Seychelles has recently introduced new Account keeping requirements as regards Seychelles IBCs and Seychelles Private Foundations.
There has been some consternation about how the rules work, particularly in respect of Foundations which are completely passive (the typical Seychelles Foundation is set up to own the shares of a Trading or Investment Company which generates all the revenue) or which own Companies that are yet to trade.
This article is designed to provide some clarity in regards to such issues.
Firstly, if a foundation was only formed in January 2022 and has not operated and does not yet have any assets or liabilities or income, then obviously no “accounting records” will exist. In such a case, the FSA’s Foundation Guide (which can be downloaded from here: https://fsaseychelles.sc/legal-framework/guidelines – see paragraph 19.11 and Annexure 2) permits the Foundation to provide a declaration for accounting record purposes confirming that it has no activities/assets, etc. See below a sample of such a declaration.
Every foundation must provide an Annual Financial Summary (short-form accounts) – see Annexure 3 to the FSA’s Foundation Guide. However, the good news is that if a foundation was formed in January 2022, then it has until end June 2023 to provide its first Annual Financial Summary. This is clear from paragraph 19.14 of the Guide, which mirrors section 75(3)(a) of the Foundations Act: a foundation shall prepare an annual financial summary to be kept at its registered office in Seychelles within 6 months from the end of the foundation’s financial year. The default financial year is the calendar year, unless changed by resolution of councillors and notified to the RA (section 75(3C) of the Foundations Act).
The above relates to a foundation without assets/liabilities, which has not commenced operating or is dormant.
What about if you’re the typical case ie you’ve set up a foundation purely to hold shares in an active trading company? In this instance the corporate documents of the subsidiary company owned by the foundation would constitute accounting records and copies would need to be submitted to the Foundation’s Seychelles Registered Agent. Yes a “blank” Annual Financial Summary could be provided. However, the Annual Financial Summary should not be totally blank if the foundation owns shares, as these are an asset of the foundation, i.e. should appear on the balance sheet/Annual Financial Summary as an asset, at least at book value (the amount paid for the shares).
If the foundation has entered any financial-related agreements (such as a share subscription agreement or loan agreement, etc), these too will be “accounting records”.
Paragraph 19 of the FSA’s Foundation Guide provides comprehensive guidance regarding accounting record requirements for foundations.
For an IBC, only a “large company” is required to prepare an Annual Financial Summary. “Large company” means a company which meets the annual turnover (income) threshold specified for a “large business” under the Revenue Administration Act, namely Seychelles Rupees 50,000,000 (approx. US$3.7 million as at today’s date ie 25.9.2022).
As with foundations, if an IBC has no assets/liabilities and has not yet traded or is dormant, for accounting record purposes it may provide a declaration: see paragraph 32.10 and Annexure 24 of the FSA IBC Guide (which can also be downloaded from/via this link: https://fsaseychelles.sc/legal-framework/guidelines ) .
Paragraph 32 of the FSA’s IBC Guide provides comprehensive guidance regarding account record requirements for IBCs.
ACCOUNTING RECORD DECLARATION
Section 75 of the Foundations Act 2009
TO: The Foundation’s Registered Agent in Seychelles
[ insert name & address of Registered Agent ]
[ insert date ]
[ Insert Foundation name ] Foundation No: [ xxxx ] (the “Foundation”)
We, the Councillor(s) of the Foundation, hereby declare and confirm that (tick as appropriate):
Since its incorporation/registration in Seychelles, the Foundation has no activities and has no assets or liabilities.
For the relevant period the Foundation has not traded and has not carried out any transactions.
Therefore, the Foundation has no transaction for which it needs to lodge the relevant accounting records in Seychelles, for the period from [ insert relevant period, i.e. either from January to June or from July to December, as applicable ], [ insert year ].
Name of Councillor / Authorised Signatory: _______________________________
For and on behalf of the Foundation
The Act requires a Foundation to keep reliable accounting records:
(a) that are sufficient to show and explain the Foundation’s transactions;
(b) that enable the financial position of the Foundation to be determined with reasonable accuracy at any time; and
(c) that allow for financial statements of the Foundation to be prepared.
The accounting records should be kept at the registered office in Seychelles on a bi-annual basis, as follows:
(a) Accounting records relating to transactions or operations in the first half (January to June) of a calendar year must be kept in Seychelles by July of that year
(b) Accounting records relating to transactions or operations in the second half (July to December) of a calendar year must be kept in Seychelles by January of the following year
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