A company limited by guarantee is a company without any share capital or shareholders. This kind of company is limited by guarantee instead of capital, meaning the company is not owned by shareholders but by guarantee members. Their liability is limited to the amount they agree to contribute if the company is being wound up. These traits make this kind of entity suitable for non-profit organisations.

Any profits earned are to be used for the non-profit objectives of the company, so no profit is distributed to the members. 

Directors of a company limited by guarantee carry the same legal duties, responsibilities and liabilities as directors of other entities. They are involved because of the company’s objectives, rather than financial gain.

What is a company limited by guarantee used for?

This type of entity is typically used to incorporate clubs and non-profit organisations that need a legal personality. 

Often these companies have the objective of promoting culture, science, art, sports, religion, education, research or other similar topics.

A company limited by guarantee can also be used as a subsidiary company to carry out the corporate social responsibility obligations of a parent company. 

The advantages of this legal entity

One of the main advantages of a company limited by guarantee, is that it is a legal entity separate from its members. As such, it can own property, obtain loans, enter into contracts, sue or be sued, and more in its own name.

Furthermore, due to perpetual succession, it means that changes in members or directors of the company will not affect its existence. 

As mentioned earlier, the liability of members is limited to the amount they have undertaken to pay and will only arise when the company is being wound up.

Structure of a company limited by guarantee

A company limited by guarantee must have at least one member, two individual directors and a company secretary.

Company members can be a natural person or a company. There are no restrictions on the nationality or residence of members. Should the number of members increase, the company must notify the Companies Registry of this change. 

There must always be at least two directors, which cannot be companies. Directors are bound by the general director’s duties applicable to any company registered in Hong Kong. Similar to members, there are no restrictions on the nationality or residence of the directors.

A company limited by guarantee must have a company secretary, which may be a natural person or a company. A company secretary must be a Hong Kong resident or have a registered office or place of business in Hong Kong. 

Any Hong Kong limited liability company must have a registered office address in Hong Kong.

As constitution documents, a company limited by guarantee must have and is governed by its articles of association. The Articles should include the company’s objective, the amount guaranteed by members, how assets and income are handled in case of winding up, etc.

How to set up a company limited by guarantee

To set up a company limited by guarantee, a set of documents must be prepared and certain steps have to be followed:

• Conduct a name search with the Companies Registry so you will not use a name that is the same or similar to an already registered company
• Draft Articles of Association
• Prepare and file the NNC1G incorporation form (company not limited by shares). It should be signed by the company’s member(s) and directors.
• File documentation for the appointment of directors and company secretary
• Apply for a Business Registration Certificate

Required documents

Besides the incorporation form, a few documents are required to attach.

Certified true copies of:

• passports (non-residents) or HKID cards for each member and director
• proof of address for each member and director
• Certificate of Incorporation and registered office if the member is a corporation

For the company secretary: a copy of HKID card and proof of address.

Should you want to apply for charity status (under Section 88 of the Inland Revenue Ordinance), include an activity plan and budget plan for the first 12 months once the company is registered.

Timeline

Usually it takes around 4-6 weeks to set up a company limited by guarantee in Hong Kong. The approval of becoming a charity can take up to six months or more.

Fees

An incorporation fee has to be paid to the Companies Registry, based on the number of members.

25 members or less: HKD 170

26-100 members: HKD 340

Every 50 members or less after the first 100 members: HKD 20

If the company is exempted from profits tax, the business registration fee to the IRD is not applicable. 

Ongoing obligations to maintain the company

Once a company limited by guarantee is incorporated, there are certain obligations that need to be met under the Companies Ordinance, which include:

• Maintaining records of members, directors, company secretaries and debenture holders and reporting any changes to the Companies Registry
• Keeping proper account books and records, that are audited annually
• Filing annual returns 
• Having annual general meetings; the first one has to be held within nine months after the company’s first anniversary (incorporation date)

Qualifying as a charity

As a company limited by guarantee, you are not automatically treated as a charity. There is an application process to go through, which takes around 6 months.

The IRD determines whether a company limited by guarantee qualifies as a charity. 

There are a few points that have to be governed when applying for charity status, such as keeping operating records (like donation receipts), demonstrating the company’s objectives are for charitable purposes and prohibiting members and directors to receive remuneration. 

HKWJ can help

At the HKWJ Group we can help in registering and setting up your company limited by guarantee and, if needed, obtaining charity status.

In addition, we provide company secretary services, cloud accounting, or corporate audit to keep you compliant with the legal and tax obligations.

Feel free to get in touch with us via the form below for more information about setting up your company limited by guarantee.