What is meaning of company limited by guarantee? How does a company limited by guarantee work? How do I set up a limited by guarantee company? Does a company limited by guarantee have members? What are the benefits of a company limited by guarantee?
A company limited by guarantee (CLBG) is a public company incorporated with the principal liability of its members limited by the constitution to the amount which the members have undertaken to contribute to the assets of the company in the event the company is wound up.
A CLBG may only hold any land or property if it is issued with a license by the Ministry of Domestic Trade, Cooperatives and Consumerism (Minister).
There are two types of CLBG:
(a) CLBG without the word "Berhad" or "Bhd"; and
(b) CLBG with the word "Berhad" or "Bhd".
A CLBG may be incorporated by lodging an application to the Registrar together with a constitution.
A CLBG can only be formed for the following objects:
providing recreation or amusement;
promoting commerce and industry;
promoting art;
promoting science;
promoting religion;
promoting charity;
promoting pension or superannuation schemes; or
promoting any other objects useful for the community or country, such as:
environment;
health;
education;
research;
social; or
sports.
A CLBG must ensure that none of its members or directors uses the company or its financial resources to conduct any form of political or unlawful activities. In conducting its activities, it must ensure that it does not depart from the objects for which it was established for.
For avoidance of doubt, no company can be formed for other purposes.
Company Incorporation Information Needed
Incorporation information required to incorporate a company is as follows:
the proposed name of the company
The name of the company shall appear in legible Romanized letters, together with the company number, on its seal, official documents, publications and website, if any.
the nature of business of the company
the address of registered office
A company must maintain a registered office in Malaysia where all books and documents required under the provisions of the Act are kept.
the business address
the name, identification, nationality and ordinary place of residence of the member of the company
the name, identification, nationality and ordinary place of residence of every person who is to be the director and promoter
In addition, a public company must have at least 2 directors. Each of the minimum director(s) must have his principal or only place of residence within Malaysia. The minimum age of a director is 18 years and there is no specified maximum age.
Declaration from the director(s) or promoter(s) that he/she:
➢ is not an undischarged bankrupt either in or outside Malaysia; and
➢ has not been convicted of any offence whether in or outside Malaysia
the amount up to which the member undertakes to contribute to the assets of the company in the event of its being wound up
Declaration of Compliance from individuals responsible for incorporation
This declaration states that the applicant has complied with all requirements of the Companies Act 2016. The declaration should be made by the individual who is responsible for the incorporation.
Additional Document(s)
a copy of consent letter from the corporate body named as the member of the company.
a copy of certificate of director’s qualification, if required.
a consent letter from relevant agency, if any.
Requirement of Founder or Director
A founder or director of a CLBG must be a person who is fit and proper and is not disqualified under the CA 2016.
For the purposes of determining whether a person is fit and proper, the Registrar may:
consider the experience, qualification and competency of the founder or director which would assist him in carrying out his duties as director of the CLBG;
consider the reputation, character and integrity of the founder or director;
conduct a security vetting on the potential founder or director,
and a safety filter (security vetting) for the potential founder or director shall be conducted by the Royal Malaysian Police and/or other agencies.
Appointment of Director
The Registrar may, if he is satisfied that the applicant is fit and proper and competent to perform the duties of a director, approve the applicant as a director of a CLBG.
Requirement as to Constitution
Unlike any other company, a company limited by guarantee is required to have a constitution. The constitution shall, among others, state -
the name of the company;
that the company is a company limited by guarantee;
the objects of the company;
the capacity, rights, powers and privileges of the company;
the amount up to which the member undertakes to contribute to the assets of the company in the event of it being wound up;
the number of members with which the company proposed to be incorporated;
the full names, addresses and occupations of the subscribers;
a statement that the subscribers are desirous of being formed into a company in pursuance of the constitution;
matters contemplated by the Companies Act 2016 to be included in the constitution; and
any other matters as the company wishes to include in its constitution.
A constitution lodged with the Registrar shall be binding on the company and its members to the same extent as if it was signed by each member and contained covenants on each member to observe all provisions in the constitution.
The constitution of a company limited by guarantee shall be signed by the person intending to incorporate such a company and lodged with the Registrar upon an application for company incorporation.
Incorporation of a Company Limited by Guarantee (CLBG) with the Word Berhad
Documents to be enclosed
Application letter
Contents of the application letter:
· Reasons for incorporating the CLBG under the CA 2016 and not under the Societies Act 1966.
· State 2 objects of the CLBG.
Explanation and justification by the promoter for the use of the proposed name. Any supporting letter from the relevant government agency for the use of the proposed name (if applicable)
Detailed activities to be carried out
Statutory Declaration by the promoter and proposed director confirming whether such an application has been made under the Societies Act 1966. If yes, to provide the supporting documents
A copy of Application for Availability of Names and Reservation
A draft copy of Constitution
A copy of I.C / passport of the promoter and proposed director
The biodata, qualification and experience in charitable activities for each proposed director and promoter
A letter of consent to act as a promoter from each promoter
A letter of consent to act as a director from each director
An estimated / forecast income and expenditure for a period of two years within the establishment of the CLBG
Verification of Incorporation
Once the Registrar is satisfied that all information provided is complete and complied with the required procedures—
(a) a notice of approval and registration will be emailed to the applicant; and
(b) a certificate of incorporation will only be issued by SSM upon request together with the prescribed fee.
The notice serves as conclusive evidence that the requirements in respect of registration and matters precedent and incidental to the registration have been complied with.
Requirements of a Company
A company secretary must be appointed within 30 days after the incorporation of the company. The secretary shall be licensed by the Registrar of Companies and possess a valid practising certificate issued by SSM. The secretary of a company must be a natural person of full age who has his principal or only place of residence in Malaysia.
The company must also appoint an approved company auditor to be the company auditor in Malaysia.
Once incorporated, the company is advised to obtain the necessary license/permit/approval from the relevant authorities before commencing business.
Application for Licence to Omit the Word “Berhad” or the Abbreviation “Bhd” from a CLBG’s Name for New Incorporation
A CLBG may apply to the Minister for a licence to omit the word “Berhad” or the abbreviation “Bhd” from its name. However, any CLBG intending to use the words “Yayasan” or “Foundation” must omit the word “Berhad” or “Bhd” from its name.
Documents to be Enclosed
Application letter
Contents of the application letter:
· Justification and purpose for:
- Using the word ‘Yayasan/Foundation/Institute’.
- Omission of the word Berhad/Bhd.
· Reasons for incorporating the CLBG under CA 2016 and not under the Societies Act 1966.
· State two objects of the CLBG.
Explanation and justification by the promoter for the use of the proposed name. Any supporting letter from any government agency for the use of the proposed name (if applicable).
Detailed activities to be carried out.
Statutory Declaration by the promoter and proposed director confirming whether such an application has been made under the Societies Act 1966. If yes, to provide the supporting documents.
A copy of Application for Availability of Names and Reservation.
A draft copy of Constitution.
A copy of I.C/ passport of the promoter and proposed director.
Biodata, qualification and experience in charitable activities for each proposed director and promoter.
A letter of consent to act as a promoter from each promoter.
A letter of consent to act as a director from each director.
Information on the contributor/donor confirming the financial contribution of RM1 million to be made within 6 months from the date of incorporation. A contributor can be either an individual or a company. Please follow the respective procedure below.
(a) Individual who acts as a contributor/donor
The supporting documents are:
· A Statutory Declaration by the individual contributor and the amount that the contributor has agreed to contribute; and
· The latest bank statement OR fixed deposit receipt.
(b) Company which acts as a contributor/donor
The supporting documents are:
· A resolution by the company the contents of which should among others include the amount that the company has agreed to contribute;
· Latest bank statement of the company; and
· Latest Audited Financial Statement of the company.
For new CLBG incorporation, an estimated/forecasted income and expenditure for a period of 2 years from the establishment of the CLBG. Estimated income and expenditure statement should show the contribution from the donor.
For existing CLBG which intends to omit the word Berhad/Bhd, the CLBG must provide its Audited Financial Statements for the last 3 years which have been laid at its annual general meeting.
Omitting the Word ”Berhad” or ”Bhd” of an Existing CLBG
A CLBG which had been incorporated for a period of three (3) years may also apply to omit the word “Berhad” or “Bhd”.
The basis to support the approval of omitting the word ”Berhad” or ”Bhd” is that the CLBG must have a fund amounting to RM1 million cash. The CLBG is required to get all of the cash which has been pledged by potential contributors within six (6) months after it is established.
A CLBG with the word “Berhad” or “Bhd” could omit the said word subject to the approval of the Minister.
The CLBG must provide information with comments on the financial position for at least the last three (3) years and the latest financial statements for a period of three (3) years, audited and presented at the annual general meeting.
A licence is issued once the application obtains the approval of the Minister.
Company Registration Time
Incorporation of a company may be approved within xx days.
Application Fees
The fee is RM50.00 for each name applied.
The required application fee for:
Approval by Registrar
Perusal of the Constitution
is RM200.
The incorporation application fee is RM3,000.
If the name is approved by SSM, the name is reserved for 30 days or any longer date as allowed by the Registrar (maximum 180 days) from the date of approval.
A payment of RM700 as the required fee for:
Using a gazetted word
Omission of the word Berhad/Bhd
Perusal of the Constitution OR
A payment of RM400 as the required fee for:
Omission of the word Berhad/Bhd
Perusal of the Constitution
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