Foreword
Companies have many attractive features and can fulfil functions. But one thing that they are unable to do is make a decision. Decisions have to be taken for them and as we have already mentioned, this would usually be the responsibility of the directors on the basis that they manage the day-to-day affairs of a company.

However, in certain circumstances a company will act following a decision which has been taken by the members, who are, after all the owners of the company and therefore entitled to have a say in certain aspects of the business of their company.

We would kindly ask the reader / client to concentrate on how a company, or rather how the directors and members, reach their decisions and also how those decisions are then recorded. Directors' and members' meetings and resolutions are key areas of which company administrators (and of course students of this subject) should be aware. They are also areas which commonly create problems as the importance of accurate and comprehensive records detailing the actions which an offshore company has undertaken cannot be overestimated. Failure to conduct proper meetings or pass valid resolutions can result in the legality and effect of an offshore company being undermined which could result in disastrous consequences, not only for the client, but also the service provider and possibly the centre as a whole.

THE ROLE AND INVOLVEMENT OF THE BENEFICIAL OWNER

The beneficial owners of offshore companies seem to think that they can open an offshore company and enjoy the various potential benefits which this can create, yet at the same time retain total control over the assets which they have placed into their company.

As the reader / client now have realised, it is often where the management and control of a company is exercised which determines where that company will be considered resident for tax purposes. If it can be argued that the client is managing the assets or affairs of an offshore company it could affect the tax situation of that entity and possibly undermine, and even remove, any benefits which might have been possible by basing that company in an offshore centre in the first place.

Some of the ways in which a beneficial owner might attempt or wish to exert some control over their company and how the service provider might want to respond are as follows.

The Client Wants to be Appointed a Director or as the Sole Director
There will be no statutory restrictions to prevent a client from being appointed as a director of their offshore company (provided he has the necessary capacity and is not precluded from acting), although some companies must have at least one director resident in the offshore centre concerned.

There are, however, a few issues which need to be addressed.

Management and Control
If the client were to be appointed a director there could be a management and control problem, especially if he were to become the sole director or one of only two on the board. In such cases there would be an argument that the client was able to control the company, and this could mean that it would be deemed to be resident in the country or jurisdiction where the client was based, possibly making it liable to tax in that centre and therefore losing the potential offshore benefits.

The Client Wants to Act as an 'Agent' or Adviser
As an alternative to being appointed to the board of directors, a client might instead wish to have the power to manage the investments or arrange contracts on behalf of the company usually as an agent.

The directors would be able to do this, but again, there is a management and control issue. The powers given to the client in his capacity as agent should not be greater than, or override, those of the directors in respect of those assets.

The Client Requests a Power of Attorney
There are essentially two types of power of attorney. Firstly, there is a special power of attorney which is restricted to activities which are expressly specified under the terms of the deed. Secondly, there is a general power of attorney which gives the person appointed much wider powers over 'general' business matters and not restricted to specific areas.

Very few service providers would be prepared to issue a general power of attorney, especially in those cases where they also provide the directors. It would not matter on whose behalf the power was issued as the wide powers which would generally be bestowed under a general power of attorney would enable the donee to conduct business on behalf of the company, and his actions would almost certainly bind the company.

Apart from the general concerns over the perceived place of the management and control which a general power of attorney would create, there is a greater danger that the donee of a general power could incur liabilities which the directors are not aware of and for which they could be liable.

A special power of attorney restricted to certain matters would be more favourably considered but once again the powers given should not be seen to be sufficiently wide so as to transfer overall management and control to the client or donee. If granted, the directors would be expected to monitor the activities of the donee of the power and to consider, from time to time, the duration of the arrangement which should not be for an indefinite period.

The Client Would Like A Credit Card in the Company's Name
A number of service providers are happy to issue corporate credit or debit cards in the name of a corporate entity and for those cards to be used by the beneficial owner of the company concerned.

However, this should raise concerns similar to those covered in the Section above in that if the client were able to incur debts which would be covered by the company's assets, there would be a strong argument that by doing so he controls those. Questions over the capacity of the client and his right to have such a card would also be raised, especially if the company was fully managed by the agent.

A solution might be to issue a credit or debit card in the name of the client and for the company to guarantee to cover any debts which are incurred under that card. Repayments could then be treated as a loan from the company to the client which would be agreed by the board from time to time.

The Client Wants to Director the Directors
This is the most common request which is made by clients. They understand the need for management and control being offshore but still want to tell the directors what to do.

Some administrators find this a difficult area because the client has instructed the corporate agents to provide various services on his behalf, for which he is paying a fee, and will also (in most cases) be providing the funds which the company will hold and possibly manage. On the other hand, the directors are personally responsible and liable for their actions and they must only act if they feel it is in the best interests of the company to do so. They should also be comfortable that the actions are within their powers and not in contravention of the articles of association or the company laws of the offshore centre.

Before the company has been incorporated and certainly before any administration services are provided, the agent must impress upon the client the benefits which an offshore company can create and then make him understand how these benefits can be eroded if the client tries to take over the management and control.