When it comes to investments and international trade, the selection of an offshore jurisdiction requires careful planning and consideration. It is of the outmost importance to select a jurisdiction that is well suited to the client’s specific corporate and personal needs. Most offshore jurisdictions are free from foreign exchange controls and they offer corporate legislation that caters to a diverse range of international business requirements, these include:

  • Political and economic situation
  • Essential corporate characteristics
  • Legislation requirements
  • Company law
  • Double taxation avoidance treaties
  • Legal and accounting frameworks
  • Communications
  • Banking
  • Foreign languages

Political and Economic Situation:

Every business, big or small, aspires to exist in a politically and economically stable environment. Therefore it is imperative to select a jurisdiction that provides political and economic stability.

Essential Corporate Characteristics:298

Most jurisdictions that offer ideal offshore and “tax planning” jurisdictions, have made efforts to ensure that their local company law answers to the following criteria:

  • –    Limited liability
  • –    Low capital requirements
  • –    Minimal or optional statutory filing obligations
  • –    Availability of bearer shares
  • –    Nominee shareholders allowance
  • –    Minimal directors’ liability*
  • –    No requirement of disclosure of beneficial ownership or disclosure requirements limited to selected bodies (offshore authorities and central banks)
  • –    A wide range of permitted company names and suffixes to denote limited liability
  • –    No requirement for directors/shareholders meetings to be held at the offshore location and they can take place anywhere in the world
  • –    No requirements or optional requirements for accounting records to be audited

*Directors are usually liable for the company’s actions. However, there are jurisdictions where directors can seek indemnities from both the company and its beneficial owners.

Legislation Requirements:

An ideal offshore jurisdiction is one that has modern, flexible and proven legislation to support offshore companies and their requirements. It is of great benefit when the local offshore legislation guarantees confidentiality and complete privacy with regards to all of the client’s business dealings and financial affairs.

Currently there are over 50 jurisdictions worldwide that offer offshore company legislation. Some of those have introduced new modern corporate legislation specifically designed to cater to international business, while others have amended their existing domestic legislation to cater specifically to offshore requirements.

Company Law:

Company Law is usually based on one of the following legal systems:  English Common Law  or European Corporate Law or US Corporate Law or. Hybrid forms of company law based on a mix of these systems also exists. Here is where they differ:

English Common Law:

Company Law based on English Common Law is the most frequent 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 concepts, such as the acceptance of nominee shareholders, based on 19th century Acts. The Joint Stock Companies Act of 1856 introduced the Memorandum and Articles of Association providing incorporation by registration.
Examples are jurisdictions using English Common Law as the basis for their company law include; the BVI, the Bahamas, 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 publically negotiable securities).

The incorporation procedures in Civil Law jurisdictions have the following features (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 influence from both Common Law and Civil Law. Apart from differences in language, terminology and interpretation, US Company Law differs from English Common Law in a number of significant 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 influenced by US Law.

Double Taxation Avoidance Treaties (DTA):

Offshore jurisdictions are the world can be divided into Treaty Jurisdictions and Non-Treaty Jurisdictions. It is important to assess all the taxation implicati160ons for the business prior to deciding whether there is a need for an offshore treaty jurisdiction as usually a treaty jurisdiction is not needed for international trade, the movement of goods of most service providers.
However, inward investment into certain countries requires a treaty jurisdiction to minimize the impact of taxation.

Treaty Jurisdiction:

In order to take advantage of the benefits of double tax treaty, the client must establish an offshore company in a Treaty Jurisdiction. This is condition is crucial for enjoying minimal withholding tax on dividend payments and royalties for contracting states.

Non-Treaty Jurisdiction:

This type of jurisdiction appeals to clients as it tends to be devoid of corporate taxes on company profits and tends to require companies to only pay a fixed annual license fee.

Legal and Accounting Frameworks:

The administration of all offshore structures and activity requires both legal and accounting services.

Communications:

Modern day businesses are reliant on advanced communication in order to conduct their business in an efficient way. Therefore an offshore location must provide such telecommunication and online facilities.

Offshore Banking:

Offshore companies are able to open bank accounts anywhere in the world. However it is advisable for most 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 access to international banking facilities and solutions.

Languages:

Although the English language is prevalent in many international businesses, offshore structures are usually capable of providing a multilingual service. This effects the desire to exclude any misgivings or misunderstandings is respect of the clients’ requirements.