Entrepreneurship is gaining rapid popularity and with many competitors in the market in virtually every industry, entrepreneurs need every advantage they can get. Combining a citizenship by investment with hybrid companies has emerged as an advantageous combination.
Hybrid companies are companies formed by a combination of two types of members, namely, shareholders and warrantors. The shareholder category is known to the public. The second category, i.e. the warrantors are not known to the public. The shareholders are liable to the extent of the company’s contributed capital. The warrantors are elected into the company by the directors. Warrantors do not take part in the day-to-day working of the company and have no voting rights. The warrantors undertake to provide funds in the company in case of bankruptcy and are entitled to take part in the distribution of the income in the company.
Assuming the role of a warrantor is not as risky as it sounds. The maximum potential contribution that a warrantor may have to make is already decided. This makes the risk certain and defined. A hybrid business structure offers complete confidentiality to the warrantors. The roles and responsibilities of each category of members can be defined in a private document. Like any other company, Hybrid companies have an identity of their own. They can own property, enter into agreements and have a common seal in their own name.
Second Citizenship and Company Ownership
For those looking for entrepreneurship as a career option, getting a second citizenship might be useful. Given the tax benefits of Hybrid companies, in the case of second citizenship by investment program, they can avoid double taxation. Investment in companies also offers the benefit of visa-free travel to both countries. Second citizenship also diversifies investment options for people like the variety and domain of investment opportunities gets wider. Adopting a hybrid structure also helps the company to avoid estate duty and inheritance tax implications.
Entrepreneurs can even avoid any kind of political and market instability in one country and start a company in the second country that they are a citizen of. Getting a second citizenship also increases the potential reach of the company. To be honest, the number of choices for lifestyle decisions, vacation ideas, retire to a better place also go up if you go for second citizenship planning. Entrepreneurs who work hard to raise a company on their own can really benefit from a second citizenship by investment as it has all these perks.
Hybrid Business Structure
Hybrid companies are the companies in which the capital is limited to the amount contributed by the shareholders and guarantee provided by the warrantors. The company structure works like this. Every share procured by a shareholder gives them the right to vote but not necessarily participate in the company profits and capital. While shareholders have the right to management and voting, the warrantors receive the profits. This minimizes the risk of the shareholder.
Benefits of investing in Hybrid companies
The most important benefit offered by Hybrid companies is that they reduce and limit the risk of both parties, thereby maximizing the returns. The shareholders can earn profits through trading and the warrantors earn from the profit and capital of the company. This reduced risk can be beneficial to the company in many ways. It gives more scope for innovation due to more company security and investors can look for long-term investments. However, the role of a warrantor is also risky upto the extent of his liability and should be entered into only if they are willing to take the risk.
The liability of the warrantors is contingent. It may or may not arise. Until it does, the warrantors can enjoy the benefits of the profit share and the growth of the company. It is the reward they get for assuming the risk of the winding up of the company. Better risk management helps the company to get more innovative and risk-taking in other domains.
In certain circumstances, the hybrid companies can also defer capital gain tax. The benefit of the structure is that it provides the necessary flexibility and discretion and also provides tax benefits from anti-avoidance legislations.
These companies can generally be registered in countries with a flexible and adjustable legal system. Other than in technical matters, there is not much difference in setting up hybrid companies in different countries. The management of the company lies with the directors, appointed by the shareholders.
Anyone looking for citizenship by investment, also known as economic citizenship, often looks for options that help in tax-saving. If they are looking to invest in companies for residency in other countries, investing in hybrid companies is a better and safer option. This is a relatively new and creative structure and has a lot of added benefits. Investing in Hybrid companies is a lucrative option for entrepreneurs looking for dual citizenship. Setting up a hybrid company of their own can also be considered. However, this is a complex area of discussion and we offer professional advice on the matter.