Discussion of basic understanding of Company Ltd by Guarantee in line with Ugandan Company Law

1. Company Ltd by Guarantee,
what does it mean
By
Magelah Peter G.
DENIVA/Legal Candle

2. What is a company
• A company is a legal entity formed by a person or a group of persons
to engage in and operate a business enterprise.
• There are different types of companies depending on the purpose
and aim of the company
• Once formed a company becomes a legal person with the ability to
sue, be sued, and own properties among other things

3. Classification of companies
• Companies can be classified by
a. On the basis of membership
b. On the basis of liability
c. On the basis of control

4. Classification on basis of membership
• The three major distinctions and they include;
a. Private Companies
ØThese restrict membership or shareholding (have a limited number of members or
shareholders.
ØThey cannot raise capital publicly e.g. through public sale of shares.
b. Public companies
ØThere is no limit to members
ØCan raise capital publicly
C. Single member companies
ØAs the name suggests these are companies with a single shareholder

5. On basis of control
• These include
a. Holding companies
These are companies that operate as apex companies and they own
and control other companies
b. Subsidiary companies and Associate Companies
These are companies owned and controlled by other companies

6. Classification on basis of liability
These include
a. Unlimited companies
• An unlimited company is where members/shareholders of the company will
be directly liable for acts of the company. They are liable to pay debts and
other liabilities the company incurs in case of winding up of the company
• The risk to shareholders/members is limited
b. Limited liability companies
• This is a type of company where liability is limited. Members of the company
are not liable for actions or liabilities of the company.
c. Companies Ltd by guarantee

7. Company Ltd by Guarantee
• A Company Ltd by Guarantee is one where members guarantee that
they will pay a certain amount of money to meet the company’s
liabilities in case of winding up
• Under this arrangement members undertake to pay a predetermined
amount of money to the company should the company get wound
up.
• In Uganda, most NGOs fall under this category

8. Key issues in arrangement of company ltd by
Guarantee
1. A guarantee company normally does not have shareholders, nor
does it have share capital. It has members (there are a few
exceptions)
2. Members of the company are guarantors (agree to pay an amount
of money if the company is in debt)
3. The company is mainly used or works on not-for-profit activities
(these range from NGOs, religious bodies, education institutions,
etc.).

9. Key features
• A Company Ltd by guarantee has
a. Limited Liability (is independent of its members)
b. Can contract in its own name
c. Can sue and be sued
d. Can own property

10. Key governing documents
• The major governing documents of the company Ltd by guarantee are
a. Memorandum of Association (aims and powers of the company)
b. Articles of association (the rules and procedures of the company)
c. Table C of the second schedule of the Companies Act (in cases of
Ugandan incorporated entities)
NOTE: some NGOs in Uganda have constitutions, however, due to
different changes in the law the constitution is not a major governing
document.

11. Who are members of a company Ltd by
Guarantee
• Member of a Company Ltd by Guarantee can be categorized in the following
a. Subscribers to the Memorandum and Articles of Association
- these are often called founder members
- They sign the Memorandum and articles of association
b. Members who were part of founding the organization but are not
signatories to the Memorandum and articles of association
- Sometimes people come together to form an organization but there are members who
for one reason or another did not sign the memorandum and articles.
- These will need to be admitted as members
c. Members who join the organization after it has been incorporated
- These join in or get admitted as the Company continues running

12. Admission to company membership
• Any other person other than those who signed the memorandum and
articles of association of the company has to be admitted to the
company
• The Articles of Association provide for the process through which
members get admitted
• Members have to fulfil certain criteria to be admitted
• Some companies provide for different categories of members

13. Membership fees vs subscription
• Many Articles of Association provide for members to pay
membership fees and subscription fees
• Membership fees are a one-off payment that is paid for one to
become a member
• Subscription fees have a time element, they are paid based on a
certain period of time e.g. yearly

14. Admission of members
• Many articles of association provide for how members have to be
admitted
• The process should include the members applying for admission and
decisions made by the Board or AGM to have members admitted
• There should be documentation to show that the members were
actually admitted
• Once admitted the members should be entered into a member’s
register
• The company must file a resolution with the Registrar of Companies
showing that members have been admitted

15. Removal of members
• The articles of association provide for the removal of members. For
example, members can be removed in case of death, or
nonattendance to AGM for a specific number of times.
• With the exception of the death or resignation of a member, all other
grounds for removing a member require a member to be heard.
• The process of removal of a member must be documented.
• Once a member is removed, such a member’s name will be canceled
from the member’s register.
• Every removal of a member should be followed by a resolution filed
with the registrar of companies.

16. General structure of Company ltd by
guarantee
• Most companies Ltd by guarantee have the following structure
a. Members who meet in the AGM (or the AGM)
b. The Board of Directors (may be given different names)
c. The secretariate
The above play different roles and we shall look at them in subsequent
classes.

17. Members vs Boards
• Ideally, members of the organization appoint the board
• The board reports to the members
• The members meet once a year in an Annual General Meeting (AGM)
• The members may have other general meetings often called
Extraordinary general meetings
• The board meets as often as there is need.
The roles of these bodies will be covered in the next class

18. Thank you for
listening!
Questions and discussions …….