Companies Limited by Guarantee (CLG) are most suitable for several types of Non-Profit Organisations
The biggest difference between a normal Private Limited (Company Limited by Shares) and a Company Limited by Guarantee is that there are no shareholders in the CLG structure. Without shareholders, the CLG is instead governed by members, who are separate legal entities from the CLG, and thus enjoy separation of risks.
The advantages of a Company Limited by Guarantee Setup versus a Society are:
- Liability and risks are limited to the company as an entity. A Society is not a legal entity in itself, and it’s members are personally liable to any transgressions of the Society.
- A Society needs a minimum of 10 members to setup at the start.
Social enterprises are a mix between companies that generate profits, yet have a strong mandate towards diverting these profits towards the benefit of the community group, versus maximizing profits for the shareholders. In that vein, a true social enterprise could choose to have the CLG structure with members guiding the direction and growth of the company.
Charities, set up to help the needy are a form of Society, that will also be subjected to additional regulations in Singapore under the Charities Act. The Charities Act governs and sets the regulations for the following:
- Registration of Charities
- Annual Submission of Accounts & Reports to ACRA
- Rules on fund raising