In
British and
Irish company law, a
private company limited by guarantee (LBG) is an alternative type of
corporation used primarily for
non-profit organisations that require
legal personality. A company limited by guarantee does not usually have a share
capital or
shareholders, but instead has members who act as guarantors. The guarantors give an undertaking to contribute a nominal amount (typically very small) in the event of the winding up of the company. It is often believed that such a company cannot distribute its
profits to its members but (depending on the provisions of the articles) this is not actually true. Converting a limited company to a
Community Interest Company (CIC) removes this doubt entirely, as CICs feature an asset lock which prevents the extraction of profits. However, a company limited by guarantee that distributes its profits to members (nor CICs) would not be eligible for charitable status.