Registration of a Company Limited by Guarantee in Kenya

Registration of a Company Limited by Guarantee in Kenya

What is a Company Limited by Guarantee in Kenya?

In Kenya, a Company Limited by Guarantee (CLG) is a unique business structure primarily used by non-profit organizations, such as charities, clubs, and community organizations. These companies do not have share capital and are defined by their members’ guarantee to contribute a specific amount to the company’s assets if it faces liquidation. Unlike private companies that focus on generating profits for shareholders, companies limited by guarantee are typically formed for purposes like promoting art, science, charity, or other similar objectives without a profit motive.

Legal Definition of a Company Limited by Guarantee

According to Section 7 of the Kenyan Companies Act, 2015:

“A company is a Company Limited by Guarantee if:

• it does not have a share capital;
• the liability of its members is limited by the company’s articles to the amount that the members undertake, by those articles, to contribute to the assets of the company in the event of its liquidation; and
• its certificate of incorporation states that it is a company limited by guarantee.”

These companies are recognized by law and granted a unique identity as non-profit entities that require a legal personality. This legal standing allows them to own property, enter into contracts, and engage in activities as specified in their objectives, independent of their members.

Key Characteristics of a Company Limited by Guarantee

• No Share Capital: A company limited by guarantee does not have share capital, and thus, it has no shareholders. Instead, it has members who undertake to contribute a specified amount if the company goes into liquidation.
• Member Liability: Member liability is limited to a predetermined amount that each member agrees to contribute toward the company’s assets upon liquidation.
• Non-Profit Motive: While private limited companies focus on profit-making for shareholders, companies limited by guarantee focus on non-profit activities, often involving charitable, educational, or community-oriented objectives.

Registration Requirements for a Company Limited by Guarantee in Kenya

Registering a Company Limited by Guarantee in Kenya is similar to registering a Private Limited Company with some differences, particularly the absence of share capital and shareholders. The registration process is conducted through Kenya’s official government portal, eCitizen.

Step 1: Choosing a Company Name

The first step is selecting an appropriate name for the company. Applicants are required to submit three name options, from which the Registrar will approve one, provided it is not already in use by another entity. The name must meet the requirements under the Companies Act, including clarity of purpose and alignment with the company’s non-profit objectives.

Step 2: Submission of Required Documents

To register a company limited by guarantee, applicants must submit the following documents to the Registrar of Companies:

1. Form CR1: This is the standard application form required for all types of company registrations in Kenya.
2. Memorandum of Association: This document outlines the company’s objectives and sets forth the responsibilities of its members. Applicants can use the model memorandum provided under the Companies Act or submit a customized memorandum specifically tailored to their company.
3. Statement of Guarantee: A statement of guarantee indicates each member’s commitment to contribute a specified amount to the company’s assets in the event of liquidation. This amount goes towards settling the company’s debts and liabilities and covering liquidation expenses, ensuring a smooth winding-up process.

Step 3: Security Vetting

After submitting the required documents, the Registrar forwards the names and details of the members to the National Intelligence Service (NIS) for a security check. This vetting process is a mandatory step and generally takes between two to three months.

Upon receiving clearance from the NIS, the Registrar informs the applicants and proceeds with the registration process.

Step 4: Issuance of Registration Documents

Once registered, the company will receive the following documents:

• Certificate of Incorporation: This official certificate serves as proof of the company’s legal existence as a Company Limited by Guarantee.
• CR12 Document: A list of the company’s members, officially recorded with the Registrar.
• Operating License (Section 55): This special license permits the company to operate as a Company Limited by Guarantee as per Section 55 of the Companies Act, 2015.

These documents give the company legal recognition and enable it to operate as a non-profit organization, fulfilling its objectives within the legal framework established by the Kenyan government.

Advantages of Registering a Company Limited by Guarantee in Kenya

1. Legal Identity: A CLG is a separate legal entity from its members, meaning it can own property, sign contracts, and take legal actions independently.
2. Limited Liability for Members: The liability of each member is limited to the amount specified in the statement of guarantee, ensuring personal assets are protected.
3. Enhanced Credibility: Registering as a CLG lends credibility to non-profit organizations, making it easier to attract funding, donations, and grants.
4. Perpetual Succession: A CLG continues to exist despite changes in membership, ensuring long-term sustainability for the organization.

Cost of Registering a Company Limited by Guarantee in Kenya

The cost of registering a Company Limited by Guarantee in Kenya includes the official filing fees, which may vary, and service fees from professional service providers. For registration assistance, we charge Kshs. 60,000 (exclusive of filing fees). This fee covers the preparation and submission of required documents, guidance through the vetting process, and liaison with the Registrar’s office to ensure a smooth registration experience.

If you’re interested in registering a company limited by guarantee in Kenya, please reach out to us at info@capitaregistrars.co.ke or by phone at +254 709 747 555 or +254 727 789 616. Our team of experts is ready to guide you through the entire registration process and answer any questions you may have.