I advise on selecting offshore jurisdiction and structuring and re-strutting of holding companies. When it comes to investments and international trade, the selection of an offshore jurisdiction requires thoughtful planning and consideration. Know more about offshore incorporation and offshore company setup guide in UAE.
Selecting an Offshore Jurisdiction
It is of great importance to select a jurisdiction that is well matched with client’s specific corporate and personal needs. Most of the offshore jurisdictions has no foreign exchange control and they offer corporate regulations that outfit diversified range of international business regulations, these include:
- Political and economic conditions
- Essential corporate attributes
- Constitution requirements
- Company law
- Double taxation avoidance treaties
- Legal and accounting structures
- Foreign language
Fundamental Corporate Attributes/Components
Most jurisdictions that propose ideal offshore and “tax planning” jurisdiction assured that their local law company answers to the following criteria:
- Limited liability
- Low capital requirements
- Minimal or alternative statutory filing obligations
- Availability of bearer shares
- Nominee shareholders allowance
- Minimal directors’ liability*
- No requirement of acknowledgment of beneficial ownership or disclosure requisite limited to selected figures (offshore ascendancy and central banks)
- A wide range of authorized company names and appendix to denote limited responsibility
- No for director/shareholders sessions to be held at the offshore venue and they can take place anywhere in the world
- No requirements or alternative requirements for accounting records to be analyzed
*Directors are usually responsible for the company’s conduct. However, there are jurisdictions where directors can seek reimbursement from both the company and its beneficial titleholder.
Perfect Offshore Jurisdiction:
An offshore jurisdiction which has latest, flexible and proven legislation to support offshore companies and their requirements is an ideal offshore jurisdiction. It is of great advantage when the local offshore legislation certifies confidentiality and complete privacy with regards to all of the client’s business dealings and financial affairs.
At the moment there are over 50 jurisdictions worldwide that offer offshore company authorization. Some of those have brought in new latest corporate legislation particularly designed to cater to international business, while others have altered their existing domestic legislation to procure specifically offshore requirements.
Offshore Company Law:
Company Law is generally based on one of the following legal systems: English Common Law or European Corporate Law or US Corporate Law or Hybrids forms of company law based on a mix of these systems also prevail. Here is where they differ:
English Common Law:
Company Law based on English Common Law is the most repeated model for most offshore jurisdictions. Company Law in this case is based on the UK Companies Act 1948. This Act in turn draws on earlier Acts (since 1844) and many other ideas, such as the agreement of nominee shareholders, based on 19th century Acts. The Joint Stock Companies Act of 1856 the Memorandum and Articles of Association support incorporation by registration.
Examples are jurisdictions using English Common Law as the basis for their company law include; the BVI, the Bahamas, Cayman Island, Sea shell, Hong Kong, and Belize.
European Corporate Law:
European Corporate Law is founded on French Law (1864) which is a Civil Law system. Usually it differs is relation to a share-based company (that carries lower initial capital and smaller number of shareholders) and a public company (which is allowed to issue publicly negotiable securities).
The incorporation process in Civil Law jurisdictions have the following characteristics (compared to English Common Law):
- An amount of paid-up capital must be subscribed before incorporation.
- A Company’ statutes are essentially a contract between subscribers.
- Procedures are more onerous and time consuming than in English Common.
- Law countries.
- Incorporation procedures are carried out by a notary.
- Corporate Law in Civil Law countries demands that the responsibility of a board of directors be shared between an executive and a supervisory board.
- Directors’ powers may be limited.
- A legal reserve may be required.
- Liquidation procedures are time consuming and complex.
US Corporate Law:
US Corporate Law draws its dominion from both Common Law and Civil Law. Apart from differences in language, diction and interpretation, US Company Law differs from English Common Law in a number of eloquent ways, including:
- US Corporations have officers in addition to directors.
- By-laws are often adopted after incorporation.
- Directors are often empowered to change by-laws.
Company Law in Liberia, Panama and Nevis has been affected by US Law.
Double Taxation Avoidance Treaties (DTA):
Offshore jurisdictions in the world are divided into Treaty Jurisdictions and Non-Treaty Jurisdictions. It is important to figure out all the taxation implications for the business before deciding whether there is a requirement for an offshore treaty jurisdiction as usually a treaty jurisdiction is not required for international trade. Moreover, inward investment into certain countries requires a treaty jurisdiction to minimize the impact of taxation.
In order to take advantage of the benefits of double tax treaty, the client must develop an offshore company in a Treaty Jurisdiction. This condition is difficult for taking pleasure in minimal withholding tax on payments and royalties for contracting states.
Non-Treaty jurisdiction suits clients a lot as it is devoid of corporate taxes on company profits and it require companies to pay only a fixed annual license fee.
Legal and Accounting Frameworks:
The administration of all offshore frameworks and activity requires both legal and accounting services.
In order to carry on business in effective way modern day business depends upon advance communication. Therefore an offshore jurisdiction should provide telecommunication and online facilities on site.
Offshore companies can open bank account anywhere in the world. However it is advisable for clients to use banking facilities in the jurisdiction where the offshore company is registered.
The bank used must meet important requirements i.e. provide the comprehensive range of banking services required by the company and offer full approach to international banking facilities and solutions.
Although the English language is widespread in many international businesses, offshore structures are usually capable of providing a multilingual service. This effects the desire to evict any misgivings or misunderstandings in account of the clients’ requirements.
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