Selecting a Jurisdiction
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 following selection criteria have been outlined to guide the selection
process:
Political and Economic Stability
Jurisdictions should always provide political and economic stability. This
ensures that business can be conducted with certainty, confidence and
corporate security.
Legislation
Legislation should be modern, flexible, private and well-proven.
Desirable Corporate Features
Many offshore and tax planning jurisdictions have made efforts to ensure
that their company law is attractive to offshore users. You should
consider the following factors when selecting a jurisdiction :
- Filing obligations and bureaucracy.
- Compliance requirements.
- Broad range of permitted company names and suffixes to denote
limited liability.
- Low capital requirements.
- The ability to hold directors and/or shareholders' meetings anywhere
in the world.
- The absence, or optional requirement for, the audit of accounting
records.
Double Taxation Avoidance Treaties
Jurisdictions can be categorized as either treaty jurisdictions or
non-treaty jurisdictions.
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.
Non-treaty jurisdictions are mainly
used because of the absence of corporate taxes on the profits of the
company. These jurisdictions usually only require companies to pay a fixed
annual licence fee.
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Company Law
Company law generally follows four different models:
- English Common Law
- European Law
- US Law
- Hybrid
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.
European Corporate Law usually
differentiates between the "share" company and the public company. The
former is 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, e.g. :
- An amount of paid-up capital must be subscribed before
incorporation.
- A company's statutes are essentially a contract between the
subscribers.
- Procedures are more onerous than in Common Law countries.
- Incorporation is facilitated by a notary.
- Corporate law in Civil Law countries often splits the responsibility
of boards of directors between an executive and a supervisory board.
- Powers of directors may be curtailed.
- Liquidation procedures are time-consuming and complex.
- A legal reserve may be required.
US Corporate Law has been
influenced by both English Common Law and Civil Law. Apart from
differences in language, terminology and interpretation, US Company Law
differs from English Law in significant ways, including:
- US Corporations have officers in addition to directors.
- By-laws are often adopted after incorporation.
- Directors are often empowered to change by-laws.
- Company Law in Panama and Nevis has been influenced by US
Law.
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