offshore company incorporation
formation process of an ibc step by step
Offshore company incorporation
is a relatively, simple, straightforward and inexpensive
process, especially when compared with
the formation of corporations in countries where the
intervention of a notary or lawyer is still required. The
procedures are quite similar to those required to form a
limited liability company or corporation in an Anglo-Saxon country. Because
of distance and unfamiliarity with local regulations, it
is common practice to rely on the services of a formation agent for offshore company incorporation. This agent, in turn will delegate the
processing upon a local consultant or registered agent.
It is also possible to directly hire one of these local professionals in the chosen jurisdiction, but this is not always that simple, as it is often difficult to locate them via the Internet or to get an answer in due time and form. In many cases it will not even be more economic, as the formation agencies often obtain significant volume discounts. They also have the advantage of offering alternatives in different jurisdictions.
The process of an offshore company incorporation (in this case an IBC or International Business Company) begins when the local agent or lawyer, who is called the initial incorporator or initial subscriber - since it is this person who "subscribes" the first documents presented to the Registrar of companies - files the two documents needed for its formation. These are the memorandum of association and the articles of association.
The Memorandum of Association sets out the basic facts of the company, such as its name, activity, registered office, name of the local representative or registered agent and the amount of subscribed capital.
The Articles of Association, sometimes called articles of incorporation or by-laws define the basic operating structure of the new company. They regulate matters such as the power of the directors, the holding of annual meetings or the custody of accounts and records.
It is important to point out that in most offshore jurisdictions, the memorandum and articles of association do not contain any reference to the names of the shareholders and directors. This information is not filed with the registrar during the offshore company incorporation, but held private by the registered agent.
Once the registration process has been completed (which usually takes between 24 and 48 hours) the registrar of companies will issue the certificate of incorporation attesting to the creation of the new company. The process of offshore company incorporation itself ends here. There are, however, a series of additional steps still needed in order to begin operating.
additional steps after the offshore company's incorporation
Once the certificate of incorporation has been obtained, the incorporator will have to issue a document appointing the first director or if there is more than one, the Board of directors. This act is known as the appointment of first director. It takes place immediately after the offshore company's incorporation and it is at this time that the power of the incorporator will cease and the management of the company will rest with the directors (or sole director).
Directors will later hold the first meeting of the directors, during which the initial corporate decisions will be taken. The managing director, also called president or chairman, responsible for the daily operations of the company, will be appointed. When required, other positions such as that of the Secretary and Treasurer may as well be designated. In many offshore jurisdictions, it is possible for the same person to perform all these duties.
Other decisions that usually take place at the first meeting of the directors are the approval of the articles of association by which the company is bound, the regulation of future annual meetings, the approval of the corporate seal or the choice of a bank in which to open the company's accounts. All these resolutions are registered in the minutes of the first meeting of the directors. Some offshore company incorporation agents provide templates or drafts for the minutes.
To offer a further documentary support for the appointments made at the First meeting of the Directors, the registered agent may on request (and at additional cost) issue a so-called Certificate of Incumbency. It is a document confirming the identity of the shareholders and legal representatives of the company, usually the Director and the Secretary (if there is such a position). While this certificate is not mandatory, it is very useful, for instance, to proof ownership of the company towards third parties such as banks. As no other corporate documents will state the names of the legal owners and representatives.
The names of the director or directors shall be entered in the register of directors, which contains the name, address and other information such as nationality and passport number of each natural person. The register is usually kept private at the registered address of the company or at any other address if the jurisdiction of incorporation allows this.
Partners will be given share certificates, approved during the first meeting of the directors, which will symbolize the percentage of shares of each shareholder in the company, as defined during the offshore company's incorporation. The names of the shareholders shall be later entered in the stock ledger. Any future changes in the ownership of the shares will also have to be registered there. The stock ledger may wbe kept by the registered agent or the owner himself, if not forbidden by law.
shares and shareholders
The offshore company incorporation can be done by registered shares, i.e. bearing the printed name of the shareholder, or bearer shares. These are freely transferable and any person who possesses them will be recognized as the rightful owner of the company. By means of bearer shares, it was usually possible to keep the identity of its owner secret. However, this has been overruled by anti-money laundering legislation, and in most jurisdictions it is now mandatory for the registered agent to hold a register of the owners of the shares at any time.
Another common option is the use of a trustee or nominee shareholder. This function is usually performed by an employee of the company formation agency or a designated local attorney or professional. It may also be a corporation. This figure is used to keep the identity of the real or beneficial owner confidential in cases where there is no wish to use bearer shares, or they are unsuitable for any reason.
When using a trustee in an offshore company incorporation, it is required to sign an additional contract called declaration of trust by which the nominee shareholder recognizes that the ownership and the rights over the company and its revenues belong to the real or beneficial owner.
nominee directors
There would be no point in hiding the identity of the shareholders in an offshore company incorporation, if the owners later acted as directors themselves. That is why a nominee director can also be used. As in the previous case, it is a person or corporation which appears in place of the beneficial owner. The nominee director may hold office (signing contracts, resolutions, etc...) or act as mere "straw man".
In the second case, the company's operations are managed by the real owner by either a limited or a general power of attorney. In either case, the beneficial owner must sign an Indemnity Agreement to the nominee director, which will not only release them from any liability in relation to the operations of the company, but will also establish the obligation to compensate them in case of legal or economic damage, or otherwise. Moreover, the nominee director will sign an undated letter of resignation, which will be handed over to the owners of the company, who will then be able to make it effective at any time they see fit. This way they would not lose control of the company.
While it is not part of the offshore company incorporation process, it is worth briefly mentioning the certificate of good standing. It's a certification issued by the registrar of companies to confirm that the company remains active and has paid its annual license fee. This document is used for various procedures, such as opening a bank account. It is typically required when the company is more than six months old.
As you can see an offshore company incorporation in itself is not complicated, but it is of the utmost importance that all the necessary documents are available and properly composed. If not, this could later cause legal problems or difficulties when claiming the ownership of the company. It is therefore advisable for this process to be carried out by real professionals.
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