If you’re starting a not-for-profit organisation, a charity, a membership body, or a purpose-driven group that needs a formal (and credible) structure, you’ve probably come across the term company limited by guarantee.
A company limited by guarantee (often shortened to “CLG”) is a popular structure in Australia for organisations that aren’t run to generate profits for owners. Instead, it’s designed to support a mission - while still giving you the benefits of a company structure, like limited liability and clear governance.
That said, “company” doesn’t always mean “simple”. A CLG has its own rules, governance expectations, and ongoing compliance requirements under the Corporations Act and ASIC (the regulator).
This 2026-updated guide walks you through what a company limited by guarantee is, who it suits, how to set one up, what legal documents you’ll likely need, and what you must do to stay compliant once you’re up and running.
What Is A Company Limited By Guarantee (And Who Is It For)?
A company limited by guarantee is a type of public company used commonly by not-for-profits. Instead of shareholders, it has members. Instead of share capital, each member agrees to contribute a small amount (the guarantee) if the company is wound up.
In plain English: if the organisation ends, the members promise to chip in up to a set amount (often something like $10–$100), but they’re not personally responsible for the company’s ongoing debts beyond that guarantee.
Common Examples Of Organisations That Use A CLG
- Registered charities
- Community organisations and associations that need a corporate structure
- Sporting clubs or peak bodies
- Industry associations or professional membership organisations
- Schools, religious organisations, and foundations
- Not-for-profit entities that want a structure recognised by funders and government bodies
How A CLG Differs From A “Normal” Company
Many people first learn about companies through proprietary limited (Pty Ltd) businesses, where owners hold shares and profits can be distributed to shareholders.
A CLG works differently:
- No shares: ownership and control are membership-based, not share-based.
- Not set up for profit distribution: many CLGs include restrictions on distributing profits to members (often via a “not-for-profit clause”).
- Public company obligations: most CLGs are public companies, which can mean more governance and reporting responsibilities than a standard small business Pty Ltd.
If your goal is to build a mission-driven organisation with long-term credibility, a CLG is often a strong option - but it’s important to understand the compliance load before committing.
Why Choose A Company Limited By Guarantee?
Choosing a structure is a big decision. The “best” structure is the one that matches your goals, funding pathway, risk profile, and how you want decisions to be made.
Here are some of the biggest reasons organisations choose a CLG.
Limited Liability For Members
Members’ liability is capped at the amount they guarantee (assuming they act properly and aren’t giving personal guarantees elsewhere). This can be reassuring for people who want to support a cause but don’t want open-ended personal risk.
Credibility With Funders, Banks, And Partners
In many industries, being “incorporated” as a company signals structure and governance. A CLG can help when you’re applying for grants, receiving donations, signing major contracts, or partnering with government or corporate sponsors.
Clear Governance And Decision-Making
A CLG gives you a framework for rules, membership, director responsibilities, meetings, and voting. When drafted well, it reduces confusion and helps prevent internal disputes.
May Align Well With Charity Registration
Many charities operate through a CLG (although charity registration has its own requirements through the ACNC). Your legal structure and your tax/charity status are connected, but they’re not the same thing - you can be a CLG without being a charity, and you can be a charity in different structures depending on your circumstances.
A Note On Ongoing Compliance
This structure is not “set and forget”. A CLG can have more formal obligations than an incorporated association (particularly if you grow), so you’ll want good systems for governance, minutes, records, and reporting.
Step-By-Step: How To Set Up A Company Limited By Guarantee In Australia
Setting up a CLG is a mix of strategic planning and formal registration steps. Here’s the process most organisations follow in 2026.
1. Confirm The Structure Fits Your Purpose
Start with the fundamentals:
- Is your organisation designed to operate on a not-for-profit basis?
- Will you have members (and do you want members to have voting rights)?
- Will you be seeking grants, donations, or government support?
- Do you need a structure that works nationally (not just state-based)?
If you’re still deciding between structures, getting advice early can save time - especially because changing structures later can trigger extra costs, transfers of contracts/assets, and governance disruption.
2. Choose Your Name (And Check Availability)
Your name needs to comply with ASIC rules and must not be identical to an existing registered name. If your name includes terms like “charity”, “incorporated”, “university”, or other restricted words, you may need consent or meet specific requirements.
It’s also worth thinking ahead: will you brand publicly under the company name, or under a different trading name?
3. Decide The Guarantee Amount
Each member agrees to contribute a set amount if the company is wound up. Many organisations choose a small, symbolic figure (like $10). The right amount depends on your constitution, member expectations, and the nature of your operations.
The guarantee isn’t a membership fee. It’s more like a capped “backstop” contribution tied to winding up.
4. Appoint Directors And A Secretary (If Needed)
A CLG is typically a public company, and public companies generally need at least:
- 3 directors (at least 2 must ordinarily reside in Australia)
- 1 secretary (at least 1 must ordinarily reside in Australia)
Director eligibility and residency rules matter. If your board includes overseas members, you’ll want to plan the appointments carefully so you remain compliant with Australian requirements.
Many organisations also put in place processes for how directors are appointed, rotated, or removed. These governance rules often live in the constitution.
When you’re confirming leadership requirements, it’s also worth reviewing Australian resident director requirements so you don’t accidentally structure your board in a way that creates compliance issues.
5. Prepare A Constitution That Matches How You’ll Operate
A CLG must have a constitution (replaceable rules aren’t used in the same way for CLGs, and most not-for-profits need tailored provisions).
Your constitution is the “rulebook” for the company. It typically covers:
- membership rules (who can join, how they leave, member rights and voting)
- director appointment and removal processes
- meeting procedures (including AGMs and board meetings)
- how decisions are made (ordinary vs special resolutions)
- not-for-profit clauses (if relevant)
- winding up clauses (including where surplus assets go)
- conflict of interest processes
It’s common to get this document professionally drafted so it actually reflects how your organisation will function in practice (not just what “sounds right”). A tailored Company Constitution can also help avoid future member disputes by setting expectations clearly from day one.
6. Register The Company With ASIC
Registering a CLG involves lodging the relevant details with ASIC, including:
- company name
- registered office and principal place of business
- director and secretary details
- member guarantee details
- your constitution (kept on record and adopted properly)
Once registered, you’ll receive an ACN (Australian Company Number). You’ll usually also need an ABN (Australian Business Number), especially if you’ll be invoicing, employing staff, or registering for tax concessions.
If you want the setup done properly and efficiently (including the documents and resolutions that usually sit behind the registration), a structured Company Set Up process can make a big difference.
7. Get Your Governance “House” In Order
Once the company exists, you’ll want to organise the practical governance essentials, such as:
- member register and member onboarding process
- board meeting schedule and minutes templates
- delegations of authority (who can sign what)
- banking and financial controls
- policies (privacy, conflicts, complaints, safeguarding where relevant)
Even if your organisation is run by volunteers, formal governance matters. It helps you make consistent decisions and shows external stakeholders you’re operating responsibly.
What Legal Requirements Do CLGs Need To Follow In 2026?
Once your company limited by guarantee is set up, the next challenge is staying compliant. Most issues we see aren’t caused by bad intentions - they’re caused by organisations being busy, growing quickly, or assuming “not-for-profit” means “less formal”.
Here are the key compliance areas to keep on your radar.
ASIC And Corporate Governance Obligations
As a company, your CLG must keep certain records and meet reporting responsibilities. This may include maintaining registers, notifying ASIC of changes (like director details or addresses), and meeting ongoing obligations as a public company (subject to any concessions that apply).
You’ll also need to manage internal approvals properly. For example, certain decisions need member approval, and certain changes require special resolutions.
Who Can Sign Documents For The Company?
Signing contracts correctly matters because it affects whether an agreement is enforceable and who is bound by it. Many organisations have informal habits here (like “any board member can sign”), which can create risk.
In many cases, companies sign under section 127 of the Corporations Act. If you want clarity on correct signing methods, Signing Documents Under Section 127 is a useful reference point when setting your internal signing policies.
Tax, Charity, And Not-For-Profit Status
A CLG structure doesn’t automatically mean you’re a charity or that you receive tax concessions.
Depending on your purpose and activities, you might consider:
- registering with the ACNC as a charity (if eligible)
- applying for income tax exemption, GST concessions, or deductible gift recipient (DGR) status (where relevant)
- registering for GST if required
These steps can be valuable, but they’re separate from the ASIC registration process, and they have their own eligibility rules.
Privacy Compliance (Especially If You Fundraise Or Operate Online)
If you collect personal information (donor details, member records, mailing lists, online enquiries), you should take privacy compliance seriously. Even smaller organisations can run into problems if they collect data without clear processes.
In many cases, you’ll want a Privacy Policy that matches what you collect, how you store it, and when you share it (for example, with service providers like CRMs or email marketing tools).
Employing Staff Or Engaging Contractors
Many CLGs start with volunteers, then grow into paid teams. As soon as you hire, employment obligations can apply - including Fair Work requirements, award coverage, minimum entitlements, and the need for clear contracts.
Even if you’re small, having a properly drafted Employment Contract can help prevent misunderstandings about duties, pay, confidentiality, and termination.
Public Officer And Tax Administration
If your company has tax obligations (which most operating organisations do), you’ll likely need a nominated public officer for certain dealings with the ATO.
If this role is new to you, appointing a public officer is one of those admin steps that’s easy to overlook, but important for smoother compliance.
What Legal Documents Will A Company Limited By Guarantee Usually Need?
The “right” documents depend on what your organisation does day-to-day. A volunteer-run community group won’t need the same suite as a national membership organisation with staff, online fundraising, and major sponsorship deals.
Still, most CLGs benefit from having a few core documents in place from the start.
- Constitution: your rulebook for members, directors, meetings, and governance (and often the foundation for not-for-profit clauses and winding up provisions).
- Board resolutions and minutes: records that decisions were made properly; many organisations start with a strong Directors Resolution Template to keep governance consistent.
- Membership terms (if applicable): practical rules around membership fees, renewals, benefits, and conduct, aligned with your constitution.
- Privacy Policy: sets out how you collect, use, store, and disclose personal information (particularly important for donations, memberships, and online forms).
- Website terms and conditions (if you operate online): rules for users, content ownership, acceptable use, and disclaimers for online information.
- Employment contracts and workplace policies: where you have staff (or plan to), so expectations are clear and compliant.
- Key commercial agreements: for sponsorships, grants, service delivery, suppliers, venues, and partnerships.
A practical tip: try to avoid “template stacking”, where you download a set of generic documents that don’t match each other. Inconsistency between your constitution, membership processes, and public-facing terms is a common source of disputes and compliance headaches.
Key Takeaways
- A company limited by guarantee (CLG) is a common Australian structure for not-for-profits, charities, and membership organisations, with members guaranteeing a set amount if the company winds up.
- CLGs can offer limited liability, improved credibility, and a clear governance framework, but they also come with ongoing compliance responsibilities as a public company.
- Setting up a CLG usually involves choosing the right name, appointing eligible directors, setting a guarantee amount, adopting a tailored constitution, and registering with ASIC.
- Ongoing obligations often include proper governance records, correct signing processes, privacy compliance, employment compliance (if you hire), and keeping ASIC details up to date.
- Strong legal foundations - especially a clear constitution, consistent governance documentation, and fit-for-purpose policies - can prevent disputes and make growth far easier.
If you’d like a consultation on setting up a company limited by guarantee, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
