Company Limited by Guarantee – Pros and Cons of a Non-For-Profit Business Registration in Scotland

Coddan helps Scottish clubs, associations, community initiatives and membership organisations prepare and form a company limited by guarantee. Compare the benefits of separate legal identity, continuity and member-based governance with the filings and running costs. If the structure fits your plans, we help clarify the requirements, prepare suitable documents and submit the approved application.

Choose Scottish CLG formation when your arrangements are settled, or discuss your purposes and documents before ordering. Charity registration and tax recognition are separate from incorporation; a charitable applicant should also compare the SCIO route.

Choose your Scottish formation package, or speak with Coddan first

Company limited by guarantee formation through Coddan

Form your Scottish CLG with suitable information and documents, professional review and personal-manager assistance. Choose a published package, select relevant additional services or discuss particular requirements. Coddan confirms the preparation and price of any further work before you proceed.

Personal-manager assistance comes with every formation order. Contact your manager by phone or email during working hours about information, documents, approvals and next steps. This is separate from paid priority handling and continuing support.

Start your Scottish CLG formation · Compare package inclusions · Discuss your requirements first

Scottish CLG formation: the essentials

A CLG may suit an organisation needing a separate legal identity and membership-based governance without shares. Weigh continuity and limited member liability against company records, annual filings and costs. Scottish charity registration and tax relief are separate.

People and addresses. A private CLG needs at least one director and one guarantor-member; one person can hold both roles. Particular organisations may need more. Prepare the name, purposes, participants, guarantee, voting and control details, an appropriate Scottish registered office and registered email.

Work and price. Coddan helps clarify requirements, prepares suitable documents, reviews the application and submits it after approval. Formation starts at £119.99 + VAT, including the £100 incorporation fee, using your own appropriate Scottish address. Compare the selected documents, addresses and support.

Time and help. Preparation typically involves 1–2 hours gathering details for suitable established articles, 2–3 hours when supplying prepared documents, or several days for tailored articles. These estimates are separate from review, checks and official processing. Your manager helps during working hours; online ordering is available 24/7.

Compare structures · What to prepare · Compare packages · Ask Coddan

In this guide

Use this guide to understand the structure, weigh the practical trade-offs and compare the available options before deciding how to establish your organisation.

1. What a Scottish CLG is
2. What non-profit means
3. Why choose a CLG
4. Main advantages
5. Disadvantages and risks
6. Limited liability
7. Members and directors
8. Income and employment
9. CLG and charity status
10. The Scottish charity test
11. SCIO or charitable CLG
12. Ongoing compliance
13. Costs of running a CLG
14. Registered office in Scotland
15. Comparing legal structures
16. Who may benefit
17. Pre-registration checklist
18. Frequently asked questions
19. Conclusion and next steps
20. Formation through Coddan
21. The essentials
22. Articles and preparation choices
23. Electronic service and portal
24. Documents and completion
25. Annual-service assistance

1. What Is a Company Limited by Guarantee in Scotland?

A Company Limited by Guarantee has members, commonly called guarantors, rather than shareholders and share capital. Each promises a stated contribution if the company is wound up in the circumstances covered by the guarantee. £1 is common; agree and record the amount for your organisation.

Companies House registration creates a legal entity separate from its members and directors. The company can hold assets, employ staff and enter contracts in its own name. Agree who can act for it and prepare the evidence that banks, landlords or other recipients require.

Members exercise their company-law and constitutional rights; directors manage the company and fulfil their duties. One person can hold both roles. A volunteer, donor or subscriber is not automatically a company member: membership follows the articles and admission arrangements.

Clubs, professional bodies, community organisations and charities use CLGs for different purposes. Tell Coddan what the organisation will do and whether charitable status is intended so the preparation and articles reflect the actual plans.

A Scottish company must maintain an appropriate registered office in Scotland. Directors and members can live elsewhere; their residence does not determine the incorporation jurisdiction. Charity registration and the organisation’s tax position depend on separate requirements.

Before incorporating, decide who will keep records, approve company decisions and manage later filings. Suitable articles and reliable administration make the legal structure useful in practice.

2. What Does “Non-Profit” Actually Mean?

A non-profit organisation applies resources to its purposes rather than private profit distribution. It can earn more than it spends and retain reserves for projects, equipment and future costs. It need not charge nothing or rely entirely on donations.

A CLG can charge fees, trade, receive funding and pay for genuine work where consistent with its articles and applicable rules. Decide what activities are intended and how the resulting funds will be used.

The articles should reflect membership, decision-making and the intended use of income and assets. Include suitable restrictions if distributions to members or the destination of assets on closure need to be controlled; the guarantee-company label does not create every restriction.

Assess Corporation Tax, VAT, employment taxes and any relief against the actual activities. A non-charitable CLG should not assume that charity tax relief or Gift Aid applies to it. Seek suitable tax assistance where needed.

A beneficial community or membership purpose need not be charitable. Scottish charitable status requires the charity test and registration with OSCR, not merely a non-profit name or intention.

Explain whether you want a member-based company, intend charity registration or plan trading to support a community purpose. These answers help Coddan identify suitable formation preparation and related services.

3. Why Choose a Company Limited by Guarantee in Scotland?

A CLG may become useful as an organisation takes on contracts, premises, staff, assets or continuing funds. Its separate identity can keep those commitments with the organisation rather than an individual volunteer.

The company can be the contracting party and hold assets in its own name. Record authority to sign and make decisions so changes in leadership can be handled without confusing company and personal arrangements.

Membership rules can cover admission, departure, voting, director appointments and decisions reserved for members. Explain how the organisation will work before the articles are prepared.

A CLG has no equity shares or ordinary shareholder dividends. Membership rights arise from the articles, which should reflect the intended use of surpluses and assets.

Choose an appropriate Scottish registered office that receives official company correspondence reliably. Use your own suitable address or Coddan’s Edinburgh service according to the selected package.

Compare an association for simpler needs, a SCIO for an eligible Scottish charity and a share company where equity investment is required. Start with the organisation’s purpose, participants and commitments.

4. The Main Advantages of a Scottish Company Limited by Guarantee

A separate legal identity

The company can contract, hold assets and operate in its own name. Illustration: a club’s CLG can rent a hall as tenant rather than relying on a volunteer to sign personally. The decision and authority to sign still need to be recorded.

Limited liability for members

The guarantee limits a member’s contribution in the relevant winding-up circumstances. It does not cap the company’s own debts or replace a separate personal guarantee. Directors’ conduct and duties remain separate considerations.

Continuity when people change

The company continues when founders, members or directors leave. Appropriate decisions, records and filings support succession while contracts and assets remain with the company.

A defined governance framework

Clear voting, meeting and appointment rules help the organisation operate and resolve vacancies or disagreements. Choose provisions that people can understand and administer.

No shares or shareholder dividends

No shares are issued to members. The articles can support reinvestment of surplus for the organisation’s purposes, with appropriate restrictions on distributions. Payment for genuine work is a separate matter, subject to authorisation and applicable rules.

Ability to earn income and grow

The company can receive suitable income, build reserves and develop its activities. Keep funds and any restrictions properly recorded as the organisation grows.

A possible route to charitable status

A suitable CLG can become a Scottish charity after meeting the charity test and registering with OSCR. Discuss the charitable purposes and intended activities before approving the articles.

5. The Disadvantages and Risks of a Company Limited by Guarantee

More administration than an informal group

Plan for annual accounts, confirmation statements, record-keeping and reportable changes, even during periods of little activity. Keep the registered office and email working so official correspondence reaches someone able to act.

Public information and reduced privacy

Company and officer information is publicly available where the law requires it. Appropriate service-address arrangements can separate a home from public correspondence details, while Companies House still receives required private residential information.

Directors’ duties and accountability

Directors must act within their powers, exercise independent judgement and reasonable care, manage conflicts and oversee finances and filings. These duties apply to volunteer directors too.

Professional and operating costs

Budget for the records, accounts, filing and operational work your organisation needs. Directors and volunteers may handle suitable tasks; choose professional help where useful rather than buying every service at formation.

Governance can become rigid if poorly designed

Suitable articles should explain membership, voting, appointments, conflicts and decision-making. Resolving these points before approval is usually more practical than amending uncertain rules after a dispute.

Limited liability is not a complete shield

A separate personal guarantee or liability arising from someone’s own conduct is not limited by the membership guarantee. Review contracts, solvency and risk controls alongside the structure.

It may not be the best form for every organisation

An association may suffice for a small group with limited commitments. An eligible Scottish charity may prefer a SCIO, while a social enterprise may consider a CIC. Compare these alternatives before incorporating.

6. Limited Liability: What Protection Does a CLG Provide?

Members’ guarantee liability is a defined winding-up contribution, recorded in the statement of guarantee. The company remains responsible for its own commitments; the guarantee is not a promise by members to fund all activities.

A £1 guarantee ordinarily limits that member’s guarantee contribution to £1 in the relevant circumstances. It does not limit the company’s borrowing or show how much money is available to creditors.

A former member’s guarantee can remain relevant to specified liabilities if winding up follows within the statutory period. Keep membership admission and departure records accurate.

Directorship alone does not make someone liable for every company debt. A separate personal guarantee, misconduct or particular insolvency-related conduct can create additional exposure. Understand commitments before signing.

Maintain realistic budgets, reserves and current financial records. If the company struggles to pay debts, seek appropriate advice promptly rather than treating limited liability as a solution.

Use suitable insurance, written contracts, payment authority and conflict controls for the actual activities. These practical arrangements work alongside incorporation.

7. Members, Guarantors and Directors: How the Company Is Governed

The articles allocate member and director powers and set decision-making procedures. Suitable established articles can serve straightforward needs; particular membership classes, charity requirements or asset restrictions may need further provisions.

Members are individuals or eligible bodies admitted under the articles. Their rights may include voting, constitutional changes and director appointments. Supporters and service subscribers are not automatically legal members.

Record and explain each guarantee separately from subscriptions, donations or other funding. It is a winding-up commitment, not normally a joining payment or investment.

Directors oversee spending, contracts, staff, records and filings. Give them reliable information, document important decisions and manage conflicts so they can exercise their responsibilities.

Agree admission, departure, voting classes, director appointment and removal, and how deadlock or disputes will be handled. Tell Coddan about those arrangements before formation preparation.

Keep accessible records and a practical handover when people change. Explain the articles to incoming directors and review them if membership or activities develop.

Assess people with significant control (PSC) from actual voting, board-appointment and influence arrangements. A company without shares can still have a reportable PSC. The guarantee amount is not a substitute for analysing control.

8. Can a Company Limited by Guarantee Earn Income and Employ Staff?

Yes. A CLG can receive subscriptions, fees, donations, sponsorship, grants and appropriate trading income. Plan the activities against its purposes, articles and any applicable charity rules.

A surplus can support reserves, projects, equipment or future liabilities. Its permitted use depends on the articles, the company’s status and conditions attached to the funds.

Pay employees or contractors for genuine work under appropriate agreements and payroll arrangements. Authorise director or connected-person payments correctly and manage conflicts. Charities have additional restrictions on trustee benefits.

Illustrations: an arts organisation may sell workshop places, an association may provide paid training and a sports club may charge for facilities. Consider contracts, insurance and tax alongside the activity.

Check the actual funder’s legal-form, charity, governance and spending conditions before choosing a structure. Keep restricted funds and their permitted use identifiable in the records.

Assess Corporation Tax and other tax responsibilities separately from incorporation. Charitable tax relief has its own recognition and conditions. Keep income and expenditure records and agree any accounting or HMRC work needed.

9. Company Limited by Guarantee vs Registered Scottish Charity

Incorporation creates the company; charitable status depends on purposes, public benefit and the applicable charity framework. A CLG can operate as a non-charitable non-profit or seek registration as a charitable company.

OSCR maintains the Scottish Charity Register and assesses the charity test. The organisation must have only charitable purposes, provide public benefit and meet the other statutory conditions, including appropriate restrictions on assets.

Charity status can support access to particular funding and tax reliefs, with additional governance and reporting duties. Check each funder’s conditions and the separate HMRC requirements.

A membership or community body need not be charitable to use a CLG. It must follow company law and its articles and describe its status accurately.

Tell Coddan about intended charitable registration before the articles are settled. Purposes, beneficiaries, activities, private benefits and winding-up provisions can affect the preparation needed.

A charitable company reports to Companies House and OSCR under their separate rules. Keep the relevant company and charity dates distinct, including accounts, returns and notifications.

Decide whether charity status is necessary to the organisation’s purpose, activities or funding. Where it is central, compare a charitable CLG with a SCIO before approving the chosen route.

10. The Scottish Charity Test: Purposes, Public Benefit and Restrictions

OSCR assesses charitable purposes, public benefit and the statutory restrictions. Describe what the organisation will actually do, not only how it will be named.

Scottish law recognises purposes including relief of poverty, education, health, community development, arts, amateur sport, human rights and environmental protection. Explain how the proposed purposes relate to the intended work; selecting a category alone does not establish eligibility.

Explain who benefits, how and why the benefit is public. Membership restrictions, fees and any private benefit can affect the assessment; a membership body is not automatically excluded or accepted.

Identify payments and benefits to founders, directors or connected people. Genuine staffing or service costs may be permissible, but must be justified, authorised and consistent with the charity’s purposes and duties.

For a new charitable CLG, the purposes and governance provisions belong in suitable articles; the memorandum uses its prescribed form. Appropriate restrictions apply to income, assets and their destination on closure.

Since 1 April 2024, OSCR must refuse charity-registration applications where the organisation has no or only a negligible connection with Scotland. Explain its actual premises, principal office and activities. A purchased registered-office address is not conclusive. A SCIO must have its principal office in Scotland. Read OSCR’s location and Scottish-connection guidance.

Prepare accurate information about purposes, beneficiaries, activities, trustees, governance and finances, and allow for OSCR questions. Company incorporation and the charity application have distinct preparation and processing arrangements.

11. What Is a SCIO, and How Does It Compare with a Charitable CLG?

A SCIO is an incorporated charity registered with OSCR, not a company incorporated at Companies House. It has its own legal identity and can hold property, contract and employ staff under the Scottish charity framework.

A charitable CLG has both company and charity obligations; a SCIO follows its separate OSCR framework. Compare governing rules, reporting and how changes will be handled.

A charitable CLG may suit an organisation that has a reason to use a company structure, including an existing company seeking charitable registration. Plan for both company and charity administration.

A SCIO offers an incorporated charity form without the Companies House company framework. It still has trustee duties, reporting and restrictions, so compare its rules with the intended organisation.

For an existing organisation, identify contracts, property, employees, liabilities and funding conditions before changing structure. Conversion or transfer work is separate from simply forming a new company.

SCIOs and the CIO form used in England and Wales have different jurisdictions and registration frameworks. Explain cross-border activities and where the organisation is based before choosing.

Compare purposes, membership, funding and reporting capacity. An eligible charity can consider a SCIO or charitable CLG; a non-charitable organisation should consider the appropriate non-charity forms.

12. Ongoing Compliance: Companies House, Accounts and Governance

Agree who keeps records, prepares information and monitors the company’s filing record. Coddan can help with defined company work after incorporation, including a CLG formed elsewhere, without automatic enrolment in an ongoing service.

A private company’s first accounts are generally due 21 months after incorporation; later accounts are normally due nine months after the accounting reference date. Check the company’s actual deadline and reporting category. Low income or no profit does not necessarily make the company dormant.

The first confirmation-statement review period normally ends 12 months after incorporation, with filing due within the next 14 days. File even if nothing changed and confirm intended future activities are lawful. Director, address and other reportable changes may need separate filings; they cannot all wait for the annual review.

Keep the register of members, financial records, minutes, decisions and filed documents. The register of members must be available for inspection at the registered office or an appropriate SAIL in Scotland. Separate local statutory registers of directors, residential addresses, secretaries and PSCs are no longer required; keep the relevant Companies House information current.

Proposed individual directors must verify their identity before incorporation and provide their Companies House Personal Codes with the application. Individual PSCs have separate code-submission requirements and windows; one person holding both roles must meet each role’s requirements. Coddan’s AML customer checks are separate from Companies House identity verification.

Keep OSCR reporting and governance work separate from Companies House accounts and confirmation statements. A charitable CLG may need both, with different deadlines. HMRC tax work has its own scope and timetable.

Follow the articles, manage conflicts and restricted funds, and record significant decisions. Tell Coddan when purposes, participants or arrangements change so suitable company work can be identified before a filing is prepared.

13. What Does It Cost to Run a Company Limited by Guarantee?

Distinguish formation from the work of running the organisation. Scottish formation starts at £119.99 + VAT, including the £100 Companies House fee, using your own appropriate Scottish registered office. Compare the formation packages and budget separately for selected accounts, filing, address or operational support.

Budget against actual activity: staffing, premises, restricted grants, trading and membership administration can require different work. Identify which tasks remain with directors or volunteers and which services you want Coddan to handle.

Use your own appropriate Scottish registered office or select Coddan’s Edinburgh service. AddressPro includes Edinburgh, South Charlotte Street, for the first year at £209.99 + VAT including formation. The current address renewal is £90 + VAT a year. Director addresses, continuing support and postage have their own applicable arrangements.

Coddan helps identify the preparation and support suited to the organisation. Compare useful deliverables, clear inclusions and personal-manager assistance as well as price. Confirm particular work before instructing it; you need not purchase every future service at formation.

A charitable CLG needs both company and charity administration; a SCIO has its own reporting framework. Budget for the records and professional work relevant to the chosen form and actual activities.

Allow for cash-flow differences, restricted funds and unexpected costs. Identify realistic income and reserves before committing to recurring services or operational obligations.

Choose the service for its practical value: suitable preparation, clear documents, review and accessible help. Use the package inclusions and quotation route to distinguish formation from addresses, further drafting, paid verification and annual work.

14. Registered Office in Scotland: What It Means and What It Does Not Mean

A Scottish company needs an appropriate physical registered office in Scotland, where official documents reach someone acting for the company and delivery can be acknowledged. Obtain permission to use it. A PO Box alone does not satisfy the requirement.

The registered office can differ from the place of activities. Use your own suitable address or form the company with Coddan’s Edinburgh registered office. Directors and members may live elsewhere; the company’s Scottish jurisdiction still determines its registered-office location.

Distinguish the registered office from a director’s public service address, private residential details and a trading address. Records kept at a SAIL must remain at an appropriate Scottish location. Coddan’s London or Aldershot SAIL services are not substitutes for a Scottish company’s required Scottish inspection location.

Choose an address for the correspondence and records function it actually provides. Charity status, tax treatment, grant eligibility and banking depend on separate assessments; explain your actual Scottish connection if seeking OSCR registration.

If changing or ending an address or support service, contact Coddan about the applicable arrangements and dates. Put the replacement Scottish registered office in place, arrange the Companies House change and ensure official post and registered email continue to reach someone able to act.

The selected Edinburgh service provides free scanning and uploading of received correspondence under its terms. Read scans already available in your portal at a convenient time, 24/7. Weekly Royal Mail forwarding can be arranged separately with postage and terms agreed. Portal access is distinct from staff hours, scanning and postal delivery.

15. Company Limited by Guarantee Compared with Other Legal Structures

Compare the legal identity, liability, membership, charity status and ongoing work of realistic alternatives. Use the table to relate each structure to your organisation’s plans.

An association can suit a small group with limited commitments, but contracts, property and liabilities may involve individuals rather than a separate legal person.

Compare a SCIO with a charitable CLG for an eligible Scottish charity. A trust may suit holding charitable assets, a CIC may serve a community enterprise, and a share company may fit equity ownership.

Consider expected staffing, premises, assets, funding and membership over the next few years. Choose arrangements proportionate to those plans rather than simply the shortest form or lowest initial fee.

16. Who Is a Scottish CLG Suitable For—and Who Should Consider Something Else?

Clubs, professional associations, community organisations and membership bodies may use a CLG where a separate company and member governance serve their plans. Explain actual activities and any existing arrangements to Coddan.

Continuing contracts, staffing, premises and assets can make incorporation useful. Agree voting, appointments and record custody to support continuity when people change.

A non-charitable membership body may use income to support its services without seeking charity status. Its articles and financial arrangements should reflect the intended use of funds.

A small informal group may need less formality. An eligible Scottish charity may prefer a SCIO. Compare those routes before undertaking company formation.

Consider a share company where equity ownership, investment for shares or shareholder dividends are needed. A CLG has no share capital.

If purposes, membership, voting or director arrangements are unsettled, describe the questions to Coddan before ordering. We help clarify formation requirements and identify suitable preparation; you do not need to diagnose bespoke drafting.

Choose a structure the organisation can use and maintain. The preparation section below explains how Coddan helps turn that choice into suitable information and documents.

17. Help with setting up your organisation before incorporation

Describe your purpose, participants and how decisions should be made. Coddan helps clarify the proposed structure, membership, guarantees, voting, directors, actual control and addresses, then prepares suitable information and documents for your approval. Use these questions to identify what needs settling; you do not need every answer before asking us.

• Purpose and activities: What will the organisation actually do? Can the aims be described clearly, and do the intended activities fit those aims?
• Charitable status: Does the organisation intend to apply to OSCR? If so, have the charitable purposes, public benefit, asset restrictions and Scottish connection been considered?
• Legal form: Why is a CLG preferred over a SCIO, an unincorporated association, a trust, a CIC or a company limited by shares?
• Members and guarantors: Who will be the initial members, what guarantee amount will each undertake, and how will new members be admitted?
• Voting rights: Will all members have equal votes? Are there membership classes, special voting rights or restrictions that need to be explained in the articles?
• Directors: Who is willing and able to act as a director? Do they understand their duties and the time needed to manage filings, finances and decisions?
• Articles of association: Which suitable established articles, supplied purposes, prepared documents or further drafting fit the organisation? Do they cover appointments, removal, meetings, conflicts, decision-making and what happens on closure?
• Control information: Has the organisation considered whether any individual has significant control through voting rights, appointment powers or other influence?
• Registered office: Is there an appropriate address in Scotland, permission to use it and a reliable arrangement for receiving official correspondence?
• Registered email: Who will monitor the company’s registered email address and ensure that notices are acted on promptly?
• Finances: What income is expected, what are the recurring costs, and how will the company maintain reserves and meet its liabilities?
• Records and reporting: Who will keep financial records, member records, minutes and filing deadlines? Is professional help needed for accounts or company administration?
• Contracts and assets: Will the organisation rent premises, employ staff, receive restricted grants or transfer activities from an existing group? These arrangements may need separate planning.
• Tax and funding: Have the likely tax position and funder eligibility criteria been checked rather than assumed from the words “non-profit” or “charity”?
• Long-term governance: What happens if a founder leaves, the board becomes vacant, membership declines or the organisation wants to change its purposes?

If an organisation already exists, send its constitution and describe its contracts, assets, funds, employees and approvals. Incorporation creates the new company but does not transfer those arrangements automatically. Identify any separate transfer work and relevant dates before choosing a changeover.

Agree who will keep records, authorise payments and act on official correspondence after formation. Your manager helps with formation information, approvals and next steps; later administration follows the selected continuing service or a separate instruction.

Choose how your company’s articles are prepared

Choose preparation that reflects your organisation and any work already done. Illustration: a new Scottish club may use suitable established articles, while an existing association may bring its constitution and proposed membership rules for discussion.

• Suitable established Coddan articles: choose an appropriate version for a straightforward CLG.
• Your purposes in Coddan’s articles: describe what the company will do for inclusion in our suitable version.
• Customer-prepared articles: you can email your or your adviser’s documents to info@coddan.co.uk before ordering. We confirm the preparation, review scope, price and document-submission route.
• Particular requirements: explain membership classes, voting, appointments or other rules; further customisation or drafting is agreed separately.

The memorandum uses its prescribed form; purposes and governance provisions belong in the articles. For suitable new CLGs seeking exemption from “Limited”, Coddan uses its special articles. Read about formation without the “Limited” suffix and discuss the relevant Scottish application route.

Addresses, checks and initial company records

Prepare the appropriate Scottish registered office and registered email, participant details and actual-control information. Coddan explains the relevant identity steps and separate AML customer checks, and helps arrange the selected address, records and document services. Discuss initial decisions, the register of members and who will hold and update the records.

Coddan CPM Limited has provided formation and business-support services since 2005 and appears on the Companies House formation-agent list. Our team prepares and checks the application and submits it after approval. As an HMRC-supervised trust or company service provider, we undertake AML customer checks. Our separate ACSP service involves requested Credas checks, evidence review and manual confirmation to Companies House when satisfied; Companies House issues your Personal Code. Direct Companies House verification is also available.

Three preparation routes: how much time to allow

For gathering the details and objectives using suitable established articles, allow typically 1–2 hours; for gathering details and supplying prepared documents, 2–3 hours; where tailored articles need drafting, discussion and approval, allow several days. These estimates concern preparation before incorporation submission, not a promised review deadline or official processing time.

With the information ready, a straightforward single-page online order normally takes around 10–15 minutes. Coddan then reviews the information, resolves questions and obtains the necessary approvals before submission.

18. Frequently Asked Questions About Scottish Companies Limited by Guarantee

1. Is a Company Limited by Guarantee a non-profit organisation?

A CLG is often used for non-profit purposes because it has members rather than shareholders and does not have share capital. However, the legal form alone does not prove that the organisation operates on a non-profit basis. Its purposes, articles, activities and financial arrangements matter. A CLG can earn income and retain a surplus, but it should use its funds in accordance with its governing document and applicable law.

2. Can a Scottish CLG make a profit?

It can generate a surplus through appropriate activities. The key distinction is how the surplus is used. It may be retained for reserves, reinvested in services or used to advance the organisation’s purposes. A CLG does not have shareholders who receive ordinary dividends. If it is also a charity, the charity’s purposes and legal restrictions on use of its assets must be observed.

3. Does a CLG automatically qualify as a Scottish charity?

No. Companies House incorporation and Scottish charity registration are separate processes. To be a Scottish charity, the organisation must meet the Scottish charity test and be entered in the Scottish Charity Register maintained by OSCR. The company’s purposes, public benefit, governing document and other statutory conditions are relevant to the assessment.

4. What is the difference between a CLG and a SCIO?

A CLG is a company incorporated at Companies House. A SCIO is a Scottish Charitable Incorporated Organisation registered through OSCR and can only be a charity. A charitable CLG has company-law obligations and charity-law obligations; a SCIO follows its own Scottish charity framework. The best option depends on the organisation’s purpose, governance and reporting capacity.

5. Do members of a CLG own shares?

No. A CLG has no share capital. Its members have the rights set out in the articles, including any voting rights, and undertake a guarantee amount. Membership is different from share ownership. The company’s rules should explain how members are admitted, how their rights operate and how membership ends.

6. What does a guarantor have to pay?

A guarantor promises to contribute the amount recorded in the statement of guarantee in the relevant winding-up circumstances. The amount is often set at a low figure such as £1, but it must be agreed and recorded correctly. It is not an investment into the company or a payment that automatically funds the organisation’s everyday activities. Separate obligations, such as a personal guarantee given to a lender, are not limited by the company’s member guarantee.

7. Can a CLG employ staff and pay directors?

A CLG can employ staff and pay for genuine services, subject to employment, tax, company-law and governing-document requirements. Director remuneration should be considered carefully and properly authorised. If the company is a charity, additional restrictions may apply to payments to trustees or connected persons. A payment should not be treated as a dividend to a member simply because the organisation has a surplus.

8. Can a CLG receive grants and donations?

It may receive grants and donations if the funder or donor’s terms permit it. Some funding programmes are open to non-charitable companies, while others require registered charitable status or a particular type of organisation. Incorporation does not guarantee eligibility. Read each funder’s criteria and ensure that restricted funds are used only for the permitted purposes.

9. Does a CLG need a registered office in Scotland?

A company registered in Scotland must maintain an appropriate registered office in Scotland. The registered office is the official address for company correspondence and is different from a director’s service address or the place where the company carries out activities. A professional address service may be used where it meets the requirements, but it does not itself establish charitable status or a substantive Scottish connection for OSCR purposes.

10. What ongoing filings does a CLG need to make?

Generally, a company must file annual accounts and a confirmation statement and notify Companies House of relevant changes. It must also maintain records and comply with applicable identity-verification and control-reporting requirements. Exact obligations depend on the company’s circumstances and the rules in force. A company that is also a registered charity must consider OSCR reporting separately.

11. Can a CLG operate without charitable status?

Yes. A CLG can operate as a non-charitable organisation, provided its activities are lawful and consistent with its governing document. It should not describe itself as a registered charity or claim charity-specific reliefs unless it meets the relevant requirements. If the organisation later decides to seek charitable status, its purposes and articles may need to be reviewed before an application is made.

12. Should a group incorporate or remain unincorporated?

The answer depends on its activities, assets, contracts, funding, membership and risk. Incorporation can help separate the organisation’s legal identity from its members and provide continuity, but it adds filings and administration. A small group with limited commitments may find an unincorporated association sufficient. A group that expects to employ people, rent premises or hold significant funds may have stronger reasons to consider incorporation.

19. Conclusion: Weigh the Pros and Cons Before Choosing a Scottish CLG

A Scottish CLG can provide separate company contracts, continuity and member-based governance. Use the comparison to decide whether those benefits justify the records, filings and running costs.

Choose who will handle decisions, finances and later administration. Personal-manager help supports formation; further accounts, address or secretarial services can be instructed when needed.

If charitable status is intended, compare the charitable CLG and SCIO routes before settling the documents. OSCR registration and HMRC recognition remain distinct from Companies House incorporation.

Start Scottish CLG formation or send your plans and documents to Coddan before ordering. We explain suitable preparation and confirm any particular work and price before you proceed.

Further official guidance

The following official sources are useful for checking current requirements. Rules, forms and filing arrangements can change, so consult the relevant guidance when making decisions or preparing an application.

• GOV.UK: Types of limited company — general distinction between companies limited by shares and companies limited by guarantee.
• GOV.UK: Choose guarantors for a company limited by guarantee — members, guarantee amounts and their role.
• GOV.UK: Prepare documents agreeing how to run your company — memorandum, articles and statement of guarantee.
• GOV.UK: Confirmation statement — annual review and filing obligations.
• OSCR: The charity test — Scottish charitable purposes and public benefit.
• OSCR: SCIO guidance — the Scottish Charitable Incorporated Organisation and its suitability.
• GOV.UK: Companies House identity verification — current guidance for relevant roles and filings.

Important: This article provides general information and is not legal, tax or accounting advice tailored to a particular organisation. The correct structure and the obligations that apply depend on the organisation’s purposes, activities, governing document and circumstances. Check current official guidance and obtain professional advice where needed before acting.