What Is A Company Limited By Guarantee?

Starting or running a not‑for‑profit or charitable organisation in Australia is incredibly rewarding. You’re creating real change, supporting your community and building something that lasts.

Before you dive in, you’ll need to choose a legal structure that fits your mission and the way you plan to operate. One option many community organisations, charities and industry bodies consider is a company limited by guarantee.

In this guide, we’ll explain what a company limited by guarantee is, how it differs from an incorporated association, the key steps to set one up in Australia, the laws you’ll need to follow, and the essential documents to put in place. We’ll also cover common questions (like whether you can omit “Limited” from your name) so you can move forward with clarity and confidence.

A company limited by guarantee (often shortened to “CLG”) is a specific type of Australian public company commonly used by not‑for‑profits, charities, clubs and professional associations.

Instead of shareholders and share capital, a CLG has members who agree to contribute a nominal amount (the “guarantee”, often $1 or $10) if the company is wound up. That’s where the “limited by guarantee” part comes from - a member’s personal liability is limited to the amount they’ve agreed to contribute.

• Separate legal entity: Like all companies, a CLG is a separate legal person. It can own property, sign contracts and sue or be sued in its own name.
• Limited member liability: Members are not personally responsible for company debts (beyond their agreed guarantee if the company is wound up).
• No shares or dividends: There are no shareholders and no dividends. Any surplus is reinvested to further the organisation’s purposes.

Under Australian law, every company limited by guarantee is a type of public company. That means higher governance standards than a proprietary (Pty Ltd) company. Practically, you’ll need at least three directors (with at least two ordinarily resident in Australia), at least one company secretary, and at least one member.

You don’t have to have a bespoke constitution to register a CLG - the Corporations Act’s replaceable rules can apply - but most not‑for‑profits adopt a tailored Company Constitution to properly capture their purposes, membership rules and winding‑up clauses, and to support charity registration if that’s on your roadmap.

Company Limited By Guarantee Vs Incorporated Association

Both structures are well‑known in the not‑for‑profit space, but they suit different scenarios.

Company Limited by Guarantee

• Registered with ASIC (the national corporate regulator) and governed by the Corporations Act 2001 (Cth).
• Well‑suited to organisations operating across multiple states and territories, or planning to scale nationally.
• Often chosen by charities seeking ACNC registration, and by peak bodies and professional associations that want a nationally recognised corporate structure.

Incorporated Association

• Registered under state/territory legislation (for example, in NSW or Victoria) and primarily designed for local or regional organisations.
• Generally has simpler (and often cheaper) compliance, but can be restrictive if you want to fundraise or operate across state borders.

If your organisation expects to grow or seek broader partnerships and grants, a CLG’s national footprint and corporate governance framework can be a better long‑term fit. If you’ll remain local and small, an association can be perfectly adequate.

How Do You Set Up A Company Limited By Guarantee In Australia?

Setting up a CLG is similar to registering any company, with a few not‑for‑profit specific decisions along the way. Here’s a practical step‑by‑step outline.

1) Clarify Your Purpose And Governance

• Define your charitable or community purpose, your intended activities, and who you’ll serve.
• Decide who will sit on the initial board (at least three directors, with at least two living in Australia) and who will be company secretary.
• If you plan to register as a charity with the ACNC, ensure your purposes are exclusively charitable and your governance model will meet ACNC standards.

2) Choose Your Rules: Constitution Or Replaceable Rules

• Most CLGs adopt a tailored Company Constitution - particularly if you’ll seek charity or DGR endorsement, as you’ll need clear not‑for‑profit and winding‑up clauses.
• At minimum, your governing rules should cover membership admission and removal, meetings, voting, director appointments, conflicts of interest, and asset distribution on winding up.
• It’s common to complement your rules with a standalone Conflict of Interest Policy to support good governance.

3) Pick A Name (And Consider The “Limited” Exemption)

• By default, a CLG’s name must include “Limited” or “Ltd”.
• If you’re a registered charity, you may be eligible for the Corporations Act s 150 exemption that allows you to omit “Limited” from your name. This generally requires a suitable not‑for‑profit constitution and ACNC registration.
• Make sure the name is available and not too similar to an existing company or trade mark.

4) Register The Company With ASIC

• Prepare the application as a public company limited by guarantee and lodge it with ASIC (you can do this directly or through a lawyer or service provider).
• Pay the ASIC registration fee. Fees change periodically - keep an eye on the current rates in light of any ASIC fee increase.
• Once registered, you’ll receive an ACN and your company is officially incorporated.

5) Get Your Tax Registrations (And Consider Charity/DGR)

• Apply for an ABN and TFN, and register for GST if you meet the threshold or it suits your activities. If you’re unsure, our team can help as part of a broader Company Set Up.
• If seeking charity status, apply to the ACNC. If you’re aiming for Deductible Gift Recipient (DGR) endorsement, remember this is not automatic - DGR status is a separate process and only available for specific charitable purposes under ATO rules.

6) Put The Right Documents And Processes In Place

• Adopt your constitution, pass initial Directors’ Resolutions, and set up statutory registers (members, directors, and the guarantee register).
• Open a company bank account and set up bookkeeping and reporting processes suitable for a public company and (if applicable) an ACNC‑registered charity.
• If you’ll hire staff, plan your onboarding and contracts early.

Tip: The Corporations Act requires at least two directors to be Australian residents for a CLG. If your founders are overseas, make sure you understand the Australian resident director requirements before you lodge.

What Laws Do You Need To Follow?

CLGs sit within a clear legal framework. The specifics depend on your activities and whether you register as a charity, but the key areas are consistent.

Corporations Act And ASIC

• As a public company, your CLG must comply with the Corporations Act 2001 (Cth). This covers director duties, meetings, member rights, and reporting.
• Each year, ASIC conducts an “annual review”. You’ll need to confirm key details, pay the review fee and keep company records current (for example, notify ASIC if directors or the registered office change).
• Public companies are generally required to prepare and lodge annual financial reports. If you’re also a registered charity, most financial reporting shifts to the ACNC and ASIC relief may apply.

ACNC Governance (If You’re A Charity)

• Registered charities must meet ACNC Governance Standards, lodge an Annual Information Statement and (depending on size) prepare and submit financial reports.
• Your constitution should reflect your charitable purpose, non‑profit character and asset distribution on winding up to another charity.

Australian Consumer Law (ACL)

• If you provide goods or services (for example, membership benefits, event tickets or training), you must comply with the Australian Consumer Law on fair trading, advertising and refunds. A quick primer on misleading conduct is in our guide to section 18 ACL.

Employment Law

• If you hire employees, you’ll need compliant contracts, observe minimum entitlements and manage workplace policies. An Employment Contract and a basic staff handbook are a good start.

Privacy And Data

• Privacy obligations depend on your circumstances. Many small not‑for‑profits under the $3 million annual turnover threshold aren’t “APP entities” under the Privacy Act, but there are important exceptions (for example, certain health service providers). It’s still best practice to be transparent about how you collect and use personal information and to adopt a Privacy Policy if you handle donor or member data.

Fundraising And State/Territory Licences

• Public fundraising often requires licences at state/territory level, and there are rules on disclosures and how funds are used. Check the requirements where you’ll operate and budget time to obtain any authorisations.

This list isn’t exhaustive. Depending on your activities, you may also need sector‑specific permits, insurance and risk management policies. If you’re unsure, it’s worth getting early advice so you can set up the right compliance calendar from day one.

What Legal Documents Will You Need?

A solid governance framework and clear contracts help your CLG run smoothly and meet its obligations. Common documents include:

• Company Constitution: Captures your purposes, membership rules, meetings, directors’ powers, conflict management and winding‑up provisions. Most CLGs adopt a tailored Company Constitution rather than relying on the replaceable rules.
• Directors’ Resolutions and Minutes: Record key decisions, director appointments, approvals and delegations so you maintain proper governance records. A directors’ resolution template can streamline this.
• Conflict of Interest Policy: Sets expectations for declaring and managing conflicts (often required under ACNC standards). See our Conflict of Interest Policy service.
• Membership Register And Guarantee Register: Keep these statutory registers up to date to reflect who your members are and the amount of their guarantee.
• Privacy Policy: Explains how you collect, use and store personal information from members, donors and stakeholders. Even where not strictly required, a Privacy Policy supports trust and transparency.
• Employment Agreements & Policies: If you hire staff, use a compliant Employment Contract and set baseline policies (work health and safety, code of conduct, complaints handling).
• Service Or Supplier Agreements: Where you engage consultants, trainers or suppliers, a clear Service Agreement or Supply Agreement helps manage performance, IP and liability.

Not every organisation will need every document from day one. Start with the core governance pieces, then add contracts and policies that match your activities and risk profile.

Ongoing Compliance And Common Questions

Good record‑keeping and a simple compliance calendar will make life easier. Here’s what to expect - plus answers to questions we’re often asked.

Annual Reviews And Reporting

• ASIC annual review: Confirm details are up to date and pay the annual review fee. Notify ASIC promptly if directors change or your registered office moves.
• Financial reporting: Public companies generally prepare and lodge annual financial reports (unless ACNC reporting relief applies for registered charities).
• AGMs: CLGs typically hold an annual general meeting (unless eligible to use a circulating resolution or apply other permitted alternatives).
• Registers and minutes: Keep your registers, meeting minutes and member communications current and accessible.

Can A Company Limited By Guarantee Earn A Profit?

Yes. You can generate surplus income through memberships, services, programs or investments. The key is that profits are applied to your purposes - they aren’t distributed to members as dividends.

Can We Leave “Limited” Out Of Our Name?

Possibly. If you’re a registered charity and meet certain conditions, ASIC can grant an exemption under section 150 of the Corporations Act so you can omit “Limited” or “Ltd” from your name. This usually requires appropriate not‑for‑profit and winding‑up clauses in your constitution.

Do We Need A Constitution?

Not strictly - replaceable rules can apply - but most CLGs adopt a tailored constitution to reflect their purpose, membership structure, charity requirements and fundraising plans. A well‑drafted constitution also helps with ACNC registration and governance.

Is DGR Status Automatic For Charities?

No. DGR endorsement is separate from charity registration and only available for specific categories. Many charities never hold DGR status. Consider your activities and funding model before applying.

Do We Have To Tell ASIC When Members Join Or Leave?

No. You must maintain your own membership register, but you don’t lodge changes in membership with ASIC. You do need to notify ASIC about certain company changes (for example, directors and registered office), and keep up with your annual review.

Key Takeaways

• A company limited by guarantee is a public company structure widely used by charities, industry associations and community organisations in Australia.
• Members’ liability is limited to a small “guarantee” amount, there are no shares or dividends, and any surplus is reinvested into the organisation’s purpose.
• Compared with an incorporated association, a CLG offers a national footprint and a robust corporate governance framework - useful if you plan to grow or operate across states and territories.
• To set up a CLG, you’ll choose your governing rules (ideally a tailored constitution), appoint a compliant board, register with ASIC, obtain tax registrations, and establish clear governance processes.
• Compliance focuses on Corporations Act and (if applicable) ACNC obligations, plus consumer, employment and privacy laws that match your activities; fundraising licences may be required.
• Core documents include your Company Constitution, board resolutions and registers, a Conflict of Interest Policy, a Privacy Policy, and the right Employment Contract and supplier agreements for your operations.

If you would like a consultation on setting up a company limited by guarantee (or to explore whether it’s the right structure for your not‑for‑profit), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.