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. GTA 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.
Advantages of the Hybrid Manx Company
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 corporate (tax)
charge which is currently fixed at £250. 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.
For further information relating to the Manx Hybrid Company please
contact Brian
Monk at the Isle
of Man office.
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