Hybrid Companies

  • A 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 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. These are registered members who 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 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.
The major advantages of a Hybrid over a Trust are that a Hybrid is not subject
     to the rule against perpetuities, for example 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. A hybrid
     company is comparatively less expensive compared to a Foundation.
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.