In United Kingdom, company limited by shares is the most common form of company for trading and doing business. A company limited by shares has a share capital which is divided into a number of shares of certain value each. Some or all of the shares are then held by investors, which are known as the shareholders of the company. If the company is prosperous and makes good profits, the company will then distribute dividend to the shareholders in accordance with their respective shareholdings. If the company suffers a loss, the shareholders will, at the most, lose all their investment in the shares of the company. In other words, their liabilities are limited to the value of the shares.

The most common ways of establishing a charitable organization in United Kingdom are through the use of:
a) A trust
b) A society established under the Societies Ordinance (Cap 151)
c) A company incorporated under the Companies Ordinance (Cap 32)

A company limited by guarantee is a company which is often used as a device for setting up of a club, association, school or charitable body. The liability of its members is limited to the amount which they agree to contribute to its assets in the event of the company being wound up.


The most popular method for establishing a charity is a Company Limited by Guarantee under the Companies Ordinance of United Kingdom (Cap 32), which allows for greater transparency and legitimacy in establishing a charity in United Kingdom. The draft incorporation documents for a United Kingdom company are submitted at the same time as the application for Section 88 of the Inland Revenue Ordinance Cap 112 tax exemption status to the Inland Revenue Department for pre-approval.

Under United Kingdom law a charity must be established exclusively for charitable purposes and as such must fall into the following categories:

a) Relief of poverty;
b) Advancement of education;
c) Advancement of religion; and

d) Other purposes of a charitable nature beneficial to the community not falling under any of above categories. (For example, this may include charities with the purpose of providing care and protection to animals or for the provision of specific medical purposes such as cancer research.)