Offshore Company Formation

Offshore Company Formation

An offshore company is a company that does not operate business substantially in it country of incorporation and are sometimes known as non-resident companies. Offshore companies have three main features; first is that it should be incorporated or formed under the offshore company’s regulations of relevant offshore jurisdictions, incorporators who are outside the offshore jurisdiction where it is formed or incorporated should form it, and lastly, it should not perform extensive business within the offshore jurisdiction where it is formed.

What are the features of offshore companies?

These are primary documents needed prior to the formation of an offshore company defining the purpose, internal processes and rights of its members.

·         Certificate of Incorporation

This certificate is issued by the Registrar of Companies that serves as proof of the company’s existence.

• Registered Agent

The registered agent will naturally be appointed in the jurisdiction where the company is formed. The purpose is to deal with official contact with the registrar.

• Registered Office

This serves as the official office of the company. The registration office serves as the official contact as well as where documents are mailed to and received. A company may however have other correspondence addresses for business.

• Directors (for IBC’s) or Managers (for LLC’s)

The people manage the daily affairs of the company where in many jurisdictions it is probable for companies to be directors of other companies too. For tax reasons, the company is generally treated as a resident at the place of decision-making.

• Shareholders (for IBC’s) or members (LLC’s)

The shareholders are the legal owners of the company although for administration to be simple or for anonymity, a corporate service provider may provide nominees who will hold shares on behalf of a beneficial owner. The nominee shall then act upon the instructions of the legitimate owner.

• Shadow directors

There are some cases, which show that officially appointed directors act as an alter ego merely following instructions. Companies that operate in this manner however face the risk of being deemed to be residing in the jurisdiction where the shadow director resides thus the tax consequences, which is unpredictable, may be imposed.

• Company Secretary

This person holds the responsibility of ensuring compliance to company obligations however, this service if often provided by the corporate service providers.

• Statutory Records

The records are maintained records of registers setting out some details regarding the company and may include the meeting minutes, list of directors and officers, charges as well as registers of members. The mandatory records differ from one jurisdiction to the other and so does the level of information allowed for public access.

• Bookkeeping

Proper records management is normally required of directors, as they maybe require presenting audited accounts. Particular documents required vary depending on the company’s activity and the jurisdiction. 

What are the types of offshore companies that can exist or be formed?

Current offshore companies include the International Business Company (IBC) and more and more, new legislations are being passed in various jurisdictions, for instance British Virgin Islands, to change the IBC company type with Business Company (BC).

As this happens, various types of companies are however common to offshore jurisdictions:

• Company limited by guarantee

This type of company has members who agree to pay up a maximum amount to the time when the company becomes insolvent. Upon becoming insolvent, the members may acquire rights to dividend, which will be specifically stated in the company rules. Complicated planning schemes may also use guarantee companies. Death maybe a reason for termination of membership however guarantee companies have been declared as not for profit organizations.

• Company having a share capital

As the term connotes, this company type issues hares and once the initial share cost (capital and premium) is paid up, there are no more obligations by shareholders to the company. Depending on the rules of the company, the shares maybe sold or transferred. The shareholders then will have the right to anjor shares from the profits or any proceeds by liquidation.

• Protected Cell Companies

Cellular companies in some jurisdictions are allowed if specific assets and liabilities are divided into “cells” so that the asset of one cell cannot be used to answer for the liabilities of the other. These are used usually for unit linked insurance bonds or umbrella mutual funds.

As relations develop however, more specialized types of companies, trusts and partnerships are being formed to seek their increased share in the market. As these develop, combinations of traditional types have evolved and become hybrid entities like limited liability partnerships, which function more as companies than actual partnerships, and foundations, which are supposedly, trust but operate more as a company than trust. Get more information about offshore company formation.