Starting a not-for-profit or charity involves more than just a good idea. Choosing the right legal structure matters. A company limited by guarantee is a popular option for organisations that work for public benefit. It offers limited liability, national legal status, and clear rules for governance. This guide explains what a company limited by guarantee is, how it works, and how to set one up.

What is a company limited by guarantee?

A company limited by guarantee (CLG) is a special public company used by many charitable and not-for-profit organisations in Australia. It has members instead of shareholders. These members agree to contribute a set amount—usually $10 or $20—if the company is wound up.

CLGs are registered as public companies under the Corporations Act 2001. They provide limited liability, national legal recognition, and a structured governance model, making them ideal for community groups, sporting clubs, advocacy bodies, and service-based charities that need a transparent, accountable framework.

Key features of a CLG:

• No shares were issued, and no dividends were paid

• Cannot operate for private profit

• Must hold an annual general meeting

• Must meet reporting obligations set by Australian Securities and Investments Commission (ASIC) or the Charities and Not-for-profits Commission (ACNC), depending on its status

• Commonly used to register charitable organisations that operate nationally

This structure offers the flexibility and legal protection needed to grow while serving the public good.

Why choose a company limited by guarantee?

A company limited by guarantee suits organisations that want to grow, operate nationally and benefit from a formal governance structure. Unlike incorporated associations, which are state-based, CLGs offer national legal standing under the Corporations Act.

Ideal for:

• Charities and advocacy groups

• Community health services

• Arts, sports and education bodies

• Any group that does not issue shares or pay dividends

Key advantages:

• National operation under one structure

• Strong governance and transparency

• Easier access to large grants and DGR status

• Limited liability for members

• Ability to hold property and enter contracts

If your organisation is growing beyond one state, managing more members or applying for grants, a CLG may be the right move.

How to register a company limited by guarantee

To set up a company limited by guarantee in Australia, you must follow a formal process under the Corporations Act. Below is a streamlined path to help your charitable or not-for-profit organisation get started properly.

Step-by-step process:

1. Determine your purpose – Ensure your goals align with charitable purposes or community benefit.

2. Choose directors and members – You need at least three directors and one member aged over 18.

3. Draft your company’s constitution – Or use replaceable rules from the Act.

4. Check and reserve your company name via the ASIC register.

5. Set your registered office and principal place of business.

6. Complete Form 201 and submit it to ASIC with the required fee.

7. Apply for charity status with the ACNC (if applicable).

Registering as a charity: Additional requirements for CLGs

If your company, limited by guarantee, will operate for charitable purposes, you may want to register it as a charity with the Australian Charities and Not-for-profits Commission. This step is optional but provides many benefits. A CLG that is a registered charity must follow extra rules and reporting obligations under the ACNC and the Corporations Act.

When to register your CLG with the ACNC

You should register your CLG with the ACNC if:

• Your purpose is charitable

• You offer services that benefit the public

• You want access to tax concessions or government grants

To register, your organisation must meet the legal meaning of a charity. This includes having a charitable purpose and following rules about governance and accountability.

Extra obligations for registered charities

When your CLG becomes a registered charity, it must follow the governance standards set by the ACNC. These include:

• Acting in line with the organisation’s purposes

• Ensuring directors of the company (known as responsible persons) act with care and diligence

• Following governance standard 2, which covers accountability to members

• Keeping financial records and submitting an annual financial report to the ACNC

• Meeting reporting obligations each financial year

Benefits of registering as a charity

There are several key benefits:

• Access to tax concessions such as income tax exemption, GST concessions and FBT rebates

• Eligibility for deductible gift recipient (DGR) status

• Better access to funding and grants

• Greater public trust and visibility on the ACNC register

Important to know

Not all CLGs are charities, and not all charities use the company limited by guarantee structure. Some may operate as incorporated associations or trusts. However, for many growing charitable organisations, a CLG offers the national recognition and governance needed to expand and succeed.

ACNC and ASIC: who regulates your CLG?

If your company limited by guarantee is also a registered charity, it must follow rules from the ASIC and the ACNC.

ASIC responsibilities:

• Legal company registration and compliance

• Director obligations

• Maintaining the registered office and member register

• Managing disputes and changes to the structure

ACNC responsibilities:

• Charity registration and governance standards

• Annual Information Statement and financial reporting obligations

• Public listing on the ACNC register

• Accountability of responsible persons (governance standard 2)

In most cases, the ACNC takes over some reporting duties from ASIC to reduce duplication. However, your organisation must still meet all legal responsibilities under the Corporations Act 2001.

Failure to comply may lead to deregistration, fines, or loss of tax benefits. Keeping up with both regulators is essential to staying on track and maintaining public trust.

How and when to transition from an incorporated association to a CLG

Many incorporated associations start small and serve a local community. As they grow, they may find this structure no longer meets their needs. In these cases, moving to a company limited by guarantee can make sense. This change supports national operations, stronger governance and access to more funding.

Triggers for making the switch

Your association may consider transitioning if:

• You plan to operate in more than one state or territory

• Funders or regulators require a national legal structure

• You need DGR status, and your current structure does not allow it

• You want more formal governance under the Corporations Act 2001

• Your membership or operations are expanding quickly

Moving to a public company limited by guarantee allows you to grow without legal limits tied to your state-based structure.

Steps to transition from an incorporated association to a CLG

The process involves several clear steps:

1. Hold a member vote: Members must pass a special resolution to approve the change, which usually requires a 75% majority.

2. Apply for ASIC registration: Prepare a constitution and register the new CLG with ASIC. You will need to appoint directors and set up your registered office.

3. Notify your state regulator: Once ASIC confirms registration, inform your local regulator to cancel the old incorporated association.

4. Transfer assets and responsibilities: Move property, contracts and obligations from the old entity to the new CLG. You may need legal advice to do this properly.

Support for a smooth transition

Templates and tools can make the transition process more manageable. Helpful resources include:

• A compliant company’s constitution

• Member resolution templates

• Documents for appointing directors

• Guidance on setting up the new structure

These resources can help your charitable or not-for-profit organisation avoid delays and reduce legal risk when switching structures.

Roles and rights of members of companies limited by guarantee

A company limited by guarantee has members, not shareholders. These members play a vital role in the company’s structure. They do not own shares or receive profits. Instead, they support the organisation’s purposes and help with major decisions.

Members vs directors

Members of a company limited are different from directors of the company. Members are usually supporters or representatives of the organisation’s cause. They vote on key matters such as:

• Appointing directors

• Approving changes to the company’s constitution

• Winding up the company

Directors manage the daily operations and ensure the company meets its legal and financial duties. In many cases, directors are also members but have separate roles.

Legal rights of members

Under the Corporations Act, limited company members have several rights. These include:

• The right to access certain financial records

• The right to vote at general meetings

• The right to receive the annual report

• The right to propose resolutions

• The right to inspect the member register

Members also agree to contribute a set amount (often $10 or $20) if the company is wound up. This amount is known as the liability of the company’s members, which is limited to the amount stated in the constitution.

Comparing members and shareholders

Maintaining good governance ensures members understand their rights and duties. A strong structure supports compliance and helps avoid internal conflict. Clear rules and good communication are essential for the long-term health of a public company limited by guarantee.

Disputes and compliance: How ASIC supports member rights

Members play a key role in a company limited by guarantee. When disputes arise, it’s essential to have clear rules in place. If those rules are not followed, members may raise concerns with the Australian Securities and Investments Commission (ASIC). ASIC can resolve certain matters and ensure that companies follow the law.

When ASIC may intervene

ASIC will not get involved in every internal dispute. However, it may take action if:

• The company acts in breach of the Corporations Act

• A member of the company is treated unfairly or denied legal rights

• The company fails to keep proper records or hold required meetings

• The company does not meet its financial reporting obligations

ASIC protects the rights of members of companies limited. It also ensures that directors act in good faith and that companies follow their constitutions and legal duties.

Common types of disputes

Disagreements in companies under the Corporations Act may include:

• A director refusing to give members access to financial reports

• Conflicts over voting rights or meeting outcomes

• Disputes about changes to the company’s constitution

• Concerns over poor governance or misuse of funds

If these issues are not resolved internally, members can report them to ASIC. The company must respond and may face penalties if found in breach.

The importance of substantial governance documents

To avoid disputes, every company limited by guarantee must have:

• A clear and current constitution

• Policies that outline member rights and meeting rules

• A defined process for resolving complaints

Support for good governance

Practical templates can help your company stay compliant and well-structured. Useful resources include:

• Constitutions

• Governance policies

• Conflict resolution procedures

These tools support strong governance, reduce risk, and protect members' liability. A clear framework builds trust and allows the company to stay focused on its goals without legal setbacks.

Real-world examples of companies limited by guarantee in Australia

Many companies limited by guarantee operate across Australia in different sectors. These companies often support the public, offer services or promote causes. They work without the goal of profit and reinvest any surplus back into their activities. The structure gives these organisations legal protection and helps them meet strict reporting rules.

Common sectors that use CLGs

You can find companies limited by guarantee in sectors such as:

• Sports and recreation: Local and national sporting clubs

• Aged care: Community-based aged care and support services

• Education: Independent schools, training providers and research groups

• Arts and culture: Galleries, performance groups and arts councils

• Health: Community health centres and professional health bodies

• Housing: Social and affordable housing providers

These sectors often need to apply for grants, meet strict compliance rules and act in the public interest. The CLG structure supports these needs.

Case study: Sarah RealEstatePro’s industry association

Sarah works in real estate and is part of an industry association that promotes ethical standards and professional growth. Her association is a company limited by guarantee. It operates across Australia and runs training, advocacy and support for members.

To support its national growth, the board:

• Drafted a compliant company’s constitution

• Set up governance and reporting templates

• Clarified their financial reporting obligations under ASIC and ACNC rules

Case study: Michael the Physio’s professional body

Michael runs a growing physiotherapy clinic and belongs to a national body for allied health professionals. His association is also a company limited by guarantee in Australia. It manages conferences, member resources and policy submissions.

To strengthen its operations, the group:

• Met ACNC registration requirements

• Created dispute resolution policies

• Protected the property of the company and its members

These examples show how CLGs support the public good while managing growth and staying compliant.

Company limited by guarantee faqs