Members In A Company Limited By Guarantee: Voting, Meetings And Governance

If you’re setting up (or running) a not-for-profit, charity, club, social enterprise, or other member-based organisation, you might be looking at a company limited by guarantee (often called a “CLG”).

One of the biggest points of confusion we see is around members of a company limited by guarantee: who they are, what rights they have, what obligations they take on, and how their position compares to shareholders in a company limited by shares.

Getting this right matters. Members are a core part of the governance model in many CLGs, and misunderstandings can lead to disputes, compliance issues, or an organisation that simply can’t make decisions smoothly.

Below, we break down how CLG membership works in Australia, what members can (and can’t) do, the obligations members and directors need to be aware of, and the practical steps you can take to set things up properly from day one. This article is general information only and isn’t legal advice.

What Is A Company Limited By Guarantee (And Why Does It Have Members Instead Of Shareholders)?

A company limited by guarantee is an Australian company structure commonly used for:

• not-for-profit organisations
• charities and public benevolent institutions
• sporting and community clubs
• industry associations and peak bodies
• member-based organisations that aren’t designed to distribute profits to owners

Unlike a typical for-profit company limited by shares, a CLG does not have shareholders who own shares.

Instead, it has members. Members don’t “own” the company in the same commercial sense as shareholders, but they can play a similar role in governance by voting on certain decisions and holding the board accountable.

So What Does “Limited By Guarantee” Mean?

In a CLG, each member agrees to contribute a set amount (the guarantee) if the company is wound up. This is usually a modest amount (for example, $10, $100, or $500), but it should be clearly recorded in the company’s constitution.

This guarantee is a key part of the “limited liability” model. Generally, it means members’ financial risk is limited to the guarantee amount (rather than being personally responsible for all company debts).

Where Do The Rules Come From?

Most CLGs will be governed by:

• the Corporations Act 2001 (Cth) and ASIC requirements (general company law)
• the organisation’s Company Constitution (your internal rulebook)
• any membership policies or by-laws you adopt (where appropriate)
• if relevant, not-for-profit and charity regulation (for example, ACNC obligations)

For most practical governance questions, your constitution is where the detail lives.

Who Are Company Limited By Guarantee Members (And How Do You Become One)?

Company limited by guarantee members are individuals or entities listed on the company’s register of members. Membership is usually voluntary and is typically connected to the organisation’s purpose (for example, members of a sporting club, professional association, or community group).

How someone becomes a member depends on your constitution. Common approaches include:

• Application model: a person applies, and the board approves or rejects the application
• Automatic model: membership is granted when certain criteria are met (for example, paying a fee or being admitted to a program)
• Class-based membership: different classes of members (for example, ordinary members, associate members, life members) with different voting rights

What Should Your Constitution Cover About Membership?

If you want fewer disputes and smoother governance, your constitution should clearly set out:

• eligibility criteria (who can be a member)
• how to apply and how admission works
• member classes (if any) and what rights attach to each class
• membership fees and renewal processes
• resignation
• termination/expulsion processes (and procedural fairness)
• what meetings members can vote at and how voting works (including proxies)

In practice, a strong constitution is one of the best “risk management tools” your CLG can have.

Rights Of Company Limited By Guarantee Members In Australia

Members’ rights can vary depending on your constitution and the Corporations Act, but there are common rights that tend to apply across most CLGs in Australia.

1. Voting On Key Decisions

In many CLGs, members vote on major “structural” decisions, such as:

• appointing or removing directors
• approving changes to the constitution
• approving certain major transactions (depending on the constitution)
• winding up the organisation

Practically, this means members can shape the organisation’s direction, values, and leadership.

2. Attending And Participating In Member Meetings

Members generally have rights to participate in general meetings, such as an annual general meeting (AGM) if your organisation holds one (many CLGs do, and the constitution often requires it).

This includes receiving notice of meetings, understanding what’s on the agenda, and voting in accordance with the constitution.

3. Accessing Certain Company Information

Members may have rights to access certain information, but what’s available (and how) depends on the Corporations Act, the constitution, and any applicable privacy or confidentiality obligations.

Depending on the organisation, this can include:

• the constitution
• member meeting minutes (where the constitution or law provides a right of access)
• financial reports (for example, where the company is required to prepare and provide them, or the constitution gives members access)

How this works in practice depends heavily on the company’s size, reporting category, and constitution rules.

4. Raising Governance Concerns And Enforcing Processes (In Limited Circumstances)

If proper processes aren’t being followed, members may be able to raise the issue internally (for example, by requisitioning a meeting where permitted) and, in some cases, apply to a court for remedies under the Corporations Act. These pathways are specific and fact-dependent, so the scope isn’t as broad as a general “right to challenge” every decision.

This is one reason it’s so important to document decisions properly and ensure meetings are run in line with your constitution.

5. Approving Fundamental Changes

Unlike “day-to-day management” (which is usually for the directors), members often have a say over fundamental changes like:

• changes to the organisation’s core rules
• mergers or restructures (where constitutionally required)
• winding up and how remaining assets are dealt with (especially relevant to not-for-profits)

If your CLG is a charity, these changes can also have flow-on regulatory considerations.

Duties And Obligations Of Company Limited By Guarantee Members

When people hear “members have rights”, the next question is usually: do members have duties too?

They can, but it’s important to separate:

• members’ obligations (usually set out in the constitution), and
• directors’ duties (which are much more extensive and are imposed by law)

1. The Guarantee Amount (Potential Liability On Winding Up)

The core “duty” specific to CLG members is the obligation to pay their guarantee if the company is wound up and there aren’t enough assets to cover its debts (subject to how the winding up plays out under law).

This is why the guarantee amount should be set thoughtfully. If it’s too high, it may deter membership. If it’s too low, it may not reflect the seriousness of governance participation (though many organisations keep it low for accessibility).

2. Following The Constitution (And Membership Rules)

Most constitutions require members to follow organisational rules. This could include:

• paying membership fees
• acting consistently with the organisation’s purpose
• complying with meeting procedures and conduct expectations

Some constitutions include disciplinary processes for members who breach these rules.

3. Acting In Good Faith In The Membership Role (Practical, Not Always Legal)

Members are not usually subject to the same statutory duties as directors (like the duty to act with care and diligence). But in a real-world governance sense, an organisation runs better when members participate responsibly, vote based on the organisation’s interests, and avoid unmanaged conflicts of interest.

If your organisation has complex stakeholder dynamics (for example, industry associations), it may be worth including clearer conflict processes in your constitution or policies.

4. When A Member Also Becomes A Director

Many CLGs appoint directors from their membership base. When a member becomes a director, they take on legal directors’ duties and responsibilities under company law.

This is a big shift. Directors are responsible for governance, compliance, and acting in the best interests of the company.

If you’re planning to appoint member-directors, it’s a good idea to make sure your constitution and onboarding processes are clear, and consider documenting director expectations and protections.

How Members Differ From Shareholders (Practical Differences For Small Organisations)

Members in a CLG can look similar to shareholders at a glance (both vote on big decisions), but they’re not the same. Understanding the differences helps you choose the right structure and communicate clearly with your community.

1. Ownership And Economic Rights

Shareholders usually have an “economic” stake. They own shares and may benefit financially through dividends and capital growth.

Company limited by guarantee members generally do not hold shares and typically do not receive profits or dividends. CLGs are often set up to reinvest funds back into the organisation’s purpose rather than distributing profits.

2. Capital Raising And Investment

Companies limited by shares can raise capital by issuing shares to investors.

CLGs typically don’t raise capital this way. Funding is more commonly through:

• membership fees
• donations
• grants
• sponsorship
• trading revenue (for example, course fees, events, merchandise, ticketing)

If your goal is to bring in equity investors and provide a financial return, a CLG is usually not the right fit.

3. Liability Model

Shareholders’ liability is usually limited to the amount unpaid on their shares (often already fully paid).

Members’ liability in a CLG is limited to the guarantee amount, generally only payable if the company is wound up.

4. Governance Culture

CLGs often have a more community or purpose-led governance culture. Members may see themselves as guardians of the mission, not “owners” seeking a return.

This affects how meetings feel, how decisions are communicated, and what disputes tend to arise.

5. Documents You’ll Use To Set Expectations

In a company limited by shares, the key “relationship document” is often a Shareholders Agreement.

In a CLG, the constitution is usually the key governance document that defines membership rights and processes. If you’re comparing governance documents across structures, it can help to understand how a Shareholders Agreement works in a typical shareholding company so you can see what’s different in a member-based model.

What Legal Documents And Governance Steps Should You Put In Place?

A CLG can be a great structure, but it works best when your governance documents match how your organisation actually operates.

Here are the practical documents and steps small organisations commonly need to think about.

1. A Clear Company Constitution

Your constitution is the foundation. It should clearly address membership eligibility, voting, meetings, board composition, dispute processes, and winding up provisions.

In many cases, starting with a tailored Company Constitution is one of the best ways to prevent problems later (especially around membership disputes and board deadlocks).

2. Policies That Support The Constitution (Without Overcomplicating Things)

Depending on your organisation, you might also consider supporting policies, such as:

• membership policy (admissions, renewals, complaints handling)
• conflict of interest policy (especially for organisations with commercial stakeholders)
• codes of conduct

The goal is clarity, not paperwork for the sake of it.

3. Contracts For Revenue Activities

Even not-for-profits need strong contracts if they sell services, run programs, or do commercial work.

If you provide services to customers or clients, you may need a Service Agreement so your scope, payment terms, liability settings, and dispute processes are clear.

If you’re selling goods, running events, or taking bookings, terms and conditions can be just as important to keep operations smooth and reduce refund disputes.

4. Privacy Compliance (If You Collect Personal Information)

Most CLGs collect personal information at some point (membership applications, mailing lists, event registrations, donations).

If you collect personal information online, it’s often appropriate to have a Privacy Policy that explains what you collect, how you use it, and how people can access or correct their information.

Privacy compliance is also a trust issue. Members and donors want to feel confident their information is being handled responsibly.

5. Employment And Contractor Documents (If You Hire People)

If your CLG hires staff (even part-time), you’ll want proper employment documentation in place.

A tailored Employment Contract can help you set expectations on duties, hours, confidentiality, and termination processes. If you engage contractors, the correct contractor agreement is equally important to reduce misclassification risks and commercial disputes.

6. Making Sure Your Decisions Are Properly Documented

Member and director decisions should be documented clearly (minutes, resolutions, meeting notices). This isn’t just about “admin” - it protects the organisation if a decision is challenged later.

If you’re updating governance rules or doing a restructure, this is also where getting advice early can save you time and avoid costly rework.

Key Takeaways

• Company limited by guarantee members replace shareholders in a CLG and often play a key governance role through voting and participation in general meetings.
• Members usually do not receive profits or dividends, and their financial exposure is generally limited to the guarantee amount payable if the company is wound up.
• Members’ rights and obligations are heavily shaped by the organisation’s constitution (and the Corporations Act), so a clear constitution is one of the most important “set up” steps for a CLG.
• Members are different from directors: directors manage the company and have significant legal duties, while members usually influence major decisions and hold the board accountable through member powers set out in law and the constitution.
• Even not-for-profits and member-based organisations benefit from practical legal documents like a Company Constitution, privacy documentation, and well-drafted contracts for revenue activities.

If you’d like help setting up or reviewing a company limited by guarantee membership structure, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.