A Company Limited by Guarantee (CLG) is a unique legal entity commonly used by non-profit organizations, including charities, NGOs, professional associations, churches, and social enterprises. Unlike a company limited by shares, CLG does not have shareholders. Instead, it has guarantors (members) who commit to contributing a nominal amount toward the company’s liabilities in case of dissolution.
This guide provides a detailed overview of the definition, purpose, registration process, requirements, timelines, and costs associated with registering a CLG in Kenya.
1. Definition and Legal Framework
A Company Limited by Guarantee is defined under Section 7 of the Companies Act, 2015 CAP 486 as a company that:-
- Does not have share capital or shareholders.
- The liability of its members (guarantors) is limited by the company‘s articles to a predetermined nominal amount (usually about Kshs 1,000) that the members undertake to contribute to the company’s assets in the event of its liquidation.
- Its certificate of incorporation states that it is a company limited by guarantee.
2. Purpose of a CLG
A CLG is typically used for:
- Charitable organisations (e.g., foundations, trusts).
- Professional associations (e.g., law societies, medical boards).
- Educational institutions (e.g., private schools, research institutes).
- Social enterprises (e.g., community development projects).
- Sports clubs and membership organisations.
Unlike a private limited company, a CLG does not aim to generate profits for distribution among members. Instead, all income is reinvested to further the company’s objectives.
If profits are distributed, the company loses eligibility for charitable status.
3. Key Characteristics of a Company Limited by Guarantee
Key Characteristics
- No Share Capital: There are no shares or shareholders.
- Liability: Guarantors’ liability is limited to the nominal guaranteed amount (e.g., KES 1,000)
- Owned by Guarantors: Members guarantee a nominal amount in case of winding up.
- Non-Profit Orientation: Profits are reinvested, not distributed.
- Separate Legal Entity: Can own property, enter into contracts, and sue or be sued in its name.
- Limited Liability: Members’ assets are protected beyond their guaranteed amount
4. Registration Requirements.
To register a CLG in Kenya, you must meet the following requirements:
- Proposed Company Name:
- Submit 3 name options for reservation via eCitizen (Name Search).
- Names must not be offensive or resemble existing entities.
- Objects of the Company
- Non-profit objectives aligned with charitable, religious, educational, or community purposes
- The memorandum of association must reflect these objects
- Directors and Guarantors
- Minimum of two directors (individuals)
- Minimum of one guarantor (can be the same as the director)
- Provide details including:
- Full names
- Copies of National ID or passport
- KRA PINs
- Passport photos of directors
- Postal and physical addresses (residential address)
- Email and phone contacts
- Company Details
- Proposed Physical address (location)
- Postal Address
- Contact details, phone number, and email address.
- Memorandum and Articles of Association.
- Statement of Guarantee.
- If the company has more than one million in nominal guarantee, a qualified company secretary is mandatory
5. Registration Process for a CLG in Kenya
The registration of a CLG follows a structured process overseen by the Business Registration Service (BRS) under the Attorney General’s Office.
Step 1: Name Reservation
- Submit three proposed names for approval via the eCitizen portal.
- The name must not be similar to an existing entity.
- The Registrar will approve one, provided it is not already in use and meets the requirements under the Companies Act.
- The approval process takes 1-3 business days.
Step 2: Drafting the Memorandum and Articles of Association
- The Memorandum of Association outlines the objectives of the CLG.
- The Articles of Association define the governance structure.
- Statement of Guarantee (detailing each member’s commitment)
- These documents must be signed by all guarantors.
Step 3: Submission of Registration Documents
The following documents must be submitted via the eCitizen portal:
- Complete and sign forms CR1 (application), CR3 (directors), and CR8 (address).
- Memorandum and Articles of Association.
- Statement of guarantee (declaring the amount each guarantor commits).
- Details of directors and guarantors (names, passport copies, residential addresses).
- Physical address of the company (including postal address).
- A declaration of compliance signed by a lawyer.
Step 4: Vetting by the National Intelligence Service (NIS)
- All CLG applications undergo mandatory security vetting by the National Intelligence Service (NIS), which can take several months.
- This process ensures that the company is not involved in illegal activities.
Step 5: Registration and Issuance of Certificate of Incorporation
Upon successful vetting, the Registrar issues:
- Certificate of Incorporation (proof of legal existence)
- CR12 (official list of members)
- Section 55 license (operating license for CLGs)
6. Timelines for Registration
The registration process takes approximately:
- 1-3 days for name reservation.
- 4-6 months for vetting by NIS.
- 1-2 weeks for issuance of the Certificate of Incorporation.
7. Costs of Registering a CLG
The costs involved include:
| Service | Estimated Cost (KES) |
| Name reservation | 150 |
| Registration fee | 10,650 |
| Legal fees (if using a lawyer) | Varies |
| Company secretary fees | Varies |
| Miscellaneous costs | Varies |
8. Post-Registration Compliance
Once registered, a CLG must:
- Hold annual and general meetings (AGMs) to approve audited reports and accounts.
- Prepare and file annual returns and audited accounts with the Registrar of Companies.
- Notify the Registrar of any changes in directors or members.
- Register for a Kenya Revenue Authority (KRA) PIN for tax purposes.
- Maintain proper governance structures and records.
- If running specific projects (education, health, etc.), apply for sectoral licenses
Conclusion
A Company Limited by Guarantee is an ideal structure for non-profit organisations in Kenya. While the registration process is lengthy due to vetting, it provides a legal framework for organisations to operate transparently and efficiently with legal advantages.
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Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified advocate for personalized legal guidance.
