Company limited by shares and by guarantee
In terms of the Companies Act 2001, it is possible to incorporate a company limited by shares and by guarantee. This type of Company is often referred to as a hybrid company.
A company limited by shares and by guarantee means a company formed on the principle of having the liability of its members:
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who are shareholders, limited to the amount unpaid, if any, on the shares respectively held by them; and |
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who have given a guarantee, limited to the respective amount they have undertaken to contribute, from time to time, and in the event of it being wound up; |
When this type of company is used like a quasi-trust, the company is structured with voting shares, which have no rights to dividends and no participation in the capital or income of the company in any way. The members have no voting rights but participate fully in the income and capital of the company. However, if liquidated, it is possible that all assets pass to the members. Thus control of the company legally rests with the shareholders, but all benefits flow to the members.
For instance, the shares may be issued to DITCL or its nominee, who acts rather like ‘quasi-trustees’ – having legal ownership of the Company and its assets but unable to receive financial benefit from holding the shares. All of the financial benefits flow to the member, placing them in a position similar to beneficiaries of a typical trust. A member’s interest may be extinguished on death to eliminate succession problems, remove any probate requirements and therefore may eliminate any inheritance tax/estate duty implications. Depending on how the Constitution of the company is drafted, the member may transfer his rights and duties to the Company, in part or in whole, to third parties. This is important so that his family can benefit from the income and capital of the company. |
