non-profit-fact-sheets

Non-Profit Fact Sheets

What is a Company Limited by Guarantee?


Published: August 19, 2013

Read Time: 5 minutes

Company limited by

When establishing a non-profit organisation, founders can choose from a large range of legal forms. An organisation’s legal structure will determine the types of activities it is legally able to carry out and which government bodies it is required to seek registration from or report to. A company limited by guarantee is one possible structure of a non-profit organisation. Find out more about the other types of legal structures here.

A company limited by guarantee is a specialised form of public company designed for non-profit organisations. In Australia companies limited by guarantee are subject to the [Corporations Act 2001 (Cth)]1 and administered to by the [Australian Securities and Investments Commission]2 (ASIC). Like incorporated associations, this legal structure designates an organisation as a separate legal entity. A company limited by guarantee can be sued, legally lease a property, enter into contracts or hold assets in its name.

The term company limited by guarantee refers to what occurs in the winding up of this type of company. The members of a company limited by guarantee must specify the amount they are willing to contribute to the property of the company on its winding up and this will determine or limit the liability of the company’s members.

Like other public companies, a company limited by guarantee has many legal restrictions and requirements. The following is an excerpt of some of ASIC’s expectations, please see [this page][5] for further details or seek legal as advice as neither our list or theirs is exhaustive.

Company limited by guarantee minimum requirements

As a minimum, a company limited by guarantee must:

  • “have at least three directors and one secretary
  • have at least one member
  • be internally managed by a constitution or replaceable rules
  • maintain a register of its members
  • keep a record of all directors’ and members; meeting minutes and resolutions
  • appoint a registered company auditor within one month of its registration
  • keep proper financial records
  • prepare, have audited and lodge financial statements and reports after the end of every financial year
  • send to its members a copy of its financial statements and reports, unless the member has a standing arrangement with the company not to receive them
  • hold an annual general meeting once every calendar year within five months after the end of its financial year
  • receive and review an annual company statement and pay an annual review fee
  • lodge notices whenever changes to its officeholders, office addresses, constitution and its name occur”3

One of the key advantages of this legal form is that it allows the organisation to operate nationwide. The strict legal requirements of this structure might also provide potential donors, clients and business partners with confidence that the organisation is run according to stringent principles and acknowledged standards. Indeed, some types of organisations are required to have this structure by law. This legal structure is not one that should be entered into lightly, however, as its legal and administrational obligations are significant and may be too much of a burden to an organisation with limited resources.

Since 2010, ASIC’s requirements of organisations classified as a “small company limited by guarantee” have been altered. This category is defined as a company limited by guarantee that has held this legal status for the entirety of the financial year, has not held deductible gift recipient status at any time during the financial year and its revenue for the financial year is less than $250,000. Unless specifically requested by ASIC a small company limited by guarantee is not required to “prepare a financial report or have it audited, prepare a directors’ report or notify members of annual reports”4. Different restrictions apply to companies limited by guarantee that do not fit into this category, and those with revenue of $1 million or more.

Company Limited by Guarantee: Frequently Asked Questions

A Company Limited by Guarantee is a specialised form of public company designed for non-profit organisations. In Australia companies limited by guarantee are subject to the _Corporations Act 2001 (Cth) and administered to by the Australian Securities and Investments Commission (ASIC). Like incorporated associations, this legal structure designates an organisation as a separate legal entity. A Company Limited by Guarantee can be sued, legally lease a property, enter into contracts or hold assets in its name.

In Australia the typical type of organisations that use the company limited by guarantee structure are clubs, charities, not-for-profits and other community organisation which may range from large to small in size. The company limited by guarantee structure is more commonly used for larger organisations. Examples of well known organisations in Australia that use the company limited by guarantee structure include some of Australia's best known charities: RSPCA Australia, Cancer Council Australia, Beyond Blue, Lifeline Australia, Make-A-Wish Australia, Ronald McDonald House Charities and National Breast Cancer Foundation. All of these examples previously used the Incorporated Association structure and moved to the Company Limited by Guarantee structure. Of the YouGov Australia 2022 Charity Rankings nine out of the top ten organisation use the Company Limited by Guarantee Structure.

Because a Company Limited by Guarantee in Australia is subject to the Corporations Act 2001 (Cth) there are rules and restrictions around who can audit its accounts. Who can audit a company limited by guarantee is dictated by which on of the three 'tiers' the organisation falls into. If the organisation has annual revenue of $1M (or more) it is a Tier 3 and its audit must be undertaken by a 'registered company auditor'. If it has annual revenue of less than $1M then it is Tier 2 and either have an audit done or elect to have a review instead. A review must be conducted by a member of CPA Australia, Chartered Accountants Australia & New Zealand or the Institute of Public Accountants who meets certain competency requirements. If the organisation has annual revenue of less than $250,000 then it may not have any reporting, audit or review requirements unless required by members or the Australian Securities and Investments Commission.



This fact sheet is intended as a simple overview. Non-profit law is incredibly complex and there are many components, allowances, restrictions, exceptions and important qualifications that are not described above. Dedicated legal advice should be sought from a legal practitioner before taking action.

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Better Boards connects the leaders of Australasian non-profit organisations to the knowledge and networks necessary to grow and develop their leadership skills and build a strong governance framework for their organisation.

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