In Malaysia, a Company limited by guarantee (CLCG) may be registered as a public company with the word ‘Bhd’ at
the end of its name under the Companies Act 2016.
It is widely formed by the non-profit
organizations and such instances include trade associations, charitable
bodies, professional societies, social and sports clubs (Companies Act 2016).
In companies limited by
guarantee, there are no shareholders as it does not hold any share capital. However, it
is owned by the member where’s liabilities
are limited by the constitution, agree to pay a set of amount that they
guarantee towards the company’s asset upon winding up (Companies Act 2016).
Also, company limited by
guarantee can merely form with the non-profit
purpose, which are the objects provided in the S45 (1) Companies Act 2016.
The objects are ranging from providing recreation, promoting commerce and
industry, art, science, religion, charity, pension or other objects that is
benefit for the community or country. As well, it shall apply its profits derived for promotion
of the company’s objects but it could
not make the payment through the way of dividend or bonus to its members.
to form the entity under the Societies Act 1996, forming company limited by
guarantee is getting much more advantages.
forming a company limited by guarantee, a distinct
legal entity from its members is created through the incorporation as
public company. It means that all the liabilities incurred in the company are
the company own responsibilities and the members of the
company are not liable for the debts incurred by the company (1stFormations, 2017). However, the society incorporated is not a separate legal
entity as it could not incorporate as a public company under the Societies act
same time, the member of the company limited by guarantee can enjoy the limited liability.
The member’s liabilities can be said is limited because of the personal
finances of the company’s members are protected. As well, the members will only
be liable for the company debts where the amount they guarantee to pay in the
event of winding up (Community Companies, 2017). While for society formed, its members do not enjoy
limited liability thereby they are personally responsible for all the debt
incurred in the society.
Section 9 setting up a company required at least one or more member and one or
more director for the obligation of company. On the other side, a society refers to an association that comprises of seven or more persons under the Section
2 of the Therefore, compared to setting up a society,
Joseph and Mary are more suitable to form a company limited by guarantee since
they are fulfill the minimum requirement for the incorporation.
On the other hand,
there are usually no profit
distributions to the members of the company. Since company limited by
guarantee is formed with non-profit purpose, it does not hold any shares
capital thereby the members of the company do not take any of the profits. As well, all of the profits generated are merely kept for the
promotion of non-profit objectives or activities as well as distribution of
dividend to the members are prohibited under the provision of S
Besides, company limited by guarantee having limited financial resources to
contribute its company’s growth. With the non-profit objective, company limited
by guarantee cannot raise the capital through invite the public to deposit
money or issue share to the company although it may be incorporated as a public
company. Hence, it can only raise the capital by borrowing loan or grant from
financial institution and the loan funding is not always be eligible.
With the provision of it is also limited to certain activities In detail, it states that the company
limited by guarantee only can be formed with the non-profit objects listed in
the S45 Thus the company activities is limited for expansion of the company
since all the company activities can merely carried out with non-profit