Section 8 companies can be formed with or without share
capital. In case they are formed without share capital, the necessary funds for
carrying the business are brought in form of donations, and subscriptions from
members of such a company. The constitution of such companies can either be that
of a Private Company or a Public Company.
Meaning of Company Limited by Guarantee
- A company limited by guarantee is also known as a Guarantee
Company. In layman’s terms, it refers to a company lacking shareholder but
owned by a member known as guarantors who assures to pay a nominal amount in
the case of wound up. It is a specific form utilized for NPOs, i.e. non-profit
organizations. Under this form, profit reaped by an entity is reinvested to
serve different companies’ purposes.
- Henceforth, it is a legally productive structure for NPOs,
charitable trusts, clubs, and other identical establishments. An entity limited
by guarantee acts as an independent legal establishment and carries a distinct
legal identity.
- It can perform undertakings in the company’s name, such as
borrowing credit, employing human resources, buying and selling property,
leveraging legal proceedings in case of dispute, etc. MOA (Memorandum of
association) is a mandate for such companies.
Types of Guarantee Company
Companies limited by guarantee or Guarantee companies are
categorized into two types.
1. Company limited by guarantee with share capital
- The company will become operational with some working funds
or initial capital from its member as initial working capital is not accessible
via subscriptions, grants, endowments, fees, or any other sources.
- But later, upon commencement of operation, normal working
funds can be secured via the services provided in the form of charges, fees,
and subscriptions.
- Shareholding figures out voting power in the guarantee
company possessing share capital.
2. Company limited by guarantee (no share capital)
- Such a guarantee entity does not secure working funds or
initial capital from its members.
- Instead, these companies procure the capital via multiple
sources such as subscriptions, grants, endowments, fees, etc. Forex: NPOs or
charitable institutes started by government grants or public donations.
- Voting power in Guarantee Company lacking share capital is
figured out by the guarantee.
Created & Posted by Pooja
Income Tax Expert at TAXAJ
TAXAJ is a consortium of CA, CS, Advocates &
Professionals from specific fields to provide you a One Stop Solution for
all your Business, Financial, Taxation & Legal Matters under One Roof. Some
of them are: Launch Your Start-Up Company/Business, Trademark
& Brand Registration, Digital
Marketing, E-Stamp Paper Online, Closure of
Business, Legal Services, Payroll Services,
etc. For any further queries related to this or anything else visit TAXAJ
Watch all the Informational Videos here: YouTube
Channel
TAXAJ Corporate Services LLP
Address: 1/11, 1st Floor, Sulahkul Vihar, Old Palam Road,
Dwarka, Delhi-110078
Contact: 8961228919 ; 8802812345 | E-Mail: connect@taxaj.com