Hybrid company is a relatively new and creative company type which can provide the necessary discretion, flexibility and a favourable tax treatment
In such type of companies, the liability of its members is limited either by shares or by guarantee. The main attractiveness of such a structure is the flexibility it offers in the financing and distribution of profits within the company.
- Corporate Structuring
A guarantor member is elected into membership of the company by its directors on the condition that he/it undertakes to contribute to the debts of the company up to a certain specified amount. The guarantor member is thus subject to a contingent liability and is under a contractual obligation to pay; this contrasts with the shareholder who, once he has paid for his shares in full, holds shares in the company.
the hybrid company will be structured in such a way that its shares are issued on terms that each carries one vote, but the owner thereof will have no right to receive dividends or participate in the income or paid-in capital of the company in any way. On the other hand, the guarantor members so elected will have no right to vote, or effectively ‘manage’ the company, but are entitled to participate in the distribution of income and capital. In this way, the control and management of the company rest with the shareholders.
The rights and obligations of each class of members of the hybrid company can be laid down in its constitution or can be set out by its directors in board resolutions and thus remain confidential. Additionally, there are minimum disclosure requirements, where the company is structured as a GBL2.
- Transmission Of Assets Upon Death
A guarantor member’s interest is extinguished upon death and new guarantor members can be elected by the directors according to a memorandum of wishes, or other mechanism, executed by the deceased indicating whom he wishes to be elected as guarantor member upon his death. Hence, transmission of assets upon death may be achieved with minimum delay, cost and formality.
- Tax exemptions and Concessions
The hybrid company in Mauritius, set up by a non-resident can take the form of a Global Business Licence Company Category 1 (GBL1) or Category 2 (GBL2). A GBL1 is governed by the Income Tax Act 1995, under which corporate income is taxed at the flat rate of 15%, excluding capital gains.
Mauritius laws allow an underlying foreign tax credit, equal to the amount of foreign taxes paid, up to the amount of tax due in Mauritius. In the absence of proof, the amount of foreign tax paid is presumed to be 80% of the Mauritius tax. The effective tax rate for a GBL1 can thereby be reduced to a maximum of 3%.
A GBL2 is not subject to any tax. In addition, there is no capital gains tax, nor withholding tax on dividends and interests paid to non-residents.