Just imagine running a business, deriving some profit but still keeping the status of an NGO, that’s what a limited by guarantee does. In this article, you will learn how to register a private company limited by guarantee in Nigeria, cost and other requirements.
In Nigeria, companies can be registered in the following categories
- Private company limited by shares
- Public company limited by shares
- Private company limited by guarantee
- Public unlimited company
- Private unlimited company
Each of these categories has different provisions from the Companies and Allied Matters Act (CAMA 2020) that regulates how they are registered.
Today, we will explore the process and steps of registering a private limited by guarantee company in Nigeria
What is a Company Limited by Guarantee?
A company limited by Guarantee is simply an entity that operates partly as a company and partly as an NGO.
The entity does not operate to make profit, but to provide value for money and also serve humanity.
The sole aim of establishing such entity is to promote activities such as humanitarian work, art, mission schools and training centers, basic amenities for society, shelter, science, religion, sports, culture, education, research institute.
However, the company at some point will make profit not as a distributable income but to keep the entity running.
E.g a company providing pipe born water and basic amenities will require the company to pay a small token of money to keep the activities running by buying fuel, paying security, operator and the likes.
So the end goal is not to make profit but to provide valuable services to humanity but still get some income reasonable enough to keep the service going.
Definition Under CAMA 2020
According to CAMA 2020, a Company Limited by Guarantee is a type of non-profit company with no share capital, formed to engage in non-profit activities
Members in a limited by guarantee are limited by the amount they agree to contribute to the company in the event of liquidation and possible winding up.
The company does not make profit and so does not pay dividends.
Key Features of a Guarantee Company
Below are some distinctive features of a limited by guarantee that separates it from a limited by shares company
- A private company limited by guarantee does not have share capital
- The company engages only in non-profit activities but could charge small fees for services to keep it sustainable.
- It has memorandum and articles of association
- The company has the capacity to acquire assets and incur liabilities
- It can enter into contractual agreement
- There are no shareholders and the company does not pay divided
- The parties involved in this company are called Guarantors and not directors
- At the point of registration, each guarantor is guaranteed a fix amount of ₦100,000
- The timeframe of registration takes a longer period of time as compared to private companies limited by shares.
Company Limited by Shares vs Limited Guarantee
Below are the major differences between a company limited by shares and the one limited by guarantee.
1. Ownership Structure
Companies limited by shares are owned by shareholders who have equity shares in the company and receive dividends as a return on investment. Directors manage the company on behalf of shareholders and receive enumerations
On the other hand, limited by guarantee does not have shares. All members in the company are referred to as guarantors and are managed by these guarantors.
2. Liability and Guarantee Clause
In a limited by shares, the liability of its shareholders is limited to the value of their shares.
These include;
- Paid-up shares: If a shareholder has fully paid for their shares, they cannot be forced to contribute more funds to settle company debts.
- Unpaid shares: In the case of winding up or insolvency, a shareholder is only liable for any outstanding amount on their shares.
Meanwhile, in a limited by guarantee, members, otherwise called guarantors, are limited by the amount they agree to contribute to the company in the event of liquidation and possible winding up. The amount guaranteed is usually ₦100,000
3. Name
The name of a limited by guarantee company is abbreviated as LTD/GTE as opposed to LTD or Limited for private limited liability companies
4. Regulation
Companies limited by shares are highly regulated in Nigeria and are mandated to prepare annual financial statements.
Public companies are often required to provide a prospectus to the public before issuing shares.
This is quite the opposite in limited by guarantee companies as they are less regulated and do not provide prospectus to the public
5. Purpose
Both private and public companies limited by shares are established for profit making purposes and to maximize shareholders wealth in the long run.
For limited by guarantees, they are not established for profit making hence they operate partly as NGOs
Requirements for Registering a Company Limited By Guarantee in Nigeria
Below are some checklists you need to tick before considering forming a LTD/GTE in Nigeria
- 3 Proposed company names ending with LTD/GTE
- Clearly stated objectives
- A minimum of 2 guarantors
- At least one of the guarantors must be a Nigerian resident
- 1 secretary
- Details of the company
- Guarantor details including ID such as NIN, voter’s card, driver’s license or international passport
- Signature of Secretary and guarantor
- A consultant like to handle the registration for you.
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Who Should Register a Company Limited by Guarantee?
- NGOs and Foundations who don’t want to fully maintain the status of an NGO
- Clubs, Associations, and Non-Profit Bodies who engage in community activities but wants to maintain some liquidity to keep it sustainable
- Religious educational Institutions, what are aimed at providing education to students while still ensuring sustainability
Guide to Register a Company Limited by Guarantee in Nigeria
The process of registering a company limited by guarantee in Nigeria is very complicated as compared to company limited by shares.
The first thing you must have is an agent portal access. Otherwise, get a consultant to handle your registration.
Do not attempt anything on public portal.
If you have your agent portal access already, follow the following steps
- Visit the CAC portal
- Navigate to name requiring consent and start your application
- Input your company end and end it with LTD/GTE
- Proceed and fill in other details in the form online
- Make a payment of ₦5,000 and submit your consent
During this period, you will have to wait for CAC to take your application to the Attorney General of justice in Abuja.
This process usually takes a long period of time. During the application will be queried, and you will be required to no further action.
If you don’t get a notice from the Attorney General of the Federation, within 30 days, you must publish a notice in three national newspapers inviting objections.
Once the Magistrate court of justice approves the application, CAC will give you a notice on the registration dashboard to proceed with the registration.
Once you reach this point
- Fill in the guarantors details
- Each guarantor should be guaranteed ₦100,000
- Upload the needed documents and make the final payment
- Also upload other compliance and industry documents as may be required
- Make the final registration payment and submit
- Wait for approval
- Final CAC Approval and Certificate Issuance
Documents To Receive After A Successful Registration
Upon a successful registration, you will be issued the following documents
- Certificate of Incorporation
- Status Report showing the guarantors and secretary
- MEMART capturing the activities engaged in by the company
How Long Does It Take to Register LTD/GTE in Nigeria
The process of registration takes about 3 to 5 months. This prolongs period is as a result of the waiting time for the Attorney general to give consent and approval for the registration to be carried out.
Cost of Registering a Company Limited by Guarantee in Nigeria
The cost to register a private company limited by guarantee in Nigeria varies slightly depending on the consultant handling the registration.
This fee can be broken down into
- CAC statutory fees
- Professional fees
- Other miscellaneous fees as may arise
On average, it costs about ₦100,000 to ₦150,000 to register an LTD/GTE in Nigeria (inclusive of professional fee)
Advantages of Registering a Company Limited by Guarantee
- Little to no tax payable
- Limited by guarantees are not highly regulated
- Non-profit motives
- Cheap compliance cost
- The company can operate a corporate account
- Limited liability protection
- The company can secure grants and assets
FAQs On Registering A Company LTD/GTE in Nigeria
Q: What is a Company Limited by Guarantee in Nigeria?
A: A limited by gaurantee company is simply a company formed to operate as a company but also maintain the status of an NGO for non profit making.
Q: Who can register a company limited by guarantee?
A: Individuals
Q: How many members are required form a limited by guarantee company in Nigeria?
A: A minimum of 2 guarantors and a secretory.
Q: What documents are needed for the registration?
A: Just deatails about the company and what they do, IDs, signature of the members and a witness
Q: Why is the Attorney-General’s consent required?
A: This is in compliance with CAMA 2020 provisions thats a LTD/GTE can not operate legally in Nigeria without consent and approval from the AG
Q: How long does limited by gaurantee registration take in Nigeria?
A: It takes about 3 to 5 months
Q: Can a LTG/GTE operate as an NGO?
A: Yes. LTG/GTE exhibit the features of both NGO and company
Q: Does a companies limited by gaurantee have share capital?
A: No.
Q: Can foreign nationals be guarantors in a LTD/GTE?
A: Yes. However, they must have a Nigerian member to team up and the minimum amount gauaranteed must be ₦100,000,000 (One hundred Million)
Q: What is the minimum guaranteed amount required by CAC?
A: ₦100,000 For Nigerian guanrantors.
Q: Can a LTD/GTE change its name or objectives after registration?
A: Yes.
Q: Can a limited by gaurantee convert to a company limited by shares?
A: Yes. If they meet all provisions required by CAMA 2020
Q: Can a company limited by guarantee secure grants?
A: Yes
Q: Can members of a LTD/GTE receive salary?
A: No. Since the company does not make profit
Q: Do LTD/GTE make profits or engage in commercial activities?
A: No.
Q: Does a limited by gaurantee need to file CAC annual returns?
A: Yes. Every entity registerd in Nigeria must pay annual returns.
Conclusion
In closing, I hope this guide has given you insights into the process, requirements and most importantly, the duration involved in forming a company limited by guarantee in Nigeria with CAC.
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