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Professionals in the offshore industry handle corporation paperwork with the same familiarity as, say, a carpenter handles a length of wood.
They often assume that you, like them, have full knowledge of the workings of offshore corporations. But this is not always the case.
It is not uncommon for first-time buyers to feel a little perplexed when the Fedex package arrives with reams of paperwork, seals and so forth. "What now?" is not an uncommon question.
Having already outlined the basic legal structure and the process of incorporation of a typical offshore company, let us turn our attention to the physical documentation that you -- the "end user" of an offshore company -- are likely to come across.
This might serve as a useful guide not only to those who have already incorporated their offshore company, but especially to those who are just planning to do so. Offshore incorporation agents do not always make a clear distinction between the documentation you really need and the pieces they would like you to buy.
Let us assume that you are the sole director and shareholder of your offshore company.
It is your responsibility to manage the company, sign contracts on behalf the company, open its bank accounts.
You might find some or all of the following items in the company kit received from your offshore company formation agent:
Essential: Documents (1), (2) and (3) are essential for you to assume control of your offshore company and begin trading. Ensure that your offshore incorporation agent provides them.
Convenient: For reasons of convenience, you might also buy a company seal (8) from your incorporation agent -- although you can easily order one elsewhere.
In the trash: In contrast, you don't need to order items (4) to (7) -- they might prove more hassle than use.
Items (4) to (7) usually make up the bulky part of any company kit -- we are probably talking a heavy binder, embossed with your company name on the outside, filled with sheets and sheets of pre-printed templates and forms, again with your company name all over them. It might look impressive, but have you ever tried fitting all that in a standard-size safety deposit box?
First time? Having said that, if you are a first-time buyer, you might want to get the full kit just to get some guidance on how to draw up and file the relevant paperwork as and when the need comes.
Remember that your offshore company does need to keep records -- we just mean, do you really need that 50-page directors' register or 100 share certificates?
When you decide to buy "off the shelf", you are getting a company that has been around at least a couple of months, or even years.
Consequently, you should expect a few documents showing that what you have bought is as good as new; these will be in addition to the paperwork discussed above.
A confirmation of non-trading, signed by either the incorporator or the first director(s), should clearly state that the company has not traded and as such has no assets or liabilities.
A Certificate of Good Standing is useful if your company was formed more than three months ago; it is almost a necessity if the company is older than a year.
If nominee directors were appointed on incorporation -- and you are not keeping them -- you should get a resolution by these original directors appointing you as the new director, followed by a letter of resignation. These two documents serve the same purpose as item (3) above, and it is recommended that they be notarised and apostilled to properly legalise your own position as the director of your new company.
Similarly, if nominee shareholders were in place in the past and you wish to have the shares transferred to your name, there will be additional documentation relating to the share transfer.
If you have bought a nominee-managed offshore company, your company package is going to be a lot slimmer.
The nominee director will maintain all the necessary records for your company. As a result, all the company's statutory books and registers, as well as the company's seal, will remain with the nominee.
Nevertheless, you will still get a Certificate of Incorporation and a copy of the Memorandum and Articles of Association as evidence of your company's formation.
If, for whichever reason, you have not employed a nominee shareholder at the same time, your company package should also include share certificates issued as per your instructions.
You will almost always need to sign a management agreement between yourself and the nominee director; your company package should include a copy of the same.
As far as most offshore havens are concerned, a Certificate of Incorporation is a document which confirms that your offshore company has in fact been properly organised and registered under the laws of the jurisdiction in question.
The Certificate is issued by the office of the Registrar of Companies (or similar body), and usually gives the name under which the company has been registered, its registration number, and the date on which it was registered.
Ideally, a Certificate of Incorporation will have a so-called apostille attached to it. An apostille is a certificate/confirmation issued by a competent authority of the country of incorporation and in this case guarantees the authenticity of the actual Certificate of Incorporation.
To have a Certificate of Incorporation apostilled ensures that it will be recognised as valid outside of the country of incorporation. This might be necessary if you decide to open a bank account for your new offshore company outside of its country of incorporation, or plan to transfer property into the company's ownership.
Memorandum of Association -- also called Articles of Incorporation in some jurisdictions -- is a statutory document which effectively governs your offshore company's relations with the outside world.
It is the act of filing Memorandum of Association with the Registrar of Companies that brings a company to life.
The Memorandum typically indicates, among others:
Most offshore companies use a fairly standard-format document, usually drawn up on the basis of the particular offshore haven's corporate legislation.
The Articles regulate the internal operation of the offshore company and typically address, among others, the following matters:
Many offshore incorporators provide companies with Memorandum and Articles that allow maximum legally-permitted flexibility in terms of business activity and administration. Offshore companies often have "broad objects", meaning that their Memorandum allow participation in any business activity unless prohibited by legislation.
It is wise to obtain copies of the Memorandum and Articles of Association that have been Registrar-certified as being true copies of the actual documents filed.
Subsequently, it is even possible to have the Registrar's certification apostilled, although this is rarely necessary -- quite unlike the case of the next document discussed, the Appointment of First Directors, where is is recommended to ensure the fullest legalisation possible.
The first director, or directors, of any offshore company is/are usually appointed by an incorporator's resolution immediately after incorporation.
Unless your incorporation agent has provided a nominee director -- a party acting on your behalf to protect your identity or ease administration -- your company paperwork is likely to include an Appointment of First Directors.
The Appointment usually takes the form of a simple document giving the name(s) of the first director(s) appointed, signed by the offshore company incorporator.
Ideally, the incorporator's signature on this document should be verified by a notary public. Thereafter, the notary's signature should be apostilled. This will ensure that there is no question as to the validity of the director(s) appointment, both in and outside of the jurisdiction of incorporation.
Years of experience tell the author of this article that banks in continental Europe tend to be particularly fussy when it comes to paperwork confirming the directorship of offshore companies. Getting the Appointment of First Directors properly legalised will save you time at account opening.
Minutes of First Meeting of Directors provide a written record of the very first meeting of your offshore company's board of directors.
At their first meeting, the directors usually acknowledge the fact of the company's incorporation, approve the company seal, and agree ("resolve") that the company should proceed to carry on the business for which it was formed. They may also appoint the company's bankers and authorise bank account opening.
Unless your offshore company comes with a nominee director, it is your responsibility to hold the first meetings and prepare the Minutes -- even if you are the sole director.
Good offshore company formation agents provide clients with sample minutes to be used as a guide or to simply be completed and signed. Note, however, that you are free to use your own format, as long as the proceedings of the directors' meeting are properly recorded and inserted in your company's minute book.
Most offshore incorporation agents supply clients with a company records book that includes a Register of Directors.
The purpose of the Register is to maintain pertinent information with regards to past and current directors of the company.
The Register should contain the following:
Unless your offshore company is managed by a nominee director, the responsibility to maintain the Register lies with you. Also, an up-to-date copy of the Register almost always needs to be kept at the company's registered office.
Note that offshore corporate legislation usually permits an electronic version of a Register of Directors so long as the company is able to produce written evidence of its contents.
Register of Shareholders (also called share register or stock register) typically takes the form of a record book that lists the owners of shares of stock issued by your offshore company.
Your company's share register needs to record the following:
The Register also notes pertinent details (dates, parties involved) in relation to:
Where shares are issued to bearer (if permitted), the appropriate entry in the Register should note the details of the bearer's agent or attorney to whom the company can address any notices normally sent to shareholders.
Unless a nominated administrator assumes responsibility for keeping your company's statutory records, you will have to maintain the company's Register of Shareholders.
|Depending on the jurisdiction of incorporation, the Register of Shareholders -- and so the ownership of your company -- might or might not have to be revealed to one extent or another. |
Some jurisdictions permit anonymous companies that only keep internal share registers; access is possible only for the company's officers and shareholders.
An increasing number of offshore havens demand disclosure to local authorities (but not to general public or other governments).
Some go yet further and allow unrestricted public access.
The majority of offshore incorporators can provide nominee shareholders who shield the actual owner from exposure.
Also, the Register must almost always be kept at the company's registered office, in its jurisdiction of incorporation.
Most offshore incorporation agents can supply clients with a corporate records-keeping package that includes a blank share register. Note however that there is no prescribed form; flexible offshore legislation even permits an electronic version of the Register so long as the company can produce written evidence of its contents.
Your offshore company can issue shares of stock up to the amount authorised by its Memorandum of Association. Once issued, shares represent ownership interest in the company.
Holders of shares enjoy certain rights defined in the Articles of Association; amongst these is the right to a proportionate part of profits, the right to vote for directors or the right to inspect the books of the company.
A share certificate (or stock certificate) is a written instrument evidencing the legal title to shares in the company.
A typical share certificate contains:
Bearer shares. Where legislation permits, share certificates may be issued to bearer -- meaning that the details identifying the owner of shares are omitted both on the certificate itself and in the company's share register.
In addition to owner anonymity, bearer share certificates allow an easy transfer of title. They are negotiable without endorsement; the person having physical possession of a bearer share certificate is assumed to be the legal owner.
In contrast, registred share certificates can only be transferred by endorsement and the relevant entry made in the company's share register. A new certificate is issued to replace the endorsed certificate.
It is often a legal requirement that an offshore company should have a company seal (also called corporate seal).
Seals have been used from remote antiquity to authenticate documents, and your company seal is no different.
The seal must first be approved at the first meeting of directors; it is subsequently used for sealing share certificates, minutes of the company or other important documents.
Note that a seal is not normally used for "stamping" invoices, for example -- a signature is enough there.
Most offshore incorporation agents supply clients with a corporate seal, although you are free to have your own made provided it is duly adopted by your company's board of directors.
Certificate of Good Standing (also known as Certificate of Existence or Certificate of Authorisation) is a document issued by the Registrar of Companies (or similar body) in evidence that a company is in legal existence as of the date of the certificate.
Just as a Certificate of Incorporation confirms that a company was once legally incorporated and able to transact its business, a Certificate of Good Standing provides an up-to-date evidence of the same.
The certificate usually gives the company's name and declares that it is duly incorporated and that all fees and taxes have been paid, annual returns filed (where appropriate), and that the company has not been dissolved or struck off the Register.
Remember, offshore companies do get deregistered if they don't pay their annual licence fee. If your offshore company is over a year old and you need to prove its continuous legal standing -- for example, to open a bank account -- you will need to request a Certificate of Good Standing.
It is recommended that the Certificate be apostilled to prove its authenticity beyond the borders of the country of issuance.
An Apostille is a government-issued certification of an underlying public document, as set by the Hague Convention of October 5th, 1961. An apostille ensures that a document issued in one country is accepted in another.
An apostille is similar to a signature verification by a notary public -- it is not a document in its own right. Unlike a notary's verification, however, an apostille is recognised across jurisdictions -- at least in those countries that signed up to the Convention.
Apostilles are issued in a standard format by a designated government authority (such as office of the Secretary of State, justice ministry, or similar) and confirm as true the name, signature, seal and capacity of the official who signed the underlying document.
Many offshore incorporation agents will -- for an additional fee -- have your company documentation apostilled; this will confirm its authenticity beyond the borders of the country of incorporation.
If you have employed a nominee director to administer your offshore company, you will almost certainly come across a Management agreement of one kind or another; in fact, you will probably have to sign one before the actual incorporation of your offshore company.
A nominee management agreement is a contract between yourself -- the beneficial owner of your offshore company -- and your company's nominee administrator.
For all intents and purposes, a nominee management agreement seeks to relieve the nominee director from any and all liabilities for your company's affairs.
This should not surprise you; remember that the role of a nominee director is a passive one. If and when instructed, the nominee will sign contracts for your company, or execute transactions on its corporate bank account -- not always having a proper idea of what the purpose might be.
A number of recent court rulings have declared that nominee directors -- despite their passive role -- are subject to director responsibilities. Consequently, be ready to sign your name on the dotted line, and do not take it personally.
Depending on your incorporation agent, nominee management agreements vary from simple one-page disclaimers to 20+ page long documents disclaiming all kinds of potential mischief on your part.
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