Solutions: Hybrid Company
A hybrid company is a relatively new and creative company type which can provide the necessary discretion, flexibility and a favourable tax treatment.
The hybrid company has two classes of members:
- The real shareholders who are liable to the extent of the company capital. They have voting rights and they’re the legal owners of the company. These shareholders are actually professionals such as asset management companies or trustee companies who then also fulfil the role of company director.
- The guarantee members who are elected into membership of the company by the company director(s). They don’t have voting rights and they’re entitled to participate in the distribution of income and capital of the company, on condition that they undertake to contribute to the debts of the company should the company go bankrupt. This sounds risky but it isn’t: the potential contribution of the guarantee members is set at a specified maximum amount, typically a relatively small amount. The bottom line is that these guarantee members are then discreetly rewarded for all their good heartedness.
The rights and obligations of each member class can be specified in a private document drafted by the directors, which means that the details of the guarantee members can be kept completely confidential. The private and confidential arrangements tolerate almost infinite fiscal creativity and this offers opportunities. These arrangements can be carefully drafted to create a structure which is tailored to the specific needs of the individual. In other words, it is possible to ‘run’ a company without revealing your identity.
Just like a trust or foundation, the hybrid company can be an excellent vehicle to avoid inheritance tax and estate duty implications. Typically, a guarantee member can draft a personal and private Letter of Wishes which is to be used at the moment of his/her death. When a guarantee member then dies, his/her membership extinguishes on the moment of death and new guarantee members (for example the children or grandchildren) are appointed who then continue to benefit from the assets of the hybrid company. Alternatively, guarantee members can also appoint their chosen heirs, during their lifetime, as the new guarantee members.
Low-tax countries offering Hybrid Company solutions
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Iven De Hoon