The selection of the most suitable jurisdiction for either international trade or investment can often be difficult and requires very careful consideration. Most offshore jurisdictions are free from foreign exchange controls and have introduced company legislation to cater for a diverse range of international business requirements.
It is important to select a jurisdiction that is well suited to specific corporate and personal needs.
The pre-requisite requirement for anyone wishing to establish their business or private interests offshore is to select a jurisdiction that provides political and economic stability, so that business can be conducted with certainty, confidence and corporate security.
There are now more than 50 jurisdictions world-wide providing offshore company legislation. Some jurisdictions have introduced new and modern suites of corporate legislation, specifically designed for international business whilst others have amended existing domestic legislation to cater for offshore requirements.
The most essential criteria is that the legislation is modern, flexible and well proven. Furthermore, the legislation should preferably provide confidentiality and complete privacy regarding a client’s business dealings.
Many offshore and « tax planning » jurisdictions have made efforts to ensure that their company law provides the following features:
The ongoing administration of all offshore entities demands both legal and accounting services. Therefore, it may be important to select a jurisdiction that provides a comprehensive selection of legal and accounting firms, which can provide cost-effective services to an international standard.
It is important for a jurisdiction to have state-of-the-art communication facilities. These include air travel, mail services and telecommunication systems so that busies can be conducted in an expeditious manner.
While most offshore providers are able to provide multilingual services, the ability to conduct business in English is useful. This may assist in ensuring that client requirements are fully understood without the risk of mistakes.
Whilst offshore companies are able to bank anywhere in the world, some clients prefer to open corporate accounts in the jurisdiction where a company is domiciled. In such cases, the availability of a comprehensive range of banking services and access to international banking facilities is of importance.
Company law generally follows four different models:
Company law based on English Common Law is the most frequent model for the classic offshore jurisdictions, such as the BVI, the Bahamas, Hong Kong and Belize. Company law in this type of jurisdiction 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, such as the acceptance of nominee shareholders, are based on 19 th Century Acts. The Joint Stock Companies Act 1856 introduced the Memorandum and Articles of Association and provided for incorporation by registration.
European corporate law is often based on French Law of 1864 and usually differentiates between the « share » company and the public company. The former is usually characterized by a lower initial capital and a smaller number of subscribers whilst 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:
US Corporate Law has been influenced by both English and Civil Law. Apart from differences in language, terminology and interpretation US Company Law differs from English Law in significant ways, including:
Company law in Liberia, Panama and Nevis has been influenced by US Law.
The jurisdictions around the world can be categorized as follows:
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 portray a non-offshore image and thus provide 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 in to certain countries, however, may require a treaty jurisdiction to minimize the impact of taxation.