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The Gibraltar Hybrid Company

The term "hybrid company" is used to describe a company which is limited both by shares and by guarantee so has two classes of members: Shareholders and Guarantee Members.

Gibraltar is a peninsula with an area of 23/4; square miles situated at the southernmost tip of Spain. Gibraltar has been a Crown colony of the United Kingdom since 1713 when the Territory was ceded to Britain under the terms of the Treaty of Utrecht. Gibraltar is politically and economically stable and although Spain still maintains a territorial claim over Gibraltar the British Government has undertaken not to place the people of Gibraltar under sovereignty of another state without their free and democratic consent. This consent is most unlikely to be forthcoming.

Britain maintains responsibility for defence and international affairs but local matters, including company and taxation law, are the preserve of a locally elected Parliament.

Gibraltar is a full member of the European Union having been included as a member when Britain joined in 1973 but Gibraltar is specifically excluded from the European Common Agricultural Policy, the VAT system and the Common Customs Union.

Gibraltar enjoys a sophisticated range of banking, legal, accountancy and other professional services. Communications are excellent. The currency is, for all practical purposes, the British Pound Sterling (although local Gibraltar Pounds are also issued and trade on par with Sterling). The population is bilingual in English and Spanish which facilitates the translation of documents for the Spanish speaking market.


The term "hybrid company" is used to describe a company which is limited both by shares and by guarantee so has two classes of members: - Shareholders and Guarantee Members. The former are familiar and well understood, the latter is less so although many sporting clubs or societies are structured as companies limited by guarantee and joining members become Guarantee Members.


A Guarantee Member is elected into membership of the company by the directors on condition that the member undertakes to contribute to the debts of the company up to a certain specified maximum amount - typically GBP2, 000. As such a Guarantee Member holds a contingent liability, which is an obligation, and this contrasts with the position of the shareholder who holds an asset - the shares. The rights and obligations which attach to each class of membership can be laid down in the Articles of Association of the company or by the directors in board meetings thereby keeping the terms and conditions of membership confidential. The arrangements which can be made are infinite and flexible as the different rights and obligations which attach to each class of membership can be arranged to suit and skilful drafting can be used to create structures which are precisely tailored to the different needs of the client.

Hybrid companies are often used as quasi trusts particularly by persons resident in civil law countries which do not recognize trusts. Typically the company will be structured so that the shares are issued on terms that each carries one vote but no rights to dividends or to participate in the capital or income of the company in any other way. The Guarantee Memberships would be issued on terms that they carry no rights to vote but all the rights to participate in the income and capital of the company. Thus all control rests with the shareholders but all benefits flow to the Guarantee Members. The shares can be issued to professional managers, who therefore act as quasi trustees, but unlike normal shareholders they cannot receive financial benefit from holding the shares. All financial benefits flow to the Guarantee Members who are therefore in a position not unlike the beneficiaries of a classical trust structure. Also a Guarantee Members interest is extinguished on death so there are no succession problems, no need to obtain probate and therefore there will normally be no inheritance tax implications/estate duty.

The anti-avoidance legislation enacted by many onshore countries aims to tax the undistributed or untaxed profits of low tax paying companies as though those profits have been received by the shareholders. The different legislations achieve this in different ways but normally focus on the percentage of shares held or the control of the company if control is achieved otherwise than through the ownership of shares. Under the arrangements outlined above the Guarantee Members would not own shares nor have control - as professional managers act as shareholders - so it may be that this type of anti-avoidance legislation is ineffective in taxing profits rolled up within a hybrid structure. Additionally, it will normally be the case that such a structure does not bring about any reporting requirement for the Guarantee Members so, on a practical level, unwanted attention from onshore revenue authorities is avoided.

There are a number of offshore jurisdictions in which it is possible to form hybrid companies - the structures offered by both the Turks & Caicos Islands & the Isle of Man have been the subject of much recent interest - the TCI hybrid offers perhaps the most flexibility and greatest advantage although Gibraltar’s geographical location together with Gibraltar’s EU status makes the Gibraltar Hybrid company very attractive.


A new corporate tax regime was introduced in January 2011. All new Gibraltar companies formed from now will fall under the new rules. Any company incorporated in Gibraltar will be subject to a tax on profits of 10% under the ‘accrued and derived’ principle... In practice this means that if the business of the company is outside Gibraltar and the company is not trading with other Gibraltar residents it will not pay any tax in Gibraltar. However the company will still be “subject to tax at 10%”, even though not actually paying any tax. This together with the fact that Gibraltar is a full member of the European Union may give some real and perceived advantages. Gibraltar is now a “low tax not a no tax” jurisdiction.

Gibraltar Hybrid companies have the following characteristics:

TAXATION is paid at a rate of 10% on any income accrued or derived in Gibraltar. Tax will not apply to non-Gibraltar sourced income. Should the company derive income both in and out with Gibraltar, only that proportion earned in Gibraltar will be subject to tax.

SHAREHOLDERS Gibraltar companies must have a minimum of one shareholder who may be corporate or individual. Details of shareholders appear on the public file but anonymity can be preserved by the use of nominee shareholders. Bearer shares cannot be issued. The directors may elect as many guarantee members as they wish.

DIRECTORS A minimum of one director is required and corporate directors are permitted. Details of directors appear on public file but anonymity may be preserved by the use of third party directors.

ANNUAL REPORTING An annual return must be filed each year showing details of shareholders and directors. All Gibraltar companies must file annual accounts with the Registrar.

TIMESCALE Incorporation can be achieved within 5 days but on payment of a premium the incorporation time may be reduced to 24 hours. Readymade companies are available for immediate purchase.

RESTRICTIONS ON NAME AND ACTIVITY The following words and their associated activities are restricted: Association, Royal, Imperial, Trust, Trustee, Bank, Assurance, Group, Europe and International.

LOCAL REQUIREMENTS As a matter of local company law the company MUST maintain a registered office address within Gibraltar. Additionally, it is a requirement for a Gibraltar resident company secretary to be appointed. We would generally provide this service as part of the domiciliary service fee.