Corporate Services in Offshore Centres

THE PROVISION OF CORPORATE SERVICES IN OFFSHORE CENTRES

We shall start by looking at the different types of corporate services which are usually offered by offshore agents. When referring to the companies for which the agent provides services we shall use the term 'managed companies' from time to time.

Offshore Corporate Services
Most corporate agents will provide many of the following services from an offshore base:

Incorporation and registration
Often an agent based in a particular centre will provide services to incorporate companies in that centre. In addition, they may also offer to incorporate companies in other centres, which they will achieve by appointing agents in the required centre to act on their behalf.

Provision of the registered office
As part of the package of services on offer will be the use of the agent's premises as the registered office for the companies under management.

Provision of directors
This is the service which not only produce the highest fees for the service providers but it is also the area which can pose the greatest problems and risks.

   a) Management and Control - Clients will not usually want to be appointed director of their company as it could create a management and control problem.

   b) Confidentiality - Details of the directors would usually have to be provided to the Registrar of Companies and also recorded in the register of directors. Such information would, therefore, usually be available to the general public and many clients would not be prepared to be appointed to the board of their company on the basis that it would not be a confidential appointment.

Provision of Company Secretary
In many centres it is a requirement that a local company must have a company secretary. Usually, a body corporate can act in this capacity although in certain circumstances (such as the Isle of Man exempt companies) an individual must be appointed (and there may be a qualification requirement which this individual must also meet).

Service providers will usually offer to provide a company secretary for those entities which are under their management. A professionally qualified individual in the employ of the organisation may be used, or alternatively a nominee company may be appointed.

Clients are rarely appointed to this position, often because they would usually fail to meet the residence and possibly qualification requirements which are sometimes imposed. In addition certain filing requirements apply in offshore centres (such as annual returns) and these are best dealt with locally by an officer of the company, preferably the secretary. Details of the secretary would usually have to be advised to the Registrar of Companies and also recorded in a register of officers. Most clients would not want their details recorded in this manner and would therefore wish an agent to fulfil this role.

Provision of other officers
Some centres also require that local companies must appoint certain officers, such as a Treasurer or President. Once again, most service providers would be willing to fill these positions on behalf of the clients.

Provision of the members of a company
Those companies which are limited by shares will usually be authorised under their articles and by local statutes to issue registered shares. However, very rarely will the client want to be recorded as the registered holder of shares in his company as his details would appear on the company's register of members, which in most centres would be available for inspection by the general public.

Services providers will therefore usually offer to provide the registered shareholders for companies which issue registered shares and would become what is commonly known as a 'nominee shareholder'.

Nominee shareholders will be registered as the owners of the shares which have been recorded in their name, but they will be holding the shares as bare trustees (or nominees) for the true beneficial owner of the company, who will usually be the client, or in some cases, another offshore vehicle which has been established on the direction of the client.

Usually a corporate body is incorporated by the service provider to act as nominee shareholder for their managed companies and such companies are often referred to as nominee companies. Some service providers prefer to use their employees as the registered shareholders for their managed companies.

Provision of a registered agent
Service providers would usually offer to act as a local agent in the centre where they are based. As we have already seen, foreign companies usually require a registered agent and some centres (such as the BVI) insist that all local companies appoint an agent to this position.

Maintenance of the corporate records
This is a service which is very much provided on the strength of other corporate services and would include such matters as updating the registers, which are required under local company laws, and filing the forms and returns required by the local Registrar.

Preparation of financial statements
As we have already mentioned, it is usually a statutory requirement that a company must maintain accurate accounting records and sometimes that financial statements be prepared and submitted to the members on at least an annual basis.

General corporate secretarial services
This cover such matters as arranging for meetings to be held in accordance with local company laws and the preparation of the minutes which are required to record what was discussed at those meetings. Agents would usually offer to provide this service.

Documentation Required by Service Providers
Here we are concerned with the documentation which the service provider will usually require the client to execute and not the documents which would be required prior to a relationship being created (such as a copy of the client's passport, two references, etc).

There are usually three documents which the agent will ask corporate clients to complete.

A new company questionnaire
Most service providers who have been asked to incorporate a company will check with their client the particular requirements in relation to that new company. Usually, the client will be asked to complete a form which contains a number of section and questions, sometimes referred to as a company request form.

The client would usually be asked the following:

   a) The intended name of the company, with at least one alternative in case the first choice of name is unavailable or unsuitable.

   b) The offshore centre where the company is to be incorporated.

   c) The authorised and issued capital.

   d) If the company is to be limited by shares, the nominal value, denomination, type of and currency of the shares.

   e) Whether there will be any special requirements concerning the memorandum or articles of association.

   f) What services the agent will be asked to provide.

   g) If the agent is not to provide the directors, members, registered office or other officers, details of who the client would like to be appointed.

   h) The anticipated activities of the company.

   i) The required financial year end for accounting purposes plus the currency in which the accounts will be prepared.

Company Management Agreement
This document would usually follow the completion of the questionnaire and would be sent to the client either before or shortly after the company had been incorporated. An agreement would also be required if the service provider has been asked to provide services for a company which has already been created.

This document sets out the terms and conditions in respect of the services which the agent has been asked to perform. The services which are to be provided would be specified, as would the basis of the fees and expenses which will be charged.

This document may be signed by the beneficial owner of the company (who would usually be the client), although some agents often require the directors of the managed company to executive it on the basis that the agent will be acting on the company's behalf. This may be despite the fact that the agent also provides the directors of the managed company.

Indemnity in favour of the service provider
This document would be intended to provide the agent with a degree of protection should there be a problem or dispute in relation to the affairs or activities of the company.

An indemnity will be intended to protect the agent and also its employees from any liability which may arise in respect of their involvement or management of a client's company.