Offshore jurisdiction for an IBC

An International Business Company (IBC) can be registered in several offshore locations all around the world. Choice of a jurisdiction from amongst these can be tricky and should be made after careful consideration. While making a choice regarding formation of an IBC in any of these locations, certain criteria need to be taken care of. The time and cost requirement for the company formation, and the degree of independence and confidentiality offered by the jurisdiction are among the most crucial deciding factors. Another consideration is the expertise and reliability of the Registration Agent.

Most offshore jurisdictions are free from foreign exchange controls and have introduced company legislation to cater to a diverse range of international business requirements. Above all, it is important to select a jurisdiction that is well suited to your specific corporate and personal needs.

Considerable factors

Political and Economic Stability - For carrying out business with certainty, confidence and corporate security, one must choose a jurisdiction that provides high political and economic stability.

Legislation - More than 50 jurisdictions across the world provide offshore company legislation. Some jurisdictions have introduced new and modern suites of corporate legislation, especially designed for international business, while others have amended their domestic legislation to fulfill offshore requirements. The legislation should be essentially modern, flexible and well proven. It should preferably provide for a client’s business transactions to be confidential and completely private.

Company Law - The company law of many offshore and "tax planning" jurisdictions provide for the following:

• Limited liability
• Minimum liability of the directors (directors are generally responsible for the acts of a company however in certain jurisdictions directors may seek indemnities from both the company and its beneficial owners)
• Minimal or optional statutory filing obligations
• Provision for nominee shareholders
• Availability of bearer shares
• Disclosure of beneficial ownership either not required or limited to special bodies
• Broad range of permitted company names and suffixes to denote limited liability
• Low capital requirements
• Ability to hold directors and/or shareholders meetings anywhere in the world
• Optional audit of accounting records

Professional Infrastructure - Administration or management of an offshore company requires legal and accounting services. Thus, a preferable jurisdiction would be the one that can offer a comprehensive selection of legal and accounting firms that can provide cost-effective services of an international standard.

Communications - For carrying out business smoothly, it is desirable that a jurisdiction has state of the art communication facilities. Air travel, mail services and telecommunication systems should all be considered.

Language - It is important that business be conducted in a language that ensures that client requirements are completely understood and chances of mistakes are eliminated. However, most offshore locations provide multi-lingual services, but it is important to choose the jurisdiction on the basis of the language used.

Banking - Offshore companies can bank anywhere in the world, though some clients may prefer opening corporate accounts in the jurisdiction where the company is domiciled. This requires a consideration of the availability of the range of banking services and access to international banking facilities.

Comparison of Company Law

Company law may be based on any of the following:

English Common Law

Company law based on English Common Law is the most popular model for the classic offshore jurisdictions, such as the BVI, the Bahamas, Hong Kong and Belize. The Company law in these jurisdictions is typically modeled on the UK Companies Act 1948.

The Companies Act 1948 draws from 1844, 1855, 1862, 1897, 1900 and 1929 Acts and many concepts. The acceptance of nominee shareholders, are based on 19th Century Acts. The Joint Stock Companies Act 1856 introduced the Memorandum and Articles of Association and provided for incorporation by registration.

European Law

European corporate law is generally based on French Law of 1864 and usually differentiates between the "share" company and the public company. The former is characterized by a lower initial capital and a smaller number of subscribers, while the latter is allowed to issue securities that are publicly negotiable.

Incorporation procedures in Civil Law jurisdictions are different from those in Common Law countries.

• An amount of paid-up capital must be subscribed before incorporation
• A company's statutes are essentially a contract between the subscribers
• Procedures are more onerous than in Common Law countries
• Incorporation facilitated by a notary
• Corporate law in Civil Law countries often splits the responsibility of boards of directors between an executive and a supervisory board
• Powers of directors may be curtailed
• Liquidation procedures are time consuming and complex
• A legal reserve may be required

US Law

US Corporate Law has confluences of both the English and Civil Law. The US Company Law is significantly different from the English Law on account of language, terminology and interpretation. Other differences include

• US Corporations have officers in addition to directors
• By-laws are often adopted after incorporation
• Directors are often empowered to change by-laws

US Law has influenced company law in Liberia, Panama and Nevis.

Hybrid 

Double Taxation Avoidance Treaties

Jurisdictions around the world can be classified into Treaty jurisdictions and Non-Treaty jurisdictions.

Clients seeking to take advantage of double tax treaty relief need to establish a company situated in a treaty jurisdiction. This is essential for the minimization of withholding taxes on the payment of dividends and royalties from contracting states. Treaty jurisdictions also have a non-offshore image and thus a cosmetic appeal.

Non-treaty jurisdictions are mainly used because of the absence of corporate taxes on the profits of the company and usually only require companies to pay a fixed annual license fee.

It is therefore important to assess the taxation implications of the business that is to be conducted, and decide whether or not a treaty jurisdiction is required.

Under normal circumstances, a treaty jurisdiction would not be required for the international movement of goods and most services. Inward investment into certain countries, however, may require a treaty jurisdiction to minimize the impact of taxation.

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