Corporate/ Company Administration:
One of the most common and defining characteristics of an offshore financial centre (or OFC) is the the use of that jurisdiction for the formation of companies that do not conduct substantial business in their country of incorporation. Such jurisdictions offer low or no tax rates, are often lightly regulated and specialise in providing the corporate and commercial infrastructure to facilitate the use of that jurisdiction for the formation of offshore companies and for the investment of offshore funds.
Offshore companies may bring a number of benefits to individuals or companies:
* Simplicity - except for regulated businesses, such as banks or other financial institutions, OFC jurisdictions make it relatively simple to set up and maintain companies.
* Legal protection - many OFC jurisdictions have stricter provisions for allowing a court to pierce the corporate veil, and in many cases, corporate governance rules require the laws of the jurisdiction where the corporation is chartered, rather than where it is sued, to apply.
* Fees - generally speaking, onshore jurisdictions impose higher fees to incorporate than offshore jurisdictions. They may also impose much higher maintenance fees on a corporation's yearly renewal of its charter.
* Reporting - the level of information required by the registrar of companies in an OFC jurisdiction is generally less onerous than in onshore locations.
* Asset protection - it is possible to organize assets and transactions in such a way that assets are shielded from future liabilities.
* Anonymity - by carrying out transactions in the name of a private company, the name of the underlying principal may be kept out of documentation. Having said that, current anti-money laundering regulations often require banks and other professionals to look through structures.
* Thin capitalisation - offshore jurisdictions tend not to impose "thin capitalisation" rules on companies (except for regulated entities such as banks and insurance companies), allowing them to be formed with a purely nominal equity investment.
* Financial assistance - offshore companies are usually not prohibited from providing "financial assistance" for the acquisition of their own shares, which avoids the needs for "whitewash" procedure in certain financial transactions.
Many of the companies incorporated in OFC's are investment holding or dealing companies holding quoted or unquoted investments throughout the world. Some act as sales distribution companies invoicing goods from one country to another, either on their own behalf, or as brokers on behalf of others. Other companies are incorporated as subsidiaries on behalf of foreign parent companies for specific tasks. Yet others, particularly in relation to the movie, record and publishing industries, are incorporated to exploit copyrights, performing rights or patents. Professionals incorporate companies to provide management and consultancy services in foreign countries. Of substantial importance is the formation and licensing of banks to transact Eurocurrency business without restriction, and the formation of insurance companies to act as captive insurance companies or for the reinsurance of foreign risks. Some companies are formed to operate offshore mutual funds, pool investors funds and spread risk. In addition, the use of an open ended multi-shareholder investment company in this way can avoid the controlled foreign corporation rules of many countries and allow capital gains to be accumulated tax free. Many companies are also formed to avoid foreign estate taxes on foreign investments.
The vast majority of offshore companies are registered and managed by specialist company management service businesses. Larger financial institutions tend to have their own company management or corporate administration departments that provide a similar, in-house service.
The services of a company administrator would typically include:
* Company Formation, including the preparation of the company's Memorandum and articles of association or bylaws and the application for a Certificate of Incorporation from the Registrar of Companies in the OFC.
* Registered Office Facilities - this is the official address of a company, to which official documents are sent and legal notices received.
* Provision of local Resident Directors - Corporate service providers in offshore jurisdictions will often provide directors, provided they are able to control, and be satisfied with, the activities of the company. The company is generally considered to be resident for tax purposes at the place where the decisions are made.
* Company Secretary - this is the person who is responsible for ensuring that the company meets its statutory obligations.
* Record Keeping & Administration - a company is obliged to maintain registers setting out certain information about the company. The mandatory records vary from jurisdiction to jurisdiction, as does the level of public access to the information contained in the records. Many jurisdictions require that the records are kept within the jurisdiction in which the company is incorporated. The records required may include minutes of meetings, registers members, directors, officers and charges.
* Accounting - directors are generally required to keep proper records. They may be required to prepare audited accounts. Specific requirements vary between jurisdictions and may depend on the nature of the company's activity. For example all banks will need to prepare audited accounts.
The following types of company are common in offshore jurisdictions:
* Company having a share capital - these companies issue shares. Once the initial cost of a share (capital and premium) has been paid, the shareholders have no further obligation to the company. The shares may, subject to the rules of the company, be sold or transferred, and the shareholders have the right to enjoy the profits of the company or any proceeds of a liquidation.
* Company limited by guarantee - the members of the company agree to pay up to a maximum limit in the event that the company becomes insolvent. They may acquire certain rights against the company, such as the rights to a dividend and the specific rights will be set out in the rules of the company. Membership may terminate on death, and guarantee companies have been used for not for profit organizations. There are also sophisticated estate planning schemes which make use of guarantee companies.
* Protected cell companies - some jurisdictions permit cellular companies, where particular assets and liabilities are segregated into "cells", in such a way that the assets of one cell cannot be used to satisfy the liabilities of another. Cell companies are particularly used for umbrella mutual funds or unit linked insurance bonds.
However, many offshore jurisdictions offer increasingly specialised forms of companies (as well as specialised trusts and partnerships seeking to increase their share of the market. Examples include limited duration companies, unlimited liability companies, companies limited by guarantee and with a share capital, restricted purpose companies and hybrid entities such as limited liability partnerships, which are more akin to companies to actual partnerships, and foundations, which are nominally trusts but are more akin to companies than trusts.
Relocation of companies
Some jurisdictions permit companies to redomicile. They may do this to take advantage of particular features of the new jurisdiction, such as merger legislation, or tax treaties with other countries. The law in both the old and new jurisdictions must permit redomiciliation. The business of the company is deemed to continue without interruption on redomiciliation.
Qualifications:
The most widely recognised professional designation within the field of Corporate Administration is the Institute of Chartered Secretaries and Administrators (ICSA). There are two classes of membership of the Institute, ie Fellows and Associates. All qualified members of the Institute are entitled to describe themselves as Chartered Secretaries and use the designatory letters, FCIS or ACIS as appropriate. Fellowship is the senior grade of membership. Another grade, Grad ICSA comprises those who have successfully completed the examinations but have not yet gained sufficient qualifying service for Associateship.
The original purpose of the qualification was the development of the profession of company secretary and the creation of high standards in corporate governance. Before the development of the offshore financial centre concept, Chartered Secretaries typically worked in the Corporate Governance or Finance departments of large companies. Nowadays it is more common to to find a Chartered Secretary working in an offshore jurisdiction for a specialist administrator, a law firm or a bank.
