elementor-3852\/","title":{"rendered":"Understanding a Company Limited by Guarantee in Nigeria"},"content":{"rendered":"\t\t
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A Company Limited by Guarantee (CLG)<\/strong> is a unique business structure under Nigerian law, often used by entities that operate for charitable, educational, religious, or other non-profit purposes. It is governed by the Companies and Allied Matters Act (CAMA) 2020<\/strong>, which provides a framework for its formation, operation, and governance. Unlike companies limited by shares, a CLG does not have shareholders. Instead, it is managed by members who guarantee to contribute a fixed amount to the company’s liabilities in the event of its winding up.<\/p>

Key Features of a Company Limited by Guarantee<\/strong><\/h4>

  1. Non-Profit Objective<\/strong>:
    A CLG is primarily established for public benefit rather than profit generation. It often supports causes like education, healthcare, community development, and the promotion of arts or sciences.<\/p><\/li>

  2. No Share Capital<\/strong>:
    Unlike companies limited by shares, a CLG does not issue shares or have shareholders. Instead, it has members who provide guarantees for the company\u2019s debts, typically a nominal amount, such as \u20a61,000.<\/p><\/li>

  3. Limited Liability<\/strong>:
    Members’ liability is limited to the amount they agree to guarantee. This protects their personal assets from company liabilities beyond the guarantee.<\/p><\/li>

  4. Distinct Legal Personality<\/strong>:
    A CLG is a separate legal entity, capable of owning property, entering into contracts, and suing or being sued in its name.<\/p><\/li>

  5. Approval from the Attorney General<\/strong>:
    To form a CLG in Nigeria, the promoters must obtain the consent of the Attorney General of the Federation. This process ensures that the intended objectives align with public interest.<\/p><\/li>

  6. Profit Distribution<\/strong>:
    Any surplus generated by the company must be reinvested into its objectives. Members are not entitled to dividends or profit-sharing.<\/p><\/li><\/ol>

    Steps to Register a Company Limited by Guarantee in Nigeria<\/strong><\/h4>

    1. Name Reservation<\/strong>:
      The first step is to reserve a name with the Corporate Affairs Commission (CAC). The proposed name must include the phrase \u201cLimited by Guarantee\u201d<\/em>.<\/p><\/li>

    2. Drafting the Memorandum and Articles of Association (MEMART)<\/strong>:
      The MEMART must outline the objectives of the company and the guarantee amount members are willing to contribute.<\/p><\/li>

    3. Consent of the Attorney General<\/strong>:
      An application must be submitted to the Attorney General of the Federation with supporting documents such as the MEMART and a detailed statement of the company\u2019s proposed objectives.<\/p><\/li>

    4. Submission to the CAC<\/strong>:
      Once the Attorney General’s consent is obtained, the promoters can file the registration with the CAC, along with the required documents and fees.<\/p><\/li>

    5. Issuance of Incorporation Certificate<\/strong>:
      Upon successful registration, the CAC will issue a certificate of incorporation.<\/p><\/li><\/ol>

      Governance of a CLG<\/strong><\/h4>

      A CLG is managed by directors and governed by its Articles of Association. The directors are responsible for running the day-to-day affairs, while members hold the directors accountable during general meetings. Key governance practices include:<\/p>