The Isle of Man Hybrid Company is a company limited by guarantee and having a share capital.
The Hybrid Company is a fusion of the two standard forms of Limited Company, namely a Company Limited by Guarantee and a Company having a Share Capital. The members of the former type of company undertake to contribute capital to the company (as defined in its Memorandum of Association) in the event that the company becomes insolvent or goes into liquidation. The members of the latter type of company contribute capital to become a member (i.e. to become a shareholder).
Companies Limited by Guarantee typically are used to establish mutual associations, charities, clubs and non-profit making organisations as the members own the company in common but no individual member has any personal right or interest therein.
Companies Limited by Guarantee and having a Share Capital have a variety of uses by virtue of the flexibility offered by Isle of Man legislation. Furthermore there are advantages in using such an entity in preference to a trust or a foundation.
Hybrid Companies can have two or more classes of member.
The first class will be the registered members (or shareholders) who will be the controlling members. OCRA will normally provide these members as the registered members will not have any right to distributions of profits but will have voting and administrative powers. The principle power of the shareholders is to elect directors to manage the company.
The second class will be the beneficial members whose identities are not in the public domain and who are the only persons entitled to share in the profits of the company although distributions from the company can only be authorised by the directors.
Subsets of members with different rights can be created through the addition of other classes of beneficial members.
The major advantage of a Hybrid over a normal Private Limited Company is that it can be structured so that economic interest is separate from control. This can be of significant importance for residents of certain countries where strict CFC rules exist.
The major advantages of a Hybrid over a Trust are that a Hybrid is not subject to the rule against perpetuities, whereas an Isle of Man Trust has a maximum life of 150 years, and it can trade.
The major advantage of a Hybrid over a Foundation is that of cost (typically a Foundation requires a minimum capitalisation of $10,000 whereas a Hybrid only requires an issued share capital of £2).
Various tax planning opportunities arise for a Hybrid Company which, in the Isle of Man, will only pay an annual government fee which is currently fixed at £360. These opportunities relate to those jurisdictions which require overseas entities to be classified, the tax implications flowing from the classification of the entity. These of course vary from jurisdiction to jurisdiction and from time to time.
The articles of association of a Hybrid can provide for the appointment of a Protector (in the same manner as trusts) where the Protector supervises the directors and whose authority is required, inter alia, to elect members and to dispose of assets.
A bespoke 'offshore' solution can be complex and requires careful planning and execution. We therefore encourage our clients to contact us directly, without obligation.
While all of our consultants in our offices provide a Free Initial Consultation, the consultant listed below has particular expertise in this area and will gladly assist with advice on how to approach your unique challenge.
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