Company limited by guarantee is unique company structure within Kenya.

A company limited by guarantee (CLG) is a legal entity that has perpetual succession.

Company limited by guarantee is a type of legal entity which has perpetual succession, and it is an alternative to a company limited by shares. The liability of its members/directors is limited to the amount if any that the members/directors undertake to contribute to the assets of the company in the event of it being wound up.

A company limited by guarantee can be incorporated with a minimum of two members/directors. In fact, you may incorporate an unlimited number of members or directors on your founding document if desired. It’s also possible for one person to act as both director and member in this type of structure (which we call a “single person company”).

As noted above, members/directors are not responsible for debts incurred by the business except for their own subscription to the memorandum of association (which is included in your initial payment).

A Kenyan registered company limited by guarantee is a legal entity with perpetual succession. It is not a legal person, as it does not have a separate existence from its members. This means that the entity cannot sue or be sued in its own name, but only through the individual directors. The company can enter into contracts and incur debts.

The liability of the members/directors in a company limited by guarantee is limited to the amount if any that the members/directors undertake to contribute to the assets of the company in the event of it being wound up. This means that if a member/director makes a payment towards settling its debts, they cannot be sued personally for any deficiency.

What you need to know about a company that is limited by guarantee in Kenya.

• Companies limited by guarantee are usually not allowed to distribute profits or dividends to its members/directors. In Kenya, companies limited by guarantee are not allowed to distribute profits or dividends to its members/directors. Profits are distributed to shareholders while dividends are paid out to the owners of shares.
• A company limited by guarantee can be a member of another Kenyan registered company limited by guarantee. However, a company limited by shares cannot be a member of another company limited by shares. Similarly, a company limited by articles cannot be a member of another type of association.
• In a company limited by guarantee, one member/director cannot transfer their obligations as a member/director or creditor of the company, to another person.
• The liability of members/directors in a company limited by guarantee is limited to the amount if any that the members/directors undertake to contribute to the assets of the company in the event of it being wound up.
• A minimum of two Kenyan citizens (with no restriction as to residence) are required for incorporation of a Kenyan registered company limited by guarantee. The directors must be Kenyan citizens, or residents in Kenya. Non-Kenyans may also be appointed as directors but only if they have permanent residence status in Kenya.
• The position of director does not necessarily have to be filled by one person, instead there may be several directors working together to run your business. It is important that at least one director has legal capacity and capability to act on behalf of the company and sign its contracts etcetera.
• If you do not have a co-director or any other nominee with legal capacity/capability then it will be necessary for him/her to appoint an attorney in writing before signing any documents on behalf of his/her client(s).
• Members/directors in a Kenyan registered company limited by guarantee have no personal rights and remain anonymous and are not responsible for debts and liabilities incurred by the business except for their own subscription to the memorandum of association.
• A member/director of a company limited by guarantee cannot take part in voting or be counted as a member at any meeting unless he has paid up his share capital or subscription within seven days after being requested to do so, or if he has admitted himself insolvent or made an arrangement with his creditors or died.
• Company Limited By Guarantee is suitable for organizations without profit intentions since they cannot distribute profits made. You should be aware that Company Limited By Guarantee is suitable for organizations without profit intentions since they cannot distribute profits made. In this case, members/directors are not responsible for debts and liabilities incurred by the business except for their own subscription to the memorandum of association.

On a final note, please ensure that you have all required documents and information before making any investments in Kenya as there can be consequences if you do not comply with applicable laws.

These are the main reasons why a company limited by guarantee is ideal for business owners. The structure has been around for many years and has proven to be a very successful model. It allows businesses to have a flexible structure which is not only easy to manage but also less expensive than other forms of incorporation in Kenya