GUARANTEE COMPANIES - Frequently Asked Questions

Q WHAT IS THE DIFFERENCE BETWEEN A GUARANTEE AND A LIMITED COMPANY?

A Guarantee company does not have shareholders who receive the benefit of the profits. 'The Guarantors' just guarantee that they will pay a certain amount to creditors should the company fail.

Q HOW MUCH IS THE GUARANTEE FOR EACH MEMBER?

That is up to you; an Unlimited Guarantee means you are liable for everything. Most members only give £1 guarantee meaning they are only liable for that amount.

Q WHAT ARE GUARANTEE COMPANIES USED FOR?

They are not seen as commercial trading companies and can be charities, members clubs, Associations, or as communal property owners i.e. a block of flats with each owner as a member.

Q IF NO SHARES ARE ISSUED HOW CAN ANY PROFITS BE TAKEN?

Directors are still appointed and they can properly take any expenses, salary, bonuses etc. that the company decides to give them.

Q CAN A GUARANTEE COMPANY BECOME A CHARITY?

Yes many Guarantee companies are formed as charities to raise money from the public to benefit the charity.

Q CAN A GUARANTEE COMPANY RAISE FUNDS?

Yes, for example 50 people paying £1000 into a company could then elect to buy a premises for their "club" or "association" to be run from.

Q DOES ANY MEMBERS HAVE DIFFERENT AMOUNTS OF GUARANTEE?

No we recommend all members guarantee the same amount.

Q DO ALL MEMBERS HAVE TO GIVE A GUARANTEE?

No, say an association is formed with 4 original guarantors then it is up to them to decide whether new members become guarantor members or not. As association of 10,000 members may only have a few as actual guarantors.

Q HOW ARE DIRECTORS APPOINTED?

By vote of the members, or in a new company the first members may decide to be the first Directors.