The Benefits of an Offshore Hybrid Company

When is an offshore trust not an offshore trust? When it’s an offshore hybrid company!

Many people are aware of the general benefits of establishing an offshore company such as offsetting or mitigating personal or company taxation, allowing for ease of cross border business transactions or just acting as the entity which owns overseas property assets…but did you know that there is a type of offshore company called an offshore hybrid company and that this can achieve all of the listed benefits above and far more besides?

The secret of an offshore hybrid company structure is that it can be used in a similar way to a trust; it can guarantee members’ interests after their death, potentially be structured to avoid probate and inheritance tax and still provide all the usual benefits of an offshore company.  In fact, an offshore hybrid company could just be the type of structure you’re looking for if you have assets to protect and business interests to enhance and preserve.

The reason for the word ‘hybrid’ in ‘offshore hybrid company’ is because this is a type of company structure that is limited in two ways – firstly by shares and secondly by guarantees - and as a result it has two very different classes of member.  Firstly you can have shareholders and secondly you can have guarantee members…

The guarantee member guarantees to meet the company’s liability up to a certain fixed amount whereas the shareholder actually holds assets – i.e., shares.

All very interesting – but what does this really mean in practice?

Well in practice, as stated, a hybrid company can be used like an alternative to a trust especially in jurisdictions where there is no trust law and where offshore trusts are not recognized.  The hybrid company can be created so that the shareholding members have control (like trustees) and the guarantee members take benefit (like beneficiaries).  If a guarantee member dies their benefits can cease (and be rerouted to another guarantee member for example) and so there are not necessarily any succession issues, there is no need for probate and inheritance tax is legitimately avoided.

In terms of taxation anti-avoidance legislation and the taxation of profits held within the company it is sometimes possible to structure appropriately to legitimately avoid taxation and it is almost always the case that guarantee members, who can be the beneficiaries, avoid all reporting requirements and therefore retain their privacy.

Some of the most attractive, highly utilized and best offshore tax havens in which to establish a hybrid company are the Isle of Man, Mauritius, Gibraltar or the Turks & Caicos Islands and if you want to know more about the secret of offshore hybrid companies or determine whether such a structure could benefit you, feel free to contact us and we will put you in touch with the most appropriate ShelterOffshore recommended partner to assist you.