In terms of the Companies Act 2001, it is possible to incorporate a company and limit shareholder and/or member liability by shares and by guarantee. This type of Company is often referred to as a hybrid company and operates like a quasi-trust.
This is an effective means to protect assets during estate planning as members can make use of hybridised company structures to ensure that the benefits of privately held business assets are transferred to dependents.
Dale International performs a comprehensive range of trustee and quasi-trustee services (in the form of Companies limited by share or guarantee). Our consultative approach produces customised structures with individualised wealth management solutions to effectively mitigate risks, and protect your interests.
More information about Companies limited by share or guarantee
Limited Liability, Maximum Benefits
The underlying principle of a hybrid company is to limit the liability of certain members.
In the case of shareholders, their liability is limited to the unpaid amount on shares held while in the case of members who have given a guarantee, their liability is limited to the respective amount they have undertaken to contribute from time to time, or upon dissolution.
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. Conversely, members with no voting rights may participate fully in the income and capital of the company. Thus control of the company legally rests with the shareholders, but all benefits flow to the members.
Benefits of Companies Limited by share and by guarantee
A member’s interest may be extinguished on death to eliminate succession problems, remove any probate requirements and therefore eliminate any inheritance tax/estate duty implications.
In addition, 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 enables the deceased members family to continue to benefit from the income and capital of the company.
In a typical scenario, shares are issued to DITCL or its nominee, 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 members, placing them in a position similar to beneficiaries of a typical trust. In this way, Dale International acts like a quasi-trustee.