Foreword
What is an Offshore Company?
Basically, a company is an entity which has been created to undertake a particular venture or to perform a series of business activities. It might have been possible for the venture or activities to be carried out by the means of a partnership although as we shall now see, the particular features of a company might have created certain advantages which a partnership could not offer.

Features of a Company

Separate Legal Entity
A company exists as a separate legal entity and has its own legal personality which is distinct from its members (shareholders). It can sue and be sued in its own capacity. It can for example open a bank account, purchase property or execute a contract.

Unlimited Liability of the Company / Limited Liability of its Members
A company is liable without limits for its own debts. However, it is usual for a company to confer limited liability on its members which means that they will only be required to contribute the amount outstanding on their shares, or if it is a guarantee company, the amount of their guarantee, in the event of the company becoming insolvent or being would up. If the members do not have limited liability, the company will be known as an unlimited company. However, the vast majority of offshore companies are limited liability companies.

Ownership
A company will be owned by its members. If the company has issued shares, the members will usually be referred to as shareholders. If the company has no shares, only an undertaking from its members that they will contribute to the assets of the company on liquidation, the company will generally be called a guarantee company. Those companies which have both shareholders and guarantee members are often referred to a hybrid company. The extent of the shareholders ownership in a particular company will be determined by the number of shares which have been issued in their favour (e.g. 100 Ordinary shares of ?1.00 each). The sums which have been paid by the members to the company will be referred to as the company's capital. The nominal amount of the shares which have been issued to members is termed the issued share capital, whereas the maximum amount of shares which could be issued (which will be specified in the memorandum of association or equivalent document). Those shareholders who have been issued with share certificates in their own names will often be referred to as registered shareholders as their personal details will be recorded in the records of the company (in the register of members). Those shares which have been issued, not in a person's name but instead in favour of the bearer of the certificate, are called bearer shares.

Management and Control
A company cannot manage itself and will therefore rely on its directors to perform this function. As we have already seen in the Unit on general taxation issues, it is usually the residence of the directors which determine where the company will be considered to be resident for tax purposes.

Governing Documents
A company must have a written constitution which sets out its internal rules and regulations. Such a document is commonly referred to as the company's articles of association (or by-laws). There will also be a document which sets out information relating to the company which outside parties who may wish to deal with the company might be interested in. this is commonly known as the memorandum of association.
* Short cut Men & Arts *

Creation
A company can only be created by a legal process which is commonly referred to as incorporation. The persons who create a company are sometimes referred to as the subscribers (who become the first members on incorporation).

Perpetual Succession
A company has what is known as perpetual succession which means that a change of ownership, such as the death of a member or shareholder, will not usually affect the continuance of the company. A company can only be terminated by legal process, such as voluntary liquidation or dissolution.

Ownership of the Assets
The assets of a company are owned by the company itself and not by the directors or the members of the company. All assets which the company owns should therefore be registered in the name of the company.

Supervision and Controls
A company will generally be supervised and regulated by the Registrar of Companies in the centre where the company was incorporated. It will also be governed by the company laws which the particular centre has enacted.

A company will be registered in the centre where it has been incorporated (as it will appear on the register of companies in that location). In addition, some companies may decide to apply for registration in another centre as well (perhaps because they want to establish a place of business in that second centre and they can only do this on application to the local registrar of companies).