Monthly Archives: October 2016

HOW TO CLOSE DOWN A HONG KONG COMPANY VIA DEREGISTRATION

We are often asked how do I close down my Hong Kong Company?

 

There are two ways to close down a Hong Kong Company:

(a)   De-registration;  and

(b)   Winding Up

 

Although both procedures will result in the dissolution of the company, the processes involved with each are significantly different.

 

Certainly of the two the simpler (and less expensive) option is Deregistration and that is the option that we will be examining in this article today.

 

The first thing to note is that the Deregistration option is only available if the company doesn’t owe any money to outside parties.

 

To be able to proceed with de-registration there are a number of conditions that must be fulfilled:

 

1. The De-registration application must be agreed to by ALL shareholders

2. The company must never have commenced business OR ceased business operation for more than 3 months immediately before the de-registration application

3. The company must have no outstanding liabilities (e.g. accounts payable, amounts due to third parties etc.)

4. The company must have no outstanding returns required to be filed with government (e.g. Annual Return, Business Registration fee & Tax Return etc.)

5. The company is not a party to any legal proceedings

6. The company’s assets must not consist of any immovable property situated in Hong Kong

7. If the company is a holding company, none of its subsidiary’s assets must consist of any immovable property situated in Hong Kong

8. The company must not be a company specified in section 749 of the Companies Ordinance (ie as stated below):

(a) a public company

(b) an authorized institution under Banking Ordinance (Cap 155)

(c) an insurer under Insurance Companies Ordinance (Cap 41)

(d) a corporation licensed under Part V of Securities and Futures Ordinance (Cap 571)

(e) an associated entity under Part VI of Securities and Futures Ordinance (Cap 571)

(f) an approved trustee under Mandatory Provident Fund Schemes Ordinance (Cap 485)

(g) a company registered as a trust company under Part VIII of the Trustee Ordinance (Cap 29)

(h) a company having a subsidiary that falls within item 1-7 above OR

(i) a company that fell within item 1-7 above at any time during the 5 years immediate before the application for de-registration

 

The good news is you do not need to visit HK during the whole procedure – everything can be done via email and courier.

 

The whole process takes around 6 months to complete after original documents are submitted to the relevant government agency (ie assuming no objection is received by the government during the de-registration process)

 

Important to Note:

•          once the company is dissolved, all property (including credit balances in bank accounts, motor vehicle, landed property, etc.) and rights vested in or held on trust for the company immediate before the dissolution is vested in the HK government as bona vacantia

•          If your HK Company has a Bank Account you’d be well advised to ensure that you properly close your Company’s account directly with the relevant bank (to begin the process you will need to present a board resolution to the bank formally authorising the account to be closed).

•          Following deregistration, you will need to keep company records for at least 10 years.

 

 

OFFSHORE COMPANIES INTERNATIONAL LTD.

www.offshoreincorporate.com

30.10.2016

 

 

Differences Between a Seychelles Foundation & a Nevis Foundation

The Seychelles Foundation law was drafted by a former business partner and ex law school classmate (1984 to 1988) of the Founder of OCI.

 

The OCI Founder also reviewed the final proposed provisions of the new/draft law in his then capacity as head of the Seychelles Offshore Practitioners Association (“SAOPRA”) Legislative Review Committee.

 

Armed with that knowledge what we can tell you is that the Seychelles Foundation Law embodies many of the key features of the Nevis Foundation Law (many of which were borrowed from the Panama Foundation Law) but with a number of additional (in our view, very attractive) features including:

 

  • In Seychelles the key powers usually held by the Foundation Council can be reserved to the Founder PLUS the rights so reserved to the Founder of a Seychelles Foundation can be assigned. This enables you to remote control your Foundation with complete privacy because normally the Founder’s name appears in the Charter (which is publicly filed as part of the registration process). However with a Seychelles Foundation you can use a Nominee Founder (who then immediately following registration assigns his rights to you via a private Deed of Assignment)
  • The Seychelles law specifically states that the Foundation is both legal and beneficial owner of any assets it holds. This is (a) a fantastic tax planning feature because traditionally onshore tax authorities have taxed such entities on the basis that the beneficiaries are the beneficial owners of the entity. It also means (b) when opening bank accounts or incorporating subsidiaries that you can avoid having to declare to the bank etc the names of the beneficiaries of the Foundation (which are usually you/your immediate family).
  • The Seychelles law also states that the beneficiaries are owed no fiduciary duty by the Foundation Council (which bolsters the above proposition ie that it is the Foundation which owns the assets/income for tax purposes)

 

The Seychelles law also provides additional asset protection provisions eg:

  • It specifically says that a transfer of property to a Seychelles Foundation, shall not be void, voidable, liable to be set aside or otherwise defective in any manner by reference to a foreign rule of forced heirship or any other written law of a foreign jurisdiction
  • It also says that a transfer of property to a Seychelles Foundation, shall not be voided by the founder’s bankruptcy or by the liquidation of the founder’s property; or by any action, proceedings or other claims against the founder brought by any creditor of the founder ie Per sections 71 to 74 of the Seychelles Foundations Act (these asset protection provisions don’t appear in the Nevis law)
  • A Seychelles Foundation can be capitalized with as little as $1. A Nevis Foundation’s minimum authorised capital is $10,000.
  • Seychelles permits registration of a Purpose Foundation ie one where no beneficiaries are named – in the Charter you simply state that the Foundation is being set up to achieve a specific (usually charitable) purpose (eg to feed street kids in India)
(c) OFFSHORE COMPANIES INTERNATIONAL LTD.
23 October 2016

 

How To Use An Offshore Company To Do Online Trading

Online Trading is an activity which lends itself well to an Offshore Corporate Structuring Plan.

 

No matter whether you trade forex or metals or commodities or oil/petroleum or futures or options a tax free Offshore Company or IBC (International Business Company) can assist you to minimize the amount of tax you would otherwise have to pay at home.

 

To summarise how it would work is:

 

  • You set up a zero tax International Business Company (“IBC”)
  • The IBC opens an account with a Broker
  • You are appointed as the IBC’s authorised trader (ie you place the buy and sell orders on behalf of the company)
  • For all intents and purposes the IBCs trading profits are generated in a nil tax environment tax free/offshore (ie provided the IBC is structured in a certain way)
  • When you need some living/spending money the IBC pays you a wage, or consulting fees or a commission (eg a percentage of trading profits generated)
  • That living/spending money can be paid to your local bank account (which means it would be assessable income wherever you are ordinarily resident for tax purposes though you should also be able to claim a sizeable amount of allowable deductions eg for home office, car, equipment, insurances, travel, stationary etc etc to reduce the amount of your “taxable” income at home)
  • If you don’t want the authorities to know how much money you are earning by way of wages you could use an anonymous ATM or Debit/VISA card to withdraw your wages from an Auto Tele Machine
  • The majority of trading profits could be banked or reinvested Offshore potentially tax free.

 

As always local laws can have an impact. So be sure to seek local legal and financial advice before you commit to establishing an Offshore Trading Company.

 

What Type of Offshore Company Should You Form?

Generally speaking there are 4 kinds of companies that you could form “Offshore” as a private individual ie:

 

  1. A Private Company limited by shares
  2. A Company Limited by guarantee
  3. An LLC (Limited Liability Corporation)
  4. A Hybrid Company (ie a Company Limited by guarantee but with share capital)

 

Some Offshore jurisdictions only offer one type of company. Some offer all.

 

Private Companies Limited by Shares

 

A private company limited by shares is a class of private limited company incorporated under the laws of England and Wales, Scotland, certain Commonwealth countries or the Republic of Ireland. It has shareholders with limited liability and its shares may not be offered to the general public, unlike those of a public limited company (plc).

 

“Limited by shares” means that the liability of the shareholders to creditors of the company is limited to the capital originally invested, i.e. the nominal value of the shares and any premium paid in return for the issue of the shares by the company. A shareholder’s personal assets are thus protected in the event of the company’s insolvency, but any money invested in the company may be lost.

 

A limited company may be “private” or “public”. A private limited company’s disclosure requirements are lighter, but its shares may not be offered to the general public (and therefore cannot be traded on a public stock exchange). This is the major difference between a private limited company and a public limited company. Most companies, particularly small companies, are private.

 

Private companies limited by shares are usually required to have the suffix “Limited” (often written “Ltd” or “Ltd.”) or “Incorporated” (“Inc.”).

 

Companies Limited by Guarantee

 

Unlike a company limited by shares, a guarantee company has no share capital or shareholders. Instead it has members who undertake to contribute a nominal amount towards any shortfall in the company’s assets to settle its debts in the event of its being wound up. This nominal amount, set out in the company’s articles, is usually $1 but it can be any amount that is thought fit.

 

In this way, members of the company are protected from any personal liability for the company’s debts. Only if the company is wound up and funding is needed to pay its debts, are members liable to the extent of their guarantee.

 

Most guarantee companies are incorporated for non-profit making functions so they are routinely used for charities, community projects, societies, clubs and other similar bodies.

 

However, guarantee memberships can be issued on whatever terms the directors decide and, depending on the provisions of the Articles of Association, a guarantee company can distribute its profits to its members.

 

Guarantee Companies are also a popular choice for property management companies: These are set up to hold an interest in or manage communal facilities in a property which is divided into units, each being owned separately. These companies may be set up by landlords or developers or by the unitholders themselves.

 

The most significant feature of a guarantee company is the facility for a guarantee membership to extinguish upon the death of a Guarantee Member. Guarantee companies can therefore form the basis of a personal holding company that allows for a smooth succession of title to the underlying assets through the guarantee membership structure.

 

Guarantee companies can be formed in most Offshore Financial Centres as well as onshore jurisdictions that follow the English legal system.

 

Limited Liability Corporations (LLCs)

 

A Limited Liability Company (LLC) is a particular type of private limited company hailing originally from the United States but now offered by a number of Offshore jurisdictions including Belize, Seychelles and Nevis.

 

It is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. An LLC is treated by the US etc Tax Authorities (“IRS”) as a Partnership ie as a flow through entity. Generally speaking provided all the profit is distributed to the member/s of the LLC the Company will pay no tax in the state/country of incorporation.

 

A Limited Liability Company (LLC) is a hybrid business entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC, although a business entity, is a type of unincorporated association and is not a corporation. The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. It is often more flexible than a corporation, and it is well-suited for companies with a single owner and for joint ventures (“JVs”) where the partners want to avoid having to pay tax at the Company level but are happy to declare and pay tax at home on their share of the LLC’s nett profit as received.

 

In the absence of express statutory guidance, most American courts have held that LLC members are subject to the same common law alter ego piercing theories as corporate shareholders. However, it is more difficult to pierce the LLC veil because LLCs do not have many formalities to maintain. So long as the LLC and the members do not commingle funds, it would be difficult to pierce this veil.

 

Membership interests in LLCs and partnership interests are also afforded a significant level of protection through the charging order mechanism. The charging order limits the creditor of a debtor-partner or a debtor-member to the debtor’s share of distributions, without conferring on the creditor any voting or management rights. Limited liability company members may, in certain circumstances, also incur a personal liability in cases where distributions to members render the LLC insolvent.

 

Hybrid Companies

 

A Hybrid Company is a company limited by guarantee and having a share capital.

 

The Hybrid Company is a fusion of the two standard forms of Limited Company, namely a Company Limited by Guarantee and a Company having a Share Capital. The members of the former type of company undertake to contribute capital to the company (as defined in its Memorandum of Association) in the event that the company becomes insolvent or goes into liquidation. The members of the latter type of company contribute capital to become a member (i.e. to become a shareholder).

 

Companies Limited by Guarantee typically are used to establish mutual associations, charities, clubs and non-profit making organisations as the members own the company in common but no individual member has any personal right or interest therein.

 

Hybrid Companies can have two or more classes of member.

 

The first class will be the registered members (or shareholders) who will be the controlling members. OCI will normally provide these members as the registered members will not have any right to distributions of profits but will have voting and administrative powers. The principle power of the shareholders is to elect directors to manage the company.

 

The second class will be the beneficial members whose identities are not in the public domain and who are the only persons entitled to share in the profits of the company although distributions from the company can only be authorised by the directors.

 

Subsets of members with different rights can be created through the addition of other classes of beneficial members.

 

As regards which type of Offshore Company is right for you that depends on a number of things including the type of business you are in your ownership structure and appetite for risk and more. As local conditions can have an impact one should always seek legal and financial advise before committing to form such a Company.

 

Ireland Stands Firm On Low Company Tax Rates

Irish Prime Minister Enda Kenny has publicly reiterated his commitment to the 12.5 percent corporate tax rate “from a tax certainty point of view.”

 

In a speech to the American Chamber of Commerce Ireland (Amcham Ireland), Kenny stressed that the rate will not change, and acknowledged that “that is an important element for consideration with American investors coming here to Ireland.”

 

Bob Savage, President of Amcham Ireland, welcomed Kenny’s statement. He said the Chamber “deeply appreciate[s] the Taoiseach’s unambiguous declaration that his Government will steadfastly defend our hard-earned reputation as a pro-business country that is defined by fairness and certainty of treatment.”

 

In its pre-Budget submission, Amcham Ireland emphasized the need for Ireland “to evolve its corporate tax regime in response to the post-BEPS landscape to remain competitive.” (Base erosion and profit shifting BEPS is a tax avoidance strategy used by multinational companies, wherein profits are shifted from jurisdictions that have high taxes such as the United States and many Western European countries to jurisdictions that have low or no taxes ie so-called tax havens).

 

Kenny’s comments were later echoed by his Finance Minister, Michael Noonan. “We could nearly put it on the flag now because everybody knows internationally that the rate is 12.5 percent. Actually, when industrialists think of Ireland, they automatically think of 12.5 percent. But just in case there’s doubt, I’ll confirm it again in this year’s Budget,” Noonan said.

 

Noonan added that the Government is under no pressure from the European Union (EU) to change the rate in the wake of the Commission’s decision that Ireland had provided selective tax treatment to Apple. “The European Commission acknowledge that the right to set tax rates is a matter for sovereign governments; it’s not for Europe or the European Commission,” he explained.

 

In the wake of these bold public statements you can expect the low Tax Irish Company to remain a popular choice of tax planning vehicle for discerning International Trading business owners the world over. That said the key to success in using Ireland as your corporate base is to ensure that you are not seen to be exercising management and control over the company from your home country (which would entail, as a minimum the appointment of a Nominee Director + establishment of an Offshore Discretionary Trust or, ideally, a Private Foundation to act as shareholder). For information on how that can work for you please contact us.