Non-Profit Fact Sheets

Difference between a Company Limited by Shares and Company Limited by Guarantee

What are the key differences between a company limited by shares and a company limited by guarantee? Is one better than the other? Under Australian law, there are two main types of company structures: proprietary companies and public companies. A closer look reveals that these businesses usually operate either as companies limited by shares (CLS) or companies limited by guarantee (CLG). The difference between the CLG vs CLS structure is primarily in the ways each approaches liability, voting and dividend rights, and share distribution.

What is a Company Limited by Shares (CLS)?

A company limited by shares (CLS) is one of the most common structures used to conduct business in Australia. As a company founder, the legal structure you choose determines the activities your organisation can legally carry out. Forming a CLS is a good option for organisations planning to conduct commercial activities and can help protect group owners from personal liability. The Corporations Act 2001 (Cth) defines a company limited by shares as “a company formed on the principle of having the liability of its members limited to the amount (if any) unpaid on the shares respectively held by them.

What is a Body Corporate in Australia?

A body corporate, or owner’s corporation, is one of several incorporated legal entities in Australia that use a group structure as a management model. In Australia, a general body corporate represents a group of independent owners who run the company as a corporation to develop, manage, and maintain jointly owned land. Bodies corporate hold the same powers and manage their affairs in a similar way to other incorporated entities, but are regulated by the state in which they are located.

What is a Public Benevolent Institution (PBI) in Australia?

A public benevolent institution (PBI) is one of several subtypes of charities able to register with the Australian taxation Office and apply for tax concessions. The purpose of a PBI is to ‘relieve poverty or distress’ in a community by providing services to people in need. Like other charities, PBIs have both legal obligations and benefits. One such benefit is that they are eligible to receive the deductible gift recipient status.

What are the non-profit structures in New Zealand Aotearoa?

There is enormous diversity within Aotearoa’s non-profit sector and the different non-profit structures organisations have to choose from. Not-for-profits and charities in New Zealand range from large nationally organised entities and associations to semi-corporate and small, to informal groups that rely on casual volunteering1. Most non-profit organisations rely on donations, gift giving/koha, government grants and contracts, service fee revenue, income from trading, investments or dividends, sponsorships, and membership fees to fund their activities.

National bodies and local groups in New Zealand

Did you know many national bodies and local groups choose to work together to make their services more accessible? Local organisations and national bodies often operate in synergy and depend on each other to meet their common objectives and deliver activities to the public. In the non-profit sector, where financial resources are sometimes difficult to come by, this arrangement is mutually beneficial and allows local organisations to effectively run programs.

What are Māori Land Trusts in New Zealand?

Māori land trusts are like other types of trusts but are specifically designed to hold Māori land and manage activities that take place there. Both the Māori Land Court, Te Kooti Whenua Māori, and the Māori Appellate Court, Te Kooti Pira Māori, oversee Māori land matters related to trusts based on the Māori Land Act and other New Zealand laws. These matters including obtaining and maintaining trust status, providing guidance on ownership such as restrictions on transferring shares, and overseeing land management and use to ensure organisations are run according to their purpose.

What is an Industrial and Provident Society in New Zealand?

An Industrial and Provident Society (IPS) consists of a group of small business owners who come together to become part of a larger entity for mutual benefit while continuing to operate independently. Group members of an IPS can carry on activities in any industry, business or trade except banking. They must operate according to the purpose and written rules and apply to the Registrar of Industrial and Provident Societies to receive their status.

What is a Limited Liability Company in New Zealand?

A limited liability company (LLC) is the most often used legal structure for companies in Aotearoa New Zealand. Less common forms are unlimited and co-operative companies. It has the advantage of limiting the liability of shareholders, with the exception of any money they owe on their shares or they personal guarantees they have made to lenders or creditors through the activities of the company. LLCs are incorporated entities and are therefore regulated by the NZ Companies Office under the Companies Act 1993.

What Are Incorporated Societies in New Zealand?

Incorporated societies are the most common form of non-profit organisations in the Aotearoa New Zealand not-for-profit sector. The category represents groups working in industries such as culture and recreation, education and research, health, social services, environmental services, development and housing, legal and political advocacy, religion, international development, grant making and voluntarism, and business and professional associations and unions1. Non-profits with an incorporated society’s structure are membership-based organisations, which means their members have control over the direction of the organisation and are often involved in its operation.