Understanding Company Limited by Guarantee (CLBG)
When you think of a company in Malaysia, most people imagine a Sdn Bhd — a business that exists to make profit for its shareholders. But not all companies are formed for profit. Some are built for a mission, a cause, or a purpose bigger than business — such as promoting education, supporting the arts, advancing research, or improving the welfare of society.
That’s where a Company Limited by Guarantee (CLBG) comes in. This structure provides a formal, legally recognised, and transparent way for non-profit organisations to operate responsibly, raise funds, and build long-term credibility.
1. What Is a Company Limited by Guarantee (CLBG)?
A Company Limited by Guarantee (CLBG) is a non-profit company formed under the Companies Act 2016, regulated by the Companies Commission of Malaysia (SSM).
Unlike a Sdn Bhd (Private Limited Company), a CLBG does not have shareholders or share capital. Instead, it has members who act as guarantors, agreeing to contribute a specific amount (usually RM10–RM100) if the company is ever wound up.
In simple terms:
- A Sdn Bhd is owned by shareholders who expect profits.
- A CLBG is owned by members who support a cause.
All profits made by a CLBG must be reinvested into achieving its objectives, not distributed as dividends.
This structure is often used for charitable, educational, religious, scientific, cultural, or social welfare purposes.
2. Types of Organisations That Commonly Register as CLBG
Common examples of CLBGs in Malaysia include:
- Charitable foundations and trusts (e.g., health, education, welfare)
- Professional associations and trade bodies
- Research institutes and educational institutions
- Sports councils, arts organisations, and cultural centres
- Environmental and sustainability initiatives
- Social enterprises looking to gain credibility and donor confidence
3. Key Features of a CLBG
A CLBG has a number of distinct characteristics that make it ideal for non-profits and organisations with public objectives:
a. No Share Capital
There are no shareholders, and therefore no distribution of profits. Members act as guarantors, contributing a nominal sum only if the company winds up.
b. Separate Legal Entity
A CLBG can enter into contracts, own property, open bank accounts, and sue or be sued in its own name — ensuring operational independence from its members.
c. Limited Liability
Members’ personal assets are protected. Their liability is limited to the guaranteed amount (for example, RM10 per member).
d. Perpetual Succession
The CLBG continues to exist even if members or directors change. This makes it ideal for long-term initiatives such as foundations or public service organisations.
e. Governing Laws
A CLBG is regulated under the Companies Act 2016, specifically Sections 45–52, and must comply with SSM guidelines on registration and operation.
If it intends to collect donations or operate as a tax exempted charity, it also requires approval from the relevant authority (such as LHDN/IRB) and may need to register with other relevant ministries (e.g. Ministry of Education for schools, Ministry of Youth and Sports for sports organisations).
f. Public Interest and Transparency
A CLBG must include in its Constitution that its income and property will be applied solely towards promoting its objectives. No portion can be distributed to members or directors, except for reimbursement of reasonable expenses.
4. Compliance Requirements for CLBGs
Although CLBGs enjoy certain benefits, they are also held to higher governance standards because they often handle public or donor funds.
Here’s a breakdown of the key compliance requirements:
a. Registration with SSM
- A CLBG must submit its Constitution, details of members and directors, and obtain approval for its name and purpose.
- It requires Ministerial approval (via KPDNHEP or relevant ministry) before registration is completed.
b. Annual General Meeting (AGM)
- Must hold an AGM each year to present the company’s audited accounts and reports.
c. Annual Return (SSM)
- A CLBG must file an Annual Return with SSM within 30 days of its AGM, detailing directors, members, and registered office.
d. Audited Financial Statements
- Every CLBG must prepare and lodge audited financial statements with SSM within 30 days after the AGM.
- Financial statements must comply with approved accounting standards in Malaysia.
e. Notification of Changes
- Any change in directors, registered address, or Constitution must be notified to SSM within 30 days.
f. Tax Compliance (LHDN)
- CLBGs can apply for tax-exempt status under Section 44(6) of the Income Tax Act 1967.
- To qualify, the CLBG must prove that:
- Its objectives are charitable;
- Its funds are used solely for those objectives; and
- It operates for the benefit of the public, not private individuals.
- Its objectives are charitable;
g. Timeline Summary
|
Compliance Item |
Regulator |
Deadline / Frequency |
|
Annual General Meeting |
Internal / Members |
Within 6 months after financial year end |
|
Annual Return |
SSM |
Within 30 days of AGM |
|
Audited Financial Statement |
SSM |
Within 30 days of AGM |
|
Tax Filing (Form TF / TR) |
LHDN |
7 months after financial year end |
|
Ministerial Approvals (if applicable) |
KPDNHEP / Others |
Upon registration or change of activities |
5. Advantages of Registering as a CLBG
A CLBG provides a structured and credible framework for non-profit and social impact work.
a. Enhanced Credibility and Public Trust
A CLBG’s formal registration under SSM gives it legitimacy. Donors, government agencies, and partners often prefer supporting registered entities with transparent governance.
b. Limited Liability Protection
Members and directors are protected from personal liability beyond their guaranteed amount. This provides comfort to those managing or contributing to the organisation.
c. Separate Legal Personality
The company can own property, hire employees, and manage bank accounts in its own name. This ensures continuity even if key individuals leave.
d. Eligibility for Tax Exemption and Grants
A CLBG can apply for Section 44(6) tax exemption and become eligible for government or corporate grants. Donations to approved CLBGs are often tax-deductible for donors, enhancing fundraising capability.
e. Perpetual Existence
Unlike societies or partnerships, a CLBG continues indefinitely unless formally dissolved. This is ideal for long-term missions like foundations and universities.
f. Access to Institutional Funding
Banks, international NGOs, and government bodies typically require beneficiaries to be legally registered. A CLBG status improves access to local and foreign funding opportunities.
6. Disadvantages and Challenges of a CLBG
Despite its advantages, forming and maintaining a CLBG involves more responsibility.
a. Lengthy and Complex Registration Process
The approval process involves ministerial review and SSM scrutiny, which can take 3–6 months or longer, depending on the organisation’s purpose.
b. Higher Governance Burden
Directors are expected to uphold strict fiduciary duties, including transparency, proper record-keeping, and accountability for all funds used.
c. Mandatory Audits
Even smaller CLBGs must prepare audited financial statements, adding to annual compliance costs.
d. Restrictions on Profit Distribution
No profits or surplus income can be distributed to members or directors — everything must go back into the cause.
e. Ongoing Reporting Obligations
Annual filings, audits, and meetings must be maintained to stay compliant. Failing to do so can lead to penalties or deregistration by SSM.
7. CLBG vs Foundation vs Society — Key Comparison
|
Feature |
CLBG |
Foundation (Trust) |
Society |
|
Governing Law |
Companies Act 2016 |
Trustees (Incorporation) Act 1952 |
Societies Act 1966 |
|
Regulator |
SSM + Relevant Ministry |
Legal Affairs Division (BHEUU) |
Registrar of Societies (ROS) |
|
Legal Personality |
Separate legal entity |
Yes, through trustees |
Separate entity once registered |
|
Profit Distribution |
Not allowed |
Not allowed |
Not allowed |
|
Annual Audit |
Mandatory |
Mandatory |
Usually required if large |
|
Tax Exemption |
Can apply under s.44(6) ITA |
Can apply under s.44(6) ITA |
Not automatic |
|
Suitable For |
Charities, NGOs, education, research |
Foundations |
Associations, clubs |
8. Who Should Choose a CLBG?
A CLBG is ideal if your organisation’s primary goal is impact, not income. It’s best suited for:
- Non-profit organisations and charities
- Industry associations or professional bodies
- CSR initiatives run by corporations
- Educational and research entities
- Community development or advocacy groups
If your aim is to build long-term credibility, attract donor confidence, and operate transparently, a CLBG offers the most robust structure under Malaysian law.
Get Started with Amaze Advisory Today!
Setting up a CLBG involves strategic planning, ministerial approvals, and compliance documentation. Getting professional guidance early ensures your application is smooth and compliant.
At Amaze Advisory, we help organisations from start to finish — from planning your structure, drafting the Constitution, and registering with SSM, to maintaining annual compliance and tax exemption status.
Our CLBG setup and compliance services include:
- Drafting and submission of Constitution and application documents
- SSM registration and ministerial approval assistance
- Accounting, audit, and tax compliance support
- Advisory for Section 44(6) tax-exempt applications
- Ongoing corporate secretarial and filing support
✔️ Email: salesteam@amazeadvisory.com
✔️ Phone: +6013-284 7678 / +6013-323 7678
Let’s build your business foundation the right way — from incorporation to growth and beyond.
Contact Amaze Advisory today and take the first step toward building your business in Malaysia.
