How to Register and Operate a Company Limited by Guarantee (Ltd/Gte) in Nigeria

Did you know that over 60% of non-profit initiatives fail to achieve their long-term goals due to legal and regulatory oversights? In Nigeria, establishing a Company Limited by Guarantee (Ltd/Gte) offers a legally structured path for non-profit organisations to make a lasting impact while remaining compliant. But navigating the registration process requires precise steps, approvals, and strict adherence to regulations. Dive into this guide to discover how to successfully set up and operate a Company Limited by Guarantee in Nigeria and safeguard your mission from costly compliance pitfalls.
How to Register and Operate a Company Limited by Guarantee (Ltd/Gte) in Nigeria

Registering a Company Limited by Guarantee (Ltd/Gte) in Nigeria is an intricate process designed to ensure that the company operates solely for the benefit of its stated purpose and not for profit.

A Company Limited by Guarantee (Ltd/Gte) is typically formed for promoting activities such as commerce, art, science, religion, sports, culture, education, research, and charity.

Such a company is barred from distributing its profits to members and is governed by specific rules, which focus on the alignment of its resources and activities with its objectives.

This comprehensive guide will walk you through the essential steps, requirements, and compliance measures needed to establish and maintain a Company Limited by Guarantee in Nigeria.


Overview of a Company Limited by Guarantee (Ltd/Gte)

A Company Limited by Guarantee (Ltd/Gte) is unique in that it does not distribute profits to its members. Instead, its income and property must solely promote the stated goals of the company. According to Nigerian law, a Company Limited by Guarantee:

  1. Promotes Non-Profit Objectives: The company’s income is channeled exclusively toward its objectives without any distribution of profits to members.
  2. Requires Attorney-General Approval: The establishment of this company type is contingent upon the authority of the Attorney-General of the Federation.
  3. Limited Liability of Members: Members guarantee a predetermined sum (not less than ₦100,000) that they commit to contributing in the event of the company’s winding up.
  4. Not Formed for Profit: Any revenue generated must be applied to the company’s purpose, prohibiting profit distribution to members.

Key Stages in the Registration Process

The following steps detail the process of registering a Company Limited by Guarantee (Ltd/Gte) in Nigeria:


Step 1: Preliminary Preparations and Application for Consent

  1. Drafting the Memorandum and Articles of Association:
    • Purpose Statement: The memorandum must explicitly state the company’s non-profit nature, with objectives limited to sectors such as education, charity, religion, sports, culture, research, or science.
    • Liability Clause: Include a clause stipulating that the company is not authorised to distribute profits to members.
  2. Application to the Registrar-General:
    • Obtain the Registrar-General’s consent to register as a Company Limited by Guarantee.
    • Submit initial documents that clearly outline the company’s purpose and demonstrate that it will operate within the bounds of its non-profit objectives.
  3. Attorney-General’s Approval:
    • The Attorney-General reviews and must approve the registration.
    • If there are no objections, the Attorney-General has 30 days to grant authority to register the company. If further information is required, the 30-day timeframe will restart upon receipt of the additional documentation.

Step 2: Publication and Invitation for Objections

  1. Public Notice Requirements:
    • After receiving the Attorney-General’s consent, the application must be advertised in three national daily newspapers.
    • The publication invites objections from the public, allowing anyone with valid concerns to object to the formation of the company.
  2. Submission and Review of Objections:
    • Members of the public are given 28 days from the date of the last publication to file objections with the Corporate Affairs Commission (CAC).
    • The CAC examines any objections raised, which may require further clarification or additional information from the applicant.

Step 3: Final Approval and Certificate of Incorporation

  1. Final Review by the CAC:
    • If no objections are received, or if the CAC deems objections invalid, it will proceed with the incorporation process.
    • The CAC conducts a comprehensive review to ensure the company meets all statutory requirements and aligns with the objectives outlined in its memorandum.
  2. Issuance of Certificate of Incorporation:
    • Once approved, the CAC registers the company as a Company Limited by Guarantee and issues a Certificate of Incorporation, formally recognising the company under Nigerian law.

Legal Obligations and Compliance for Companies Limited by Guarantee

Operating a Company Limited by Guarantee in Nigeria involves continuous compliance with various legal and regulatory requirements. Some of these obligations include:

  1. Restriction on Profit Distribution: Profits or assets cannot be distributed to members. Any attempts to allocate profit or interests among members will be deemed void.
  2. Mandatory Non-Profit Purpose: The company must continually demonstrate that its activities align with its stated goals. Engaging in profit-making activities with the intent of distributing profits to members will attract penalties.
  3. Audit and Financial Disclosure:
    • Annual audits are required to verify that funds and resources are strictly used for the company’s stated purposes.
    • Financial records must reflect compliance with the non-profit mandate.
  4. Liability of Members: Each member’s liability is limited to the amount they have guaranteed. However, if the company engages in profit-making activities in violation of its mandate, responsible members and officers may be held jointly and severally liable for its debts and penalties.

Operating a Company Limited by Guarantee in Nigeria

Once registered, operating a Company Limited by Guarantee entails a diligent focus on adherence to the guidelines that define its unique structure. Key operational practices include:

  1. Governance: The board and management must ensure compliance with both the letter and spirit of the non-profit mandate.
  2. Resource Allocation: All funds should be allocated to advance the company’s specific purpose, with detailed records maintained to avoid any potential conflicts of interest.
  3. Audit and Reporting Requirements: Yearly financial audits and reporting to the CAC ensure that funds are appropriately managed and objectives are met without profit diversion.

Frequently Asked Questions (FAQs)

Here are some common questions related to registering and operating a Company Limited by Guarantee in Nigeria:

1. What is the minimum liability requirement for members?

  • Members are required to guarantee a minimum of ₦100,000 in case the company is wound up. This sum underscores the limited liability of members while ensuring the company’s stability.

2. Can a Company Limited by Guarantee engage in profit-making activities?

  • No, a Company Limited by Guarantee is prohibited from profit-making with the intent of distributing profits to its members. It must channel all revenue toward its stated goals.

3. What happens if an objection is raised during the registration process?

  • If an objection is raised, the CAC reviews the grounds of the objection and may request additional information. Based on its findings, it can either uphold or dismiss the objection.

4. How long does it take to register a Company Limited by Guarantee in Nigeria?

  • The timeline largely depends on the promptness of approvals. The Attorney-General has 30 days to review and approve (or request further information), followed by the 28-day public objection period. The entire process can extend over a few months if delays or objections occur.

Common Misconceptions About Companies Limited by Guarantee

  1. Misconception: A Company Limited by Guarantee can distribute profits as long as it maintains its primary objectives.
    • Fact: The company is legally barred from distributing profits to members, even if it maintains its objectives.
  2. Misconception: Registering a Company Limited by Guarantee is the same as registering a non-profit organisation.
    • Fact: While similar, a Company Limited by Guarantee is a specific legal entity with distinct requirements, including Attorney-General approval and liability stipulations.
  3. Misconception: The Attorney-General’s consent is a mere formality.
    • Fact: Consent from the Attorney-General is critical and may involve thorough scrutiny of the company’s objectives, intended activities, and compliance with non-profit stipulations.

Final Thoughts

Setting up a Company Limited by Guarantee (Ltd/Gte) in Nigeria involves detailed regulatory steps and compliance measures that ensure the company operates solely for non-profit purposes.

From obtaining consent from the Attorney-General to managing operational compliance, each step ensures the company remains focused on its non-commercial objectives.

For individuals or groups with a genuine commitment to serving the public good, this structure provides a legally sound pathway to achieving lasting impact.

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