By Magelah Peter G.

Generally there are several types of companies that can be opened and operated. Most common types of companies include

·      Companies Limited by Shares (also known as Limited Liability Companies)

·      Companies Limited by Guarantee

·      Unlimited Companies

·      Public Companies, among others

Each company in created for a different purpose that the promoters want to achieve. In this article we focus on Company Ltd by Guarantee which is ideally a not-for-profit type of company.

Company Ltd by Guarantee is often formed for not-for-profit work, though some do focus on profits and carry out work such as consultancies and trade. Most company Ltd by guarantees do not have share capital. Unlike other traditional forms of companies, Company Ltd by guarantee has members as opposed to shareholders. (Though of late laws create exceptions and there are companies Ltd by guarantee that may have share capital). 

In Uganda most NGOs are incorporated as Companies Ltd by guarantee. These range from ordinary NGOs, to sports clubs, trade associations, faith and religious organizations such as Churches and other religious denominations among others. 

The major reason for the different persons or entities creating a Company Limited by Guarantee is for them to be able to benefit from incorporation and being a legal person. On the other hand it is much easier to create a Company in Uganda as compared to creating and running a Trustee which is the other option that such persons or entities would have taken. 

In a Company Ltd by Guarantee, every member declares (guarantees) that he or she will pay a certain amount of money (the guarantee) to contribute to the company in case it is being wound up. The money would ideally be paid when the Company is being wound up to meet existing liabilities. 

In most Company Articles and Memorandum, a member will be liable to pay this amount if the company is wound up when that person is still a member or within a year after the person has left the company.

This is yet another reason why Companies Ltd by Guarantee need to keep their membership registers clear indicating who is actually a member or those who have left. As noted in the article on membership such members have to be registered with URSB. 

It should be noted that the money set to be paid as a guarantee for a company is not the same as membership or subscription fees. These are paid conditional to joining the company or periodically as the case might be, while the funds provided as guarantee will only be paid if the company is being wound up.