BT Explains: Company limited by guarantee
Claudia Tan HS
SINGAPORE Press Holdings ( T39 ) announced on Thursday that it will be transferring its media business to a company limited by guarantee (CLG). BT explains what a CLG is and other commonly asked questions.
What is a CLG?
A CLG is an entity that does not have share capital or shareholders. Instead, members act as guarantors and agree to pay a fixed sum in the event that the company winds up.
Unlike companies that distribute profits to shareholders, CLGs are prohibited from distributing profits in the form of dividend, bonus or otherwise to its members. They instead retain profits within the company and reinvest them.
CLGs are registered with the Accounting and Corporate Regulatory Authority Singapore (Acra) and governed by the Companies Act.
Are CLGs charities?
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Not necessarily. CLGs are usually set up by non-profit organisations that require a corporate status. But CLGs may also obtain charity status if they fulfil the criteria set out by the commissioner of charities.
How do CLGs pay staff?
According to Acra, income can be used to provide:
- reasonable and proper remuneration for services rendered to the company
- reimbursement to a director of the company for out-of-pocket expenses
- payment of a reasonable and proper rent to a director or member of the company for premises let to the company
Are CLGs considered a public or private entity?
Public. Companies require share capital to be classified as private.
Why set up a CLG?
- Protect members from personal liability for the company's debts
- Have a distinct legal entity from members
Must CLGs pay tax?
CLGs are liable to pay corporate tax at the prevailing corporate tax rate of 17 per cent. CLGs with a charity status are exempt from tax.
Are there other CLGs in Singapore?
- The Esplanade
- The Arts House
- National University of Singapore
- Temasek Foundation
Read more:
- MCI expresses support for SPH's proposed restructuring
- SPH restructuring: 6 other news outlets under media trusts and foundations
- The SPH Journey: A timeline of key events since SGX listing
- SPH deal aims to improve asset values, ease shareholder pressure off media unit
- SPH will need to clarify future plans to secure shareholder approval
- Hot stock: SPH loses 15.1% on media restructuring plan
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