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Company Limited by Guarantee vs Society


Company Limited by Guarantee vs Society | Bestar
Company Limited by Guarantee vs Society | Bestar


Company Limited by Guarantee vs Society


Company Limited by Guarantee (CLG) and Society are two different legal structures for non-profit organizations in Singapore. Both structures have their own advantages and disadvantages, so the best choice for your organization will depend on your specific needs and circumstances.


Company Limited by Guarantee


A Company Limited by Guarantee (CLG) is a type of company that is specifically designed for non-profit organizations. It is a separate legal entity from its members, which means that the members' personal liability is limited to the amount they have agreed to contribute in the event of the company being wound up. This can be a significant advantage for non-profit organizations, as it protects their members from personal liability for the organization's debts.


CLGs are also subject to the same corporate governance requirements as other types of companies in Singapore. This means that they must have a board of directors, hold regular general meetings, and keep proper financial records. This can help to ensure that the organization is run in a transparent and accountable manner.


Why Set up Company Limited by Guarantee


There are several reasons why you might choose to set up a Company Limited by Guarantee (CLG) in Singapore. Here are some of the key benefits:


Limited liability: CLGs offer limited liability protection to their members. This means that the members' personal assets are protected from the company's debts, even if the company is wound up. This can be a significant advantage for non-profit organizations, as it protects their members from personal risk.

Separate legal entity: CLGs are separate legal entities from their members. This means that the company is its own legal entity and is responsible for its own debts and liabilities. This can help to protect the personal assets of the company's members and can also make it easier for the company to raise funds.

Tax benefits: CLGs are generally exempt from corporate income tax in Singapore. This can be a significant advantage for non-profit organizations, as it can free up more money to be used for their charitable purposes.

Flexibility: CLGs are relatively flexible and can be used for a wide variety of purposes. This makes them a good option for non-profit organizations of all sizes and types.

Credibility: CLGs are seen as credible and professional organizations. This can help to attract donors, volunteers, and partners.


Here are some specific examples of when you might choose to set up a CLG:

  • If you are running a non-profit organization that provides social services or other public benefits.

  • If you are running a sports club or other recreational organization.

  • If you are running a professional association or trade union.

  • If you are running an educational institution or other training organization.

  • If you are running a research foundation or other charitable organization.

If you are considering setting up a CLG in Singapore, it is important to seek professional advice. A lawyer can help you to understand the legal requirements and can also assist you with the incorporation process.


Society


A Society is a voluntary association of individuals who come together for a common purpose. It is not a separate legal entity from its members, which means that the members are personally liable for the society's debts. This can be a significant disadvantage for societies, as it exposes their members to personal risk.


Societies are also not subject to the same corporate governance requirements as CLGs. This means that there is no requirement for them to have a board of directors, hold regular general meetings, or keep proper financial records. This can make it more difficult for societies to ensure that they are run in a transparent and accountable manner.


Why Set up a Society

There are several reasons why you might choose to set up a Society in Singapore. Here are some of the key benefits:


Simplicity: Societies are relatively simple to set up and manage. They do not have the same complex corporate governance requirements as Companies Limited by Guarantee (CLGs). This can make them a good option for small organizations with limited resources.

Flexibility: Societies are also quite flexible and can be used for a wide variety of purposes. This makes them a good option for organizations that are not sure of their exact long-term goals.

Cost-effectiveness: Societies are typically less expensive to set up and maintain than CLGs. This can be a significant advantage for small organizations with limited budgets. Community-based: Societies are often seen as more community-based than CLGs. This can make them a good option for organizations that want to foster a sense of belonging and camaraderie among their members.


Here are some specific examples of when you might choose to set up a Society:

  • If you are a small group of people who share a common interest, such as a hobby or sport.

  • If you are a local community group or organization.

  • If you are a student organization or club.

  • If you are an alumni association.

  • If you are a social or cultural club.

If you are considering setting up a Society in Singapore, it is important to make sure that you understand the legal requirements. You should also consider whether a Society is the best structure for your organization's specific needs and circumstances.


Which Structure is Right for You


The best structure for your non-profit organization will depend on your specific needs and circumstances. If you are looking for a structure that will protect your members from personal liability and provide you with a strong foundation for corporate governance, then a CLG is a good option. However, if you are a small organization with limited resources, then a society may be a more suitable option.


Here is a table summarizing the key differences between CLGs and Societies in Singapore:

Feature

Company Limited by Guarantee (CLG)

​Society

​Legal personality

Separate legal entity

​Not a separate legal entity

​Member liability

Limited to the amount agreed to contribute in the event of winding up

​Personally liable for the society's debts

​Corporate governance

Subject to corporate governance requirements

​Not subject to corporate governance requirements

​Suitability

​Large organizations with limited resources

​Small organizations with limited resources


If you are Considering Setting up a CLG or Society in Singapore, Seek Professional Advice from Bestar

Company Limited by Guarantee vs Society


It is crucial to seek professional guidance when establishing a Company Limited by Guarantee (CLG) or society in Singapore. Bestar, an accounting firm specializing in corporate matters, can provide you with comprehensive assistance throughout the incorporation and registration process. We can also offer valuable insights into the legal requirements for both CLGs and societies in Singapore.


Here's a summary of Bestar's services related to CLG and society incorporation and registration:

  1. Consultation and Advice: Bestar can provide you with a thorough consultation to understand your organization's objectives, structure, and operational needs. Based on this understanding, we can advise you on the most suitable legal structure, whether a CLG or a society, for your organization.

  2. Drafting Incorporation Documents: Bestar can expertly draft the necessary incorporation documents, including the Memorandum of Association (MOA) and Articles of Association (AA) for a CLG, or the Constitution for a society. These documents outline your organization's fundamental structure, purpose, and governance rules.

  3. Filing with ACRA: Bestar can handle the filing of the incorporation documents with the Accounting and Corporate Regulatory Authority (ACRA), ensuring compliance with all legal requirements and ensuring a smooth incorporation process.

  4. Corporate Governance and Compliance: Bestar can provide ongoing guidance on corporate governance and compliance matters, ensuring that your CLG or society adheres to best practices and legal regulations.

  5. Bank Account Assistance: Bestar can assist you in opening a bank account for your CLG or society, streamlining the process and ensuring that your organization can manage its finances effectively.

By engaging Bestar's accounting expertise, you can ensure that your CLG or society is established on a solid legal foundation, compliant with all relevant regulations, and well-positioned to achieve its objectives. Our comprehensive services can save you time, effort, and potential legal complications. Contact Bestar today!


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