Company- Management | Offshore Companies International

Where To set Up a Private Fund Offshore

Are you an Online Trader (eg Trading cryptocurrency or Trading forex or Trading shares or Trading commodities/futures/options or etc)?

Have you developed a successful Trading strategy?

(Having experienced some success) are you now being asked by family and friends to trade their funds?

If the answer to all these questions (in particular, the latter question) is yes then you’re probably considering (or thinking about the possibility of) setting up some kind of Private Investment Fund.

Most “Onshore” jurisdictions make it extremely difficult for a career Trader to set up a Hedge Fund. You may be interested to know there are several ways to cost effectively set up a Fund type Company “Offshore” (including options that do not require any form of special license).

Here’s how this might be achieved:

If your main aim is to obtain a Special License that will enable you to trade other person’s funds then a Broker’s License or a Securities Dealer’s license might be the way forward. For a summary of what a Brokerage business might look like check out this file/link FX Brokerage Structures: https://www.dropbox.com/s/hrd783n205pdzwf/FX%20Brokerage%20Structures.pdf?dl=0

Popular Licensing Options here include:

- A Seychelles Securities Dealers License – Check this file/link for an overview: https://www.dropbox.com/s/6pstxtedigpb0ep/Seychelles%20Securities%20Dealers%20License%20OVERVIEW.docx?dl=0

- A Belize Broker’s License – Check this file/link for an overview: https://www.dropbox.com/s/vrofr9vhhgcwkd3/Belize%20Broker%27s%20License%20FACT%20SHEET.docx?dl=0

- A BVI Brokers License – Check this file/link for an overview: https://www.dropbox.com/s/kkapiwyse8wyhwn/BVI%20Brokers%20License%20FACT%20SHEET.docx?dl=0

- A Vanuatu Financial License – Check this file/link for an overview: https://www.dropbox.com/s/h15jmyga764vo7x/Vanuatu%20-%20Applications%20for%20Financial%20Licenses%20-%20Requirements.pdf?dl=0

Alternatively you could set up a Private (non-licensed) Closed End Fund. Check this link/file for details of how this might be achieved: https://www.dropbox.com/s/p92e6iveqgql4vf/Structuring%20Options%20for%20a%20Non%20Licensed%20Closed%20End%20Fund.doc?dl=0 ; or

Another possibility would be to apply for a Mutual Fund License for the proposed business. The quickest, easiest and cheapest place to do this would be Seychelles. Check this link/file for details: https://www.dropbox.com/s/e3s6v1tp1sbfr2d/How%20To%20Set%20Up%20a%20Licensed%20Fund%20in%20Seychelles.pdf?dl=0

Another possibility would be to utilise an IBC (International Business Company) which would be contracted to trade an investor’s money in the broker’s account under Power of Attorney. Check this link/file for details on how that can work: https://www.dropbox.com/s/8v0qmsta7f90evk/How%20To%20Trade%203rd%20Party%20Funds%20Using%20a%20PoA.docx?dl=0

Semi licensed/regulated options include the BVI Incubator Fund & Mauritius Special Purpose Fund; Check these files/links for details:

https://www.dropbox.com/s/quu1kjc7emnpbys/How%20To%20set%20up%20a%20BVI%20Incubator%20fund.docx?dl=0

https://www.dropbox.com/s/89cm6g0mkje1tyo/Mauritius%20Special%20Purpose%20Fund%20FAQ.pdf?dl=0

The simplest & most cost effective way to kick off a Startup Hedge Fund would be to set up a Panama PF-20 Fund. Check this file/link for details: https://www.dropbox.com/s/ypvfyb7bq1nmm28/Panama%20Private%20Funds.pdf?dl=0

Cost to set up a Licensed Entity range from circa $US15,000 (eg a for a Broker’s License) up to north of $25,000 (eg to establish a Licensed Mutual Fund).

To set up a non-licensed Closed End Fund can be done for as little as $3-5,000 (+ Bank Account set up). A BVI Incubator fund to set up costs around 15-18k. The most cost-effective Open Ended Fund Option would be a Panama PF 20 Fund which can be set up for a little as $4,000 (+ nominee Directors if required).

Non License Jurisdiction Suggestions

Given they are low regulation, boast peerless privacy laws and are cost effective places to maintain/setup such a Company (ie assuming you’d prefer to go down the non licensing road) commonly we would suggest Seychelles, Belize or Nevis as potential jurisdictions in/at which to incorporate “Offshore” such an Enterprise.

See here for details:

Nevis – For detailed information click on this link: http://offshoreincorporate.com/st-kitts-and-nevis-offshore-companies/
Belize – For detailed information click on this link: http://offshoreincorporate.com/belize-offshore-companies/
Seychelles – For detailed information click on this link: http://offshoreincorporate.com/seychelles-offshore-companies/

Cost there to incorporate a Company would be:

For a Nevis Company, including incorporation, registered/agent office service and one year’s basic admin: $1,475 . 2^nd and subsequent years $1,165
For a Belize Company, including incorporation, registered/agent office service and one year’s basic admin: $1,000. 2^nd and subsequent years $690 (or $1,090 if nominees are required)
For a Seychelles Company, including incorporation, registered/agent office service and one year’s basic admin: $1,075 2^nd and subsequent years $765

Another popular place to incorporate such a business is Hong Kong. Check this link which explains why it’s so popular: https://www.dropbox.com/s/hfzo6gdlk5v0xci/Why%20Incorporate%20in%20Hong%20Kong.docx?dl=0

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

How To Add a New Shareholder to your IBC or Offshore Company

If you want to or need to add a new shareholder to your Offshore Company the process is simple and streamlined.

To add an additional shareholder/s for/to an IBC/Offshore Company:

(a) You will need to tell us the name and address of the new shareholder and how many shares, and of what value and what kind of shares are to be issued to that person/entity (eg please issue 1,000 ordinary shares of one USD each to Mr John Smith of 1 Jones Street Jonesville, NY, USA)

(b) You will need to provide us with KYC (ie Certified Proof of ID and residential address) per the requirements for/as regards the proposed new shareholder

(c) We would need the Director/Chairman of the Company to sign s a Change of Shareholder minute/resolution.

(d) A new share certificate will need to be issued

(e) The share register will need to be amended

(f) A share subscription form will need to be drafted and signed by the new shareholder.

(g) We will also need the requisite fee settled in advance. See details below.

Procedures Once Documents Have Been Received

Once OCI’s fees have been settled and we have received the original (or certified copy) of the signed resolution and the original share subscription form duly signed, within 72 hours we will:

(i) email you (and prepare for couriering to you) the new share certificate/s; and

(ii) upgrade the Company’s Share register to note the new shareholder’s name; and

(iii) email you a Lawyer certified true copy of the upgraded Share register plus a new Certificate of Incumbency (if required); &

(iv) (the same day) package and take the above docs to DHL (or to the post office for airmailing as you may prefer) for dispatch by courier to you with the next available flight to your region.

Cost of attending to Change of Shareholder inclusive of the above is from $375 per shareholder inclusive of provision of Certificate of Incumbency if required (cost of courier if required is extra).

NOTE: If the new shareholder is a Company we’ll also need proof of the Company’s Incorporation + confirmation that the Company is in Good standing (eg a Certificate of Good standing issued by the Company Registry in the country wherein the Company is incorporated) + KYC per the requirements for the shareholders & directors (& beneficial owners) of the new shareholder Company.

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

How To Close Down A Hong Kong Company

In many jurisdictions if you no longer require a Company all you need to do in order to kill it off is stop paying the annual renewal fees and eventually it will be struck off the Register.

Closing down a company in Hong Kong however involves a certain number of formal steps and the overall process can take some months to complete. Depending on how the company is being closed, this process can also be expensive; hence the decision whether to cosle down and how to close down should be made after careful thought and consideration.

This article serves as a guide on the options available to close down a company in Hong Kong.

The most common reasons for closing a company are:

Failure of the company to carry on business
Company is no longer profitable
Inability to pay its debts
Falling out between shareholders
Non-compliance with statutory requirements, including mis-management of company affairs
Corporate restructuring of the group to which the company belongs

The process of closing down a company is referred to as “liquidation” in common terms. Companies can be liquidated either by “De-registration” or “Winding Up“. Although both the procedures will result in the dissolution of a company, the processes they entail are significantly different.

Deregistration is a relatively simple, inexpensive and quick procedure for dissolving defunct private companies who meet certain specific requirements. Winding up is the process of appointing a liquidator who will settle the accounts, pay off the company’s debts (if any), liquidate the assets of a company and distribute the surplus assets (if any) to members, ensuring that the company is completely dissolved.

Detailed below are the procedures involved in deregistration and winding up of a Hong Kong company.

De-registration of a HK Company

Requirements

The company must be a solvent private company incorporated under the Hong Kong Companies Ordinance, other than those companies specified in section 291AA(16) or registered under Part XI of the Companies Ordinance, and must meet the following requirements:

All the members of the company agree to the deregistration
The company has never commenced business or operation, or has ceased to carry on business or ceased operation for more than 3 months immediately before the application
The company has no outstanding liabilities
It has obtained a written notice of no objection from the Commissioner of Inland Revenue

Procedure

An applicant must submit to the Companies Registry:

A duly completed form NDR1
A Notice of No Objection from the Commissioner of Inland Revenue (original copy)
Any further information/documents that the Companies Registry may request in connection with the application
If the Companies Registry finds all documentation to be in order it will proceed to issue a Letter of Approval for the deregistration application within five working days.
The Registrar will then publish a notice of the proposed deregistration in the Gazette. If the Registrar receives no objection, within 3 months of publishing the notice, it will proceed with the deregistration process by publishing a final notice in the Gazette declaring the company to be deregistered and the applicant or nominated person will be duly notified of the same.
Upon the publication of the final notice the company will be dissolved.
The whole process will be completed within 5 months.
Upon dissolution of the company, all the company s property (including credit balances in the company s bank account) shall be deemed to be bona vacantia and shall vest in the Government of the Hong Kong Special Administrative Region. You are strongly advised to seek legal or professional advice to ensure the proper disposal of the company s property before making an application for deregistration of the company.
You must notify the Business Registration Office of the Inland Revenue Department, in writing within 1 month of the date of cessation of business, to apply for a cancellation of Business Registration.
Until the company is deregistered, the company is still required to adhere to compliances, including the filing of annual returns and notification of situation of registered office.

Winding up a HK Company

There are two paths to winding up a company in Hong Kong – voluntary winding up or compulsory winding up.

Voluntary winding up

Voluntary winding up of a Hong Kong company can be initiated either by members (shareholders) or creditors.

The voluntary winding up of a company begins by a special resolution being passed for the company to be voluntarily wound up and publishing this information in the Gazette within 14 days. The winding up is said to begin on the date on which the resolution is passed.

Members’ Voluntary Winding Up

A members’ voluntary winding up of a company can be carried out if the directors believe that the company will be able to pay its debts, in full, within 12 months after the commencement of the winding up.

To initiate such a winding up, a directors’ meeting must first be convened where a majority of the directors must make a statutory Declaration of Solvency. The Declaration of Solvency must also contain the statement of assets and liabilities, based on the most recent financial statements of the company. The Declaration must be delivered to the Companies Registry within seven days after the date on which it was made.

The directors should proceed to appoint a provisional liquidator, who is generally a solicitor or professional accountant and must give his consent to act as the provisional liquidator in writing. The notice of the appointment of the provisional liquidator and notice of the commencement of the winding up by virtue of delivery of the Declaration to the Companies Registry must be published in the Gazette within 14 days of the appointment of the provisional liquidator. The provisional liquidator must also notify the Companies Registry of his appointment within 14 days after the date of his appointment.

Within 28 days of delivering the Declaration of Solvency to the Companies Registry, the directors must convene an Extraordinary General Meeting (EGM). The purpose of the EGM is for passing a Special Resolution to wind up the company, and an Ordinary Resolution appointing the liquidators (and approving their remuneration). The company should, within 14 days of passing the special resolution for voluntary winding up, give notice of the resolution by advertising in the Gazette. The voluntary winding up is deemed to have commenced with the passing of the special resolution at the EGM. The liquidator, or provisional liquidator will proceed to wind up the affairs of the company and file the necessary notifications required under the Companies Ordinance.

When the liquidation process takes more than a year, the liquidator must hold a general meeting every year to keep the members informed of the winding up process. Once the company’s affairs are fully wound up, the liquidator must prepare a final account of the winding up, showing how the property of the company has been disposed of and how the winding up has been conducted. The account must be presented at a final general meeting. The meeting has to be called by advertising in the Gazette, one month prior to the scheduled date. A copy of the account, along with a return stating that the meeting was held, must be sent to the Companies Registry within one week after the meeting. The company will be dissolved three months after the Registry receives the documents or at a later date as set by a court order in Hong Kong.

Creditors’ Voluntary Winding Up

If the company cannot make a Declaration of Solvency, a creditors’ voluntary winding up will have to be executed. Soon after the meeting at which the resolution for a voluntary winding up is made, a creditors’ meeting should be convened. The company must advertise notice of this meeting in the Gazette and two Hong Kong newspapers (one English language paper and one Chinese). The directors must present a complete picture of the company’s affairs, along with a list of creditors of the company and the estimated amount of their claims. The creditors will then proceed to appoint a liquidator and may also appoint a committee of inspection whose role is to act in concert with the liquidator. The liquidation process is similar to that of a members’ voluntary winding up, as mentioned above.

Effects of Voluntary Winding Up

With effect from the commencement of the winding up, the company must cease to carry on its business except insofar as it is required for the beneficial winding up.
The directors’ powers will cease, except under circumstances where the liquidator has resolved that the directors should continue to have such powers.
Any transfer of shares is void unless made to, or sanctioned by the liquidator, and the status of the members cannot be altered.

Compulsory Winding Up

The most common circumstances under which a Hong Kong Court can order a compulsory winding up of a company in Hong Kong are:

The company is unable to pay a debt of HKD 10,000 or above
The court is of the opinion that it is just and equitable that the company should be wound up
The company has by special resolution resolved that the company be wound up by the court

A creditor, a shareholder or the company itself can file a winding-up petition against the company, by appointing a solicitor. The petition must be prepared in accordance with the Companies Winding Up Rules. The petition must be advertised in the Gazette at least seven clear days before the hearing date and once at least in two Hong Kong daily newspapers (one Chinese and one English). A sealed copy of the petition must be delivered to the registered office or principal place of business of the company and an affidavit verifying the petition must be filed.

Once a winding-up petition is filed in the court, the winding-up of the company shall be deemed to commence and a court hearing will take place. At the hearing, the court will make a winding up order (if it deems fit) and the Official Receiver becomes the provisional liquidator (unless a provisional liquidator has already been appointed prior to the making of the winding-up order), until a liquidator is appointed. The provisional liquidator will take over control of the company including its assets and accounting records and will proceed to investigate the company’s affairs.

If the property of the company is not likely to exceed in value HKD 200,000, the provisional liquidator is appointed as the liquidator. If the property of the company is likely to exceed in value HKD 200,000, the provisional liquidator will hold meetings of creditors and contributories for the purpose of appointing a liquidator and a committee of inspection. The liquidator continues to investigate the company’s affairs, realises and disposes off the company’s assets and pays dividend to the creditors (if possible). Once the company’s affairs are completely wound up, it will be dissolved.

Effects of Compulsory Winding Up

Once a winding-up petition is filed in the court, the winding-up of the company shall be deemed to commence.
Once the winding up commences any disposition of the property of the company, including any transfer of shares or alteration in the status of the shareholders of the company, unless the court orders otherwise, is void.
The company or any creditor or shareholder may apply to the court to stay or restrain any pending action or proceeding against the company.
If the petitioner believes that the assets of the company are in jeopardy, he may apply to the court, after the filing of the winding-up petition, for the appointment of a provisional liquidator to safeguard the assets of the company prior to the hearing of the petition.

Notification Requirements

A company must notify the following bodies as part of closing down its business:

Companies Registry
Inland Revenue Department
Relevant Licensing Authorities

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

SEYCHELLES LIMITED PARTNERSHIPS REVIEWED

1. INTRODUCTION

This Article relates to Seychelles limited partnerships (limited partnerships) registered under the Seychelles Limited Partnership Act 2003 as amended (the Act). This Article is not exhaustive, is intended as a general summary and is given only in respect of the position as at the date hereof (see footer). We do not provide legal or tax advice. We recommend that clients seek independent expert legal and tax advice prior to forming a limited partnership.

2. HIGHLIGHTS

Limited partnerships are required to have one or more general partners and one or more limited partners.

A limited partnership is not an entity with separate legal personality and cannot own property in its own right. The Act provides that the property of a limited partnership shall be held by its general partner, or where there is more than one general partner, by the general partners jointly, as an asset of the limited partnership in accordance with the terms of its partnership agreement.

The general partner is responsible for the administering and managing of a limited partnership. For example, the general partner is responsible for the signing of letters, contracts, deeds and other documents on behalf of the limited partnership. General partners are liable for any debts and obligations of a limited partnership if the liabilities exceed the assets of the limited partnership.

At least one general partner of a limited partnership is required to be a Seychelles international business company incorporated under the International Business Companies Act 2016 or a company incorporated under the Companies Act 1972 and issued with a special licence under the Companies (Special Licences) Act 2003).

Limited partners are not liable for limited partnership debts except in certain very limited cases.

A general partner may also take an interest as a limited partner.

A limited partnership is not permitted to carry on business in Seychelles except to the extent necessary for the carrying on of the limited partnership’s business outside of Seychelles.

A limited partnership is not liable for Seychelles tax on its foreign sourced income. A limited partnership is exempt from Seychelles stamp duty in respect of: (i) a transfer of partnership assets; (ii) transactions in respect of partnership contributions, debt obligations and other securities of a limited partnership; and (iii) all other transactions relating to the business of n limited partnership.

3. FORMATION AND REGISTRATION REQUIREMENTS

3.1 A limited partnership is formed by one or more general partners and one or more limited partners entering into a partnership agreement (which sets out the terms of the limited partnership and the partners’ respective rights and obligations, etc). To bring the partnership within the ambit of the Act, a limited partnership must be registered with the Registrar, which is achieved by the designated general partner filing a statement pursuant to section 9(1) of the Act (Statement of Particulars) setting out:

the name of the limited partnership;
the address of its registered office in Seychelles;
the general nature of the business of the limited partnership;
the full name and address of each general partner;
a declaration that the limited partnership will not carry on business in Seychelles except so far as may be necessary for carrying on of the business of that limited partnership outside of Seychelles; and
the name and address of the registered agent of the limited partnership.

3.2 The Registrar will issue a Certificate of Registration upon registration of the section 9(1) Statement of Particulars and on payment of the applicable registration fee (section 9(2) of the Act). The limited partnership’s partnership agreement is not required to be filed with the Registrar.

Name of limited partnerships

3.3 A limited partnership is required to have a name which shall include the words “Limited Partnership”, “L.P.” or “LP” and may include the name of any general partner or limited partner or any derivation thereof (section 6(1) of the Act).

Business restriction

3.4 Certain activities are regulated in Seychelles and a limited partnership may be required to obtain a licence from the proper authority if it wishes to carry on such activities (e.g. mutual fund business is regulated by the Seychelles Financial Services Authority (FSA) and an limited partnership wishing to operate as a mutual fund will need to apply for the requisite licence under Seychelles mutual fund legislation).

Tax exemptions

3.5 A limited partnership is not liable for Seychelles tax on its foreign sourced income. A limited partnership is exempt from Seychelles stamp duty in respect of: (i) a transfer of partnership assets; (ii) transactions in respect of partnership contributions, debt obligations and other securities of a limited partnership; and (iii) all other transactions relating to the business of a limited partnership (section 18 of the Act).

4. GENERAL PARTNERS

4.1 Any one or more partners of an limited partnership may be resident, domiciled, established, incorporated or registered pursuant to Seychelles laws or of any other country, provided that at least one general partner of a limited partnership is required to be a Seychelles international business company incorporated under the International Business Companies Act 2016 or a company incorporated under the Companies Act 1972 and issued with a special licence under the Companies (Special Licences) Act 2003 (section 4(7) of the Act).

4.2 One or more general partners shall be responsible for the administering and managing the limited partnership and its business. The general partner is responsible for the signing any letters, contracts, deeds instruments and documents as general partner on behalf of the limited partnership (section 7(1) of the Act). Each general partner must at all time act in good faith in the interest of the limited partnership (section 4(3) of the Act).

4.3 Any property of the limited partnership which is transferred to a general partner or held on behalf of any one or more general partners shall be held by the general partner, and if more than one then by the general partners jointly as an asset of the limited partnership in accordance with the terms of the partnership agreement (section 7(2) of the Act).

4.4 Any debt or other obligations incurred by a general partner in the conduct of the limited partnership’s business shall be a debt or obligation of the limited partnership (section 7(3) of the Act). The general partner(s) shall, in the event that the assets of the limited partnership are inadequate, be liable for all the debts and obligations of the limited partnership (section 4(2) of the Act).

5. LIMITED PARTNERS

5.1 A limited partner shall not take part in the conduct of a limited partnership’s business (section 7(1) of the Act). Subject to the terms of a limited partnership’s partnership agreement, a limited partner of a limited partnership may be a person resident in or outside Seychelles.

5.2 The limited partners shall not be liable to any debts and obligations of a limited partnership, except that if a limited partner takes part in the conduct of a limited partnership’s business in its dealings with persons who are not partners of the limited partnership, that limited partner shall be liable in the event of insolvency of the limited partnership for all debts and obligations of the limited partnership incurred during the period in which he or she so participated in the conduct of the limited partnership’s business, provided that he or she shall be rendered liable pursuant to the foregoing provision only to a person who transacts business with the limited partnership during such period with actual knowledge of such participation and reasonable belief that such limited partner was a general partner (section 7(4) of the Act).

5.3 Pursuant to section 7(5) of the Act, any of the following activities done by a limited partner do not constitute taking part in the conduct of a limited partnership’s business within the meaning of section 7 of the Act:

(a) being a contractor for or an agent or employee of the limited partnership or a general partner, or by being an officer, director or shareholder of a corporate general partner;

(b) consulting with and advising a general partner with respect to the limited partnership’s business;

(c) investigating, reviewing, approving or being advised as to the accounts or business affairs of the limited partnership or exercising any right conferred under the Act;

(d) acting as a surety or guarantor for the limited partnership, either generally or in respect of specific obligations of the limited partnership;

(e) approving or disapproving an amendment to the partnership agreement; or

(f) voting as a limited partner on any matter.

6. SEYCHELLES REGISTERED AGENT AND REGISTERED OFFICE

6.1 A limited partnership must have a registered office situated in Seychelles for the service of process and to which all notices and communications may be addressed, which shall be the same address as the principal place of business in Seychelles of its registered agent (section 6(2) and (3) of the Act).

6.2 As from 6 February 2022, a limited partnership shall at all times have a registered agent in Seychelles, which shall be a person licensed to provide international corporate services under the International Corporate Service Providers Act (section 6A(1) and (2) of the Act). The registered agent has a non-fiduciary role and acts as a limited partnership’s point of contact in Seychelles. Filings to be made by a limited partnership with the Registrar must be submitted through its registered agent.

7. CHANGE OF REGISTERED PARTICULARS

Notice to Registrar of change of Particulars (other than notice of person ceasing to be a general partner)

7.1 If during the continuance of a limited partnership any change occurs in any particular contained in the Statement of Particulars filed with the Registry pursuant to section 9(1) of the Act (i.e. a change in respect of the name or address of each general partner or the registered agent, the general nature of the limited partnership’s business or the registered office address), the general partner shall file a statement specifying the nature of any change with the Registrar within 60 days of the change (section 10(1) of the Act).

Notice to Registrar involving person ceasing to be a general partner

7.2 A statement of change signed in accordance with section 10(1) of the Act in respect of any arrangement or transaction consequent upon which any person will cease to be a general partner in any limited partnership shall, within 15 days of such arrangement or transaction, be filed with the Registrar and until such statement is so filed, the arrangement or transaction shall, for the purposes of the Act and the partnership agreement, be of no effect (section 10(2) of the Act).

8. KEEPING OF PARTNERSHIP REGISTER required by the Limited Partnership Act

8.1 The designated general partner shall maintain or cause to be maintained at the registered office of the limited partnership a register of partnership interests (the Partnership Register) containing the name and address of each partner, the amount and date of contribution or contributions made by each partner and the amount and date of any payment representing a return of any part of contribution of any partner (section 11(1) of the Act). The Partnership Register should be kept in such form as the partnership’s general partner thinks fit, including in electronic or other data storage form as the general partner thinks fit (i.e. a PDF or Word copy is sufficient), but the general partner must be able to produce legible evidence of its contents.

8.2 The Partnership Register must be updated within twenty-one business days of any change in the particulars therein. The Partnership Register shall be made available for inspection and copying without charge during business hours at the request of a partner and a certified copy of the Partnership Register or any part thereof duly certified by the designated general partner shall be issued by a partner at his request (section 11(2) of the Act).

9. REGISTER OF BENEFICIAL OWNERS required by the Beneficial Ownership Act

9.1 In addition to the Partnership Registers required to be kept by the Act (see preceding paragraph), the Beneficial Ownership Act 2020 (the BO Act) and the Beneficial Ownership Regulations 2020 (the BO Regulations) require that the general partner of a limited partnership keep a Register of Beneficial Owners (see paragraph 9.2 below). For BO Act and anti-money laundering (AML) law purposes, pursuant to regulation 3 of the BO Regulations, the beneficial owner in relation to a limited partnership means an individual who:

(a) ultimately owns or controls, whether directly or indirectly, ten percent or more of the partnership ownership interests or voting rights of the partnership;

(b) holds the right, whether directly or indirectly, to appoint or remove the majority of the general partners of the partnership;

(c) ultimately owns or controls, whether directly or indirectly, absolute decision or veto rights in the conduct or management of the partnership; or

(d) is entitled to the assets of the partnership in the event of the dissolution of the partnership.

9.2 A general partner of a limited partnership is required to keep at the principal place of business in Seychelles of its Seychelles general partner, a Register of Beneficial Owners (see section 5(1) of the BO Act and regulation 12(1) and the First Schedule of the BO Regulations), containing the following information:

(a) the name, residential address, service address, date of birth and nationality of each beneficial owner of the partnership;

(b) the nature and details of each beneficial owner’s interest in the partnership;

(d) the date on which a person ceased to be a beneficial owner of the partnership; and

(e) where a nominee holds any interest in or control of the partnership on behalf of the beneficial owner:

(i) the name, residential address, service address, date of birth and nationality of each nominee holding the interest on behalf of the beneficial owner and the particulars and details of the interest held by the nominee; and

(ii) the identity of the nominator (who nominates the nominee to hold interests on his, her or its behalf), and where the nominator is a legal person, the identity of the individual who ultimately owns or controls the nominator (providing their name, residential address, service address, date of birth and nationality)

9.3 The Register of Beneficial Owners may be maintained in magnetic, electronic or other data storage form (section 7 of the BO Act) but the general partner of the limited partnership must be able to produce legible evidence of its contents. Every general partner of the limited partnership shall maintain accurate and up to date information required under section 5(1) of the BO Act in the limited partnership’s Register of Beneficial Owners.

9.4 The registerable particulars of a limited partnership’s Register of Beneficial Owners must be submitted to the Seychelles Financial Intelligence Unit (FIU) which submitted information is not publicly accessible (see sections 5(6) and 13(4) of the BO Act). The filing of the registrable particulars with the FIU is required to be done by a limited partnership’s general partner in Seychelles.

9.5 A limited partnership’s Register of Beneficial Owners kept at its resident general partner’s office in Seychelles is not open to public inspection. The persons entitled to inspect a limited partnership’s Register of Beneficial Owners are a partner of the limited partnership and a person whose name is entered in the limited partnership’s Register of Beneficial Owners as a beneficial owner, limited to inspection of the person’s name in the Register (section 11(1)(d) and (e) of the BO Act).

10. OBLIGATIONS RELATING TO BENEFICIAL OWNERSHIP

Declaration by person on becoming beneficial owner

10.1 Every person on becoming a beneficial owner of a limited partnership shall within 14 days from the date of becoming a beneficial owner, submit to the general partner of the limited partnership a Declaration of Beneficial Ownership containing the registrable particulars relating to the person (section 10(1) of the BO Act and regulation 14 and Second Schedule of the BO Regulations). “Registrable particulars” means the particulars to be registered under the BO Act in relation to a limited partnership including the particulars required by section 5 of the BO Act to be kept in a limited partnership’s Register of Beneficial Owners.

Notice of relevant change by beneficial owner

10.2 A relevant change in relation to a person occurs if: (i) the person ceases to be a beneficial owner in relation to the limited partnership; or (ii) any other change occurs as a result of change in the registrable particulars of the beneficial owner (section 10(8) of the BO Act).

10.3 If a relevant change occurs in relation to a beneficial owner of a limited partnership, the beneficial owner shall within 14 days of such change give written notice to the general partner of the limited partnership providing the following details for changes to be made to the limited partnership’s Register of Beneficial Owners: (i) the relevant change; (ii) the date on which it occurred; and (iii) any information needed to update the Register of Beneficial Owners (section 10(3) of the BO Act).

11 KEEPING OF ACCOUNTING RECORDS

11.1 Each general partner of a limited partnership is required to keep or cause to be kept proper accounting records that: (i) are sufficient to show and explain the limited partnership’s transactions; (ii) enable the financial position of the limited partnership to be determined with reasonable accuracy at any time; and (iii) allow for financial statements of the limited partnership to be prepared (section 11A(a) of the Act). For the purposes of the Act, accounting records of a limited partnership mean documents relating to assets and liabilities of the limited partnership including receipts and expenditure, sales and purchases and other transactions (e.g., including bank statements, receipts, title documents, agreements and vouchers): section 2 of the Act.

11.2 Pursuant to section 11A(3) of the Act, as from 6 February 2022, a limited partnership shall:

(a) prepare an annual financial summary to be kept at its registered office in Seychelles within 6 months from the end of the limited partnership’s financial year; and

(b) where its accounting records are kept outside Seychelles, lodge, not less than on a bi-annual basis, the accounting records at the limited partnership’s registered office in Seychelles, provided that any accounting records. The FSA’s applicable Guidance Circular indicates that the following shall apply:

limited partnership 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;

limited partnership 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; and

In respect of existing accounting records (i.e. accounting records relating to the years prior to year 2022) and accounting records relating to year 2022 for limited partnerships on the Register, accounting records relating to transactions or operations in the past 7 years to 31December, 2021 must be kept in Seychelles by 6 February 2022.

11.3 It shall be sufficient compliance with section 11A(3) of the Act (see paragraph 11.2 above) if a copy of the accounting records and financial summary is kept in electronic form at the limited partnership’s registered office in Seychelles (section 11A(4) of the Act). Where a limited partnership registered under the Act before 20 December 2021 keeps its accounting records outside Seychelles, it shall lodge its accounting records relating to transactions over the past 7 years at the limited partnership’s registered office in Seychelles by 6 February 2022 (section 8 of the International Business Companies Act and Other Related Laws (Amendment) Act 2021).

11.4 The financial year of a limited partnership shall be the calendar year, unless it is changed by the general partner and notified to the limited partnership’s registered agent within 14 days (section 11A(3A) of the Act).

11.5 While the accounting records are required to be kept at the registered office in Seychelles, they are not required to be filed with the Registrar (except on legal request) and are not open to public inspection.

11.6 Where a limited partnership: (a) keeps a copy of its accounting records at its registered office; or (b) keeps its original accounting records in Seychelles at a place other than at its registered office, the limited partnership shall inform its registered agent in writing of the physical address of the place where the original accounting records are kept (section 11A(4A) of the Act).

11.7 Where there is a change in the place at which its original accounting records are kept, a limited partnership shall, within 14 days of the change, notify in writing its registered agent of the physical address of the place at which its original accounting records are kept (section 11A(4B) of the Act).

11.8 A general partner shall retain all accounting records for seven years, from the date of completion of the transactions to which they relate (section 11A(5) of the Act).

12. DISTRIBUTIONS

No distributions and no return of capital contributions to a limited partner may be made unless at the time of and immediately following such payment the limited partnership is solvent (section 14(1) of the Act). In the event that the limited partnership goes into insolvency within 6 months of any return of contribution to a limited partner, such return will be repayable by the limited partner with interest to the extent that such contribution or part thereof is necessary to discharge a debt or obligation of the LP that incurred during the period the contribution represented an asset of the limited partnership (section 14(1) of the Act).

13. TRANSFER OR MORTGAGE OF PARTNERSHIP INTERESTS & REGISTER OF MORTGAGES OF LIMITED PARTNERSHIP INTERESTS

13.1 Subject to the provisions of the limited partnership’s partnership agreement, a limited partner may assign either absolutely or by way of mortgage the whole or any part of his or her partnership interest and an assignee shall, to the extent of such assignment, become a limited partner, provided that such assignee shall not assume any liability of the assignor from him or her taking part in the conduct of business of the limited partnership which is prohibited the Act or for the return of contributions to the assignor following an insolvency of the limited partnership and provided further that, notwithstanding any term of the partnership agreement or any other agreement to the contrary, no such assignment shall relieve the assignor of any liability arising pursuant thereto (section 7(9)(a) of the Act).

13.2 If any limited partner has mortgaged any of his or her partnership interests, the limited partnership’s general partner has a duty to maintain or cause to be maintained a Register of Mortgages of such mortgaged interests. The register of mortgages of partnership interests shall be maintained at the registered office and shall record the identity of the mortgagor and mortgagee, the date of creation of the mortgage, the partnership interest or part thereof subject to mortgage and the date of receipt of notice of the mortgage (section 7(9)(b) of the Act). The register of mortgages of partnership interests shall be open to inspection by any person during all usual business hours (section 7(10) of the Act).

14. LIMITED PARTNER’S RIGHT TO INFORMATION

Subject to any term of the partnership agreement to the contrary, each limited partner may demand and shall receive from the general partner true and full information regarding the state of the business and financial condition of the Limited Partnership (section 12 of the Act).

15. RETURN OF CONTRIBUTIONS

15.1. A limited partner shall not, on the dissolution of the limited partnership or otherwise, receive out of the capital of the limited partnership a payment representing a return of any part of his contribution to the partnership unless at the time of such payment the limited partnership is solvent (section 14(1) of the Act). In section 14 of the Act, the word “receive” shall include the release of any obligation forming part of the capital contribution and, in this context, liabilities to make repayments pursuant to section 14(2) of the Act shall be read as including a reference to the due performance of such obligation (section 14(3) of the Act).

15.2 For a period of six months from the date of receipt by a limited partner of any payment representing a return of contribution or part thereof received by such limited partner in circumstances where the requirements of section 14(1) of the Act have not been met such payment shall, in the event of the insolvency of the limited partnership within that period, be repayable by such limited partner with interest at the legal rate to the extent that such contribution or part thereof is necessary to discharge a debt or obligation of the limited partnership incurred during the period that the contribution represented an asset of the limited partnership (section 14(2) of the Act).

16. DISSOLUTION & DE-REGISTRATION

16.1 A limited partnership shall not be dissolved by an act of the partners until a notice of dissolution signed by a general partner has been filed with the Registrar (section 15(1) of the Act). Notwithstanding the foregoing and any provision of the partnership agreement to the contrary, the death, insanity, retirement, bankruptcy, commencement of liquidation proceedings, resignation, insolvency or dissolution of the sole or last remaining general partner shall cause the dissolution of a limited partnership which shall then be wound up in accordance with the partnership agreement or, if any, applicable court order. Notwithstanding the foregoing, if within 30 days from the date of any of the aforementioned occurrences, one or more new general partners are appointed, the business of the limited partnership shall not be dissolved and wound up (section 15(3) of the Act).

16.2 Subject to the terms of a limited partnership’s partnership agreement, a general partner may at any time deregister a limited partnership by filing a written notice with the Registrar (section 16A of the Act).

17. COMPLIANCE INSPECTIONS

Subject to section 25 of the Act, the Registrar may for the sole purpose of monitoring and assessing compliance with this Act, after giving reasonable notice to the general partner during business hours: (i) access the registered office of the limited partnership; (ii) inspect the documents required to be kept under this Act; (iii) during or after a compliance inspection request for explanation from the general partners of the limited partnership (section 24(1) of the Act). For the purposes of section 24(1) of the Act, where a document is not in the English or French language, the Registrar may request a translation of the records in the English or French language from the general partner of the limited partnership or from the registered agent (section 24(1A) of the Act).

18. PRESERVATION OF RECORDS BY REGISTERED AGENT

A registered agent shall, in respect of each limited partnership (including a deregistered limited partnership) to which it was or is acting as registered agent, preserve for at least 7 years: (i) the register of mortgages and the register of limited partnership interests, from the date of deregistration of the limited partnership; and (ii) the accounting records of the limited partnership in the possession of the registered agent, from the date of completion of the transaction or operation to which they each relate (section 26(1) of the Act). Where a registered agent ceases to hold a licence to provide international corporate services under the International Corporate Service Providers Act, that person shall hand over all the records specified under section 26(1) of the Act to the Registrar or any other person approved by the Registrar. All records to be handed over under section 26(2) shall be preferably in digital form or in such form as agreed upon between the Registrar and the registered agent (section 26(3) of the Act).

Summary & Conclusion

As a starting point when setting up a Seychelles LP, you’ll need to nominate one or more General partners and a Limited Partner/s.

In case you’re unsure as regards who is to fulfil what role you might like to note:

An LP is not a Legal entity and cannot hold property in its own right. The property of the LP is held by the General Partner/s
The General Partner/s is/are responsible for the administration and management of the LP including signing agreements and resolutions on behalf of the LP
The General Partner/s is/are liable for the debts of the LP if the debts of the LP exceed assets owned by the LP
Limited Partners are generally speaking (subject to certain exceptions) not liable for the debts of the LP
A General Partner may also take an interest as a Limited Partner
At least one General Partner must be a Seychelles entity (we supply a Corporate Nominee as part of the package)
As part of the registration process an LP must file a “Statement of Particulars” which must include the name/s of the General Partner/s and a summary of the LP”s proposed business activities

Price and Inclusions

OCI can assist you to set up a Seychelles LP. Included in the all-inclusive set up price of $1,500 for a Seychelles Limited Partnership are the following components:

Services:
Unlimited name availability inquiries
Advice from an experienced International Corporate Lawyer on how to structure your Limited Partnership
Preparation (overseen by a Lawyer) of application to register the Limited Partnership
Preparation (overseen by a Lawyer) of the Limited Partnership agreement
Preparation (overseen by a Lawyer) of the Statement of Particulars
Attending to filing the Limited Partnership registration request with the registry
Attending to payment of government filing fees
One year’s Registered Agent’s service in the country of registration
One year’s Registered Office service in the country of registration
Provision of Seychelles resident General Partner (corporate or individual)
Mailing address in the country of registration
Delivery of registration pack by international courier (ie DHL/Fedex/TNT etc)
Unlimited free legal consultations for 12 months

Documents included in your Registration pack:

Certificate of Registration
Minutes of first meeting
Statement of particulars
Resolution to open a bank account for the Partnership
Resolution to appoint a lawyer for the Partnership
Resolution to appoint an accountant for the Partnership
Notarised & Apostilled set of Registration/Partnership formation documents

Price (all inclusive): $US1,500

Annual fees from 2^nd year onwards are as follows:

Registered Office Annual Fee: $600
General Partner, resident of Seychelles (individual or corporate): $300

TOTAL 2^nd and subsequent years: $900

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

DISCLAIMER: Information current at 2.7.22. OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

Cook Islands Foundations

Whilst best known for its Internationally renowned Asset Protection Trusts the Cook Islands also boasts an interesting Private Foundation product. In this article we will take a close a look at the Cook Islands model of Foundation including the legal structure, key features and common uses.

Advantages and Uses

The Cook Islands Foundations Act 2012 was enacted in June 2012. It is a modern and innovative piece of legislation drawing from the experiences and features of foundation law in other financial centres, and adding Cook Islands specialist asset protection provisions.

Validity of a Foundation in the Cook Islands (“CI”)

A CI Foundation is a separate legal entity from its founder.
A CI Foundation is valid even if the law in the founder’s jurisdiction does not recognise or prohibits foundations.

Multipurpose Use

A CI Foundation can be used for charitable or non-charitable purposes, inheritance and estate planning, wealth management.

Protection from Creditors

A two year statute of limitations on claims to set aside the foundation or attack the transfer of an asset to the foundation.
Courts cannot recognise or enforce a foreign judgment against the foundation.
Stringent fraudulent transfer rules that make it difficult for creditors to bring a claim for fraudulent transfer.
A CI Foundation stands independent from the founder’s personal circumstances. The foundation cannot be void or voidable in the event of the founder’s bankruptcy, insolvency, or liquidation.

Cook Islands Foundations – Management

Founder establishes rules that govern the operation of the foundation.
Foundation is managed by a board, allowing for input from a number of relevant persons.

Foundation Supervisor or Enforcer

The CI Foundations Law recognises someone to oversee the board’s management of the foundation, an ‘enforcer’ or ‘supervisor’.

Privacy

Strict privacy laws against disclosure of the affairs of the foundation.

Cook Islands Foundations -Investment Opportunities

A CI Foundation can derive earning from investments/broad investment powers may be authorised in the foundation rules.
A CI Foundation cannot be used for regular trade or commercial activity.

Tax Exemption

A CI Foundation and its beneficiaries are exempt from paying tax in the foundation’s jurisdiction.

Application of Foreign Law to a Cook Islands Foundation

The Foundations Act 2012 specifically provides that foreign laws (ie laws other than those of the Cook Islands) shall not apply to invalidate the establishment of the CIF or any dedication of assets to the CIF.
In addition forced Heirship laws of another jurisdiction cannot be enforced.
Foreign law will not apply notwithstanding that a dedication of assets to a CIF has the effect of avoiding, defeating (or potentially avoiding or defeating) a right, claim interest, obligation or liability conferred by that foreign law.

Cook Islands Foundation – Wealth Preservation Advantages

Certainty as to the time limitation periods in which creditors must commence actions in relation to “fraudulent transfers” against Founders of CIFs. In summary, a creditor must commence an action against a Founder within 12 months of the date of transfer of assets to the CIF and against the CIF itself within 24 months of the date of transfer of assets to the CIF, in order to have legal standing to argue a fraudulent transfer by the Founder.

The creditor bears the onus of proof to show that a transfer by a Founder was done with intent to defraud that creditor. The creditor must satisfy this onus of proof to a standard of “beyond reasonable doubt”.

A CIF will continue to exist notwithstanding that the Founder of the trust may be declared bankrupt.

In the event that a creditor is successful in arguing that a transfer to a CIF was done with intent to defraud creditors, the only remedy available to the creditor is an award of damages from the assets of the CIF.

Punitive damages cannot be recovered from a CIF.

The avoidance of forced heirship rights in the home jurisdiction of the Founder will not render a CIF void or voidable.

Special purpose domestic or offshore entities can be placed underneath the CIF and take advantage of the wealth preservation features offered by Foundations Act 2012.

Background

A foundation is formed by a person known as the founder (who may be either an individual or corporate body) who provides (through an “endowment”) the assets to be administered by the foundation. The foundation’s assets are to be administered through contractual, rather than proprietary, principles.

Unlike a trust, a foundation is a separate legal entity. It is managed by a council of members. A foundation can hold assets, enter into agreements with third parties and can sue or be sued in its own name. On the face of it a foundation is similar to a corporation. However, unlike a corporation, a foundation does not have any shareholders. A foundation can have beneficiaries, similar to a trust, or it can have purely charitable purposes. Contrary to trust beneficiaries, who have equitable rights, the beneficiaries of a foundation have contractual rights in relation to the assets of the foundation.

A founder may retain some control over the foundation’s assets through reserving certain powers under its rules. Powers that are commonly reserved include powers relating to the investment strategy of the foundation and the appointment or removal of beneficiaries. The founder may also be given the power to revoke the foundation.

Registration and Rules

The Act provides a registration regime for foundations in the Cook Islands. Each foundation shall have a foundation instrument which contains its basic details including name, objects, and the registered agent in the Cook Islands. The foundation instrument is filed with the Registrar.

A foundation must also have rules that comply with the Act. Under the Cook Islands Act, while there are certain matters that must be addressed in the rules, there is significant flexibility in how the rules in general are drafted. This allows client founders and their advisors to set out clearly how they want the foundation to operate, and how they want it to benefit the beneficiaries. The rules of the foundation are not required to be filed with the Registrar, but only held by the registered agent in the Cook Islands.

The rules of the foundation provide the substantive details of how the foundation will operate. The rules will include procedures as to the establishment of the council, the appointment of registered agent, the functions of any enforcer, and the rules as to endowment of further assets. The rules may also deal with how powers can be exercised by the council, and the distribution of assets of the foundation should it be wound up and dissolved.

Asset protection provisions

Many of the specialist and proven asset protection provisions contained in the Cook Islands International Trusts Act have also been brought into the Foundations Act, and apply to a registered Foundation and its founder.

The Act states that only Cook Islands law applies to any questions as to a foundation or the transfer of assets to a foundation. This is furthered by the exclusion of foreign law and the non-recognition of foreign judgments in relation to Cook Islands foundations. Therefore, as with Cook Islands International Trusts, a creditor of a founder is forced to commence proceedings against the founder and foundation in the Cook Islands High Court.

The Act then provides for a number of barriers to any such creditor bringing proceedings in the Cook Islands High Court. These include the all-important time limits. In particular the strict 2 year time limit for bringing an action against a foundation, as well as the deemed time limits where property is transferred to a foundation before a cause of action has accrued, or where property is transferred to a foundation more than 2 years after a cause of action has accrued.

Other important asset protection provisions for foundations include the standard of proof beyond reasonable doubt, the exclusion of punitive damages, and the requirement that all remedies against a founder, and all rights of appeal, have been exhausted.

Migration, Dissolution and Termination

An overseas foundation can be moved to and registered in the Cook Islands. This allows existing foundations to take advantage of the flexibility and protections contained in the Cook Islands Foundations Act. The equivalent of the Registrar in the overseas jurisdiction in which the foundation is established must provide written confirmation that the foundation is able, under the law of that jurisdiction, to be registered as a Cook Islands foundation. The overseas foundation must also comply with the requirements of its home jurisdiction to be registered. Upon registration in the Cook Islands, the overseas foundation is to be treated as a Cook Islands foundation. Furthermore, such registration does not in any way affect the identity or continuity of the foundation’s personality.

Conversely, the Act provides that a foundation cannot transfer its registration to another jurisdiction unless allowed under the foundation’s instrument and rules. A foundation also cannot transfer if it is bankrupt, a receiver or administrator is appointed, or proceedings have been commenced relating to the solvency of the foundation. A foundation cannot be removed from the register unless it has first notified its creditors of its intention to do so.

The Act provides for a number of situations in which a foundation is to be terminated and dissolved by its council members. The foundation rules can provide for events upon which the foundation is to terminate. A foundation may also be terminated upon bankruptcy of the foundation, the completion, failure or lapse of the foundation’s purpose, and upon the making of an order by the High Court for the winding up of the foundation. The High Court may order the winding up of the foundation upon the application of any of the foundation’s council members, founder, beneficiaries, enforcer or creditors, or upon the application of the Registrar.

Cost:

Set up $4,500

From 2^nd year $2,900

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

BVI REGULAR TRUSTS

GENERAL INFORMATION

The basic principles of British Virgin Islands trust law derive from those of the English law, as supplemented by BVI statute. The principles of the English common law apply in the BVI by virtue of the provisions of the 1705 Common Law (Declaration of Application) Act (Cap 13) and those of English equity apply by virtue of the West Indies Associated States Supreme Court (Virgin Islands) Act (Cap 80).

The original British Virgin Islands Trustee Act (the “Act”), which was based on the English Trustee Act 1925, has been updated by the Trustee Amendment Act 1993, 2003 and 2013 (the “Amendment Act”).

DEFINITION OF A TRUST

The trust is a well-established concept in common law originated in England during the Middle Ages. A trust, as per the Trustee Act, refers to the legal relationship created either during life or on death by a person (the “Settlor”) who places assets (the “trust fund”) under the control of a trustee or trustees to hold the trust fund for the benefit of certain persons (the “beneficiaries”) or for the achievement of a specified purpose.

TYPES OF TRUST

Discretionary trust: is a trust where the beneficiaries and/or their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust instrument by the settlor.

Fixed trust: A fixed trust is a trust in which persons have fixed entitlements to all of the income and capital of the trust at all times during the income year. That is, the trustee is bound to make a distribution to the beneficiaries in a fixed or predetermined manner, as set out in the trust deed.

Charitable trust: is an irrevocable trust established for charitable purposes.

Purpose trust: is a type of trust which has no beneficiaries, but instead exists for advancing some non-charitable purpose of some kind.

COMMON USES

• Administration of assets

• Private investments

• Holding vehicle of assets or properties • Shareholding participations • Succession planning • Business preservation • Recurring payments to individuals in this or future generations for subsistence, education, training, clothing and other relief • Substitute for prenuptial agreements

BENEFITS AND ADVANTAGES

• Taxation: The Trust is relieved entirely from local taxation.

• Asset Protection: The Settlor is able to provide long-term protection to his/her assets outside the country of his/her residence or domicile, free from the danger of expropriation by government agencies.

• Flexibility may be provided by including in the Trust Deed certain special clauses, i.e. the possibility of revoking the Trust, allowing the removal of the Trustee and the continuation of the Trust in another jurisdiction should it be thought that worldwide political developments make this a prudent precaution.

TAXATION

BVI trusts without any BVI resident beneficiaries are generally not liable to tax in the BVI. No estate tax, inheritance tax, succession tax, gift tax, rate, duty, levy or other charge is payable by beneficiaries who are not resident in the BVI in respect of any distribution to them by the trustee of any trust.

REVOCABLE OR IRREVOCABLE TRUST

Revocable Trust: this trust may be altered or revoked by its Settlor at any time (given the Settlor is not mentally incapacitated).

Irrevocable Trust: an irrevocable Trust, in contrast to a revocable Trust, is one in which the terms of the Trust cannot be amended or revised by the Settlor, until the terms or purposes of the Trust have been completed.

The Trust Deed should also specify if the Trust is to be irrevocable. If not, it should contain provisions setting out the manner in which its terms can be revoked or amended.

ACCOUNTING RECORDS

On March 30, 2015 the BVI Trustee (Amendment) Act No. 4 introduced the obligation for Trustees to maintain accounting records for trusts. The new obligations indicate that every Trustee shall maintain records and underlying documentation of the trust whether within or outside the BVI and retain these records and underlying documentation for a period of at least five (5) years.

The records and underlying documentation of the trust shall be sufficient to show and explain the trusts’ transactions and must enable the financial position of the Trust to be determined with reasonable accuracy.

The records and underlying documentation includes accounts and records (such as any invoices, contracts or other similar documentation) in relation to all sums of money received and expended by the trust and the matters in respect of which the receipt and expenditure takes place, all sales and purchases of goods by the trust and the assets and liabilities of the Trust.

A Trustee who, without lawful or reasonable excuse, fails to comply with this legal requirement commits an offence and is liable on summary conviction to a fine not exceeding one hundred thousand dollars (US$100,000) or to imprisonment for a term not exceeding five (5) years.

Cost would be as follows:

- Set up fee $US4,400 (plus $200 stamp duty)

This includes using our standard trust document adopted to fit the Settlor’s requirements or a trust document that has been approved by a BVI based lawyer.

- Annual trustee fee $3,300

This is the basic fee. Should there be more than a few activities, there will be an administrative charge based on either time spent or on agreed fees.

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

BVI IBC’s ECONOMIC SUBSTANCE RULES EXPLAINED

On January 1st, 2019 The Economic Substance (Companies and Limited Partnership) Act 2018 (“ES Act”) came into force in the British Virgin Islands (“BVI”) to address tax system concerns of the European Union and the OECD. The BVI International Tax Authority (“ITA”) has been task with enforcing the ES Act in the BVI.

All Economic substance (“ES”) filings with the ITA are submitted by the Registered Agents only via the Beneficial Owner Secure Search System (“BOSSS)”, which is the existing portal used by the ITA for private filing of ultimate beneficial owners.

The rules have been refined over the course of the past 3 years. The purpose of this article is to clarify the current position in that regard.*

TARGETTED ACTIVITIES

The ES Act simply requires that Business Companies and Limited Partnerships (“Entities”) conducting specifically targeted relevant activities (as listed below) should show substance/presence in the British Virgin Islands unless they are tax resident in another jurisdiction. However, there is an exception to the rule with respect to two of the relevant activities, namely, intellectual property business and pure equity holding business in that once these types of entities do not earn any income during their financial period, they are not considered to be conducting a relevant activity.

Below are the targeted relevant activities, which are more broadly defined in the ES Act and Rules, (it is important to note that an entity can fall under more than one relevant activity at any given time, except for holding business, which will not apply as a relevant activity if the entity is conducting any other type of business activities besides holding business):

Banking business
Insurance business
Fund management business
Finance and leasing business (eg. earning interest from offering of credit)
Headquarters business (which relates to groups)
Shipping business (by sea only)
Holding business, i.e. pure equity holding of shares in other entities and earning dividend or in receipt of capital gains. (Please take note that an entity holding shares and not earning any dividend or in receipt of capital gains during the financial period, do not qualify as pure equity holding business).
Intellectual property business. (Please take note that if no income is earned from the intellectual property during the financial period, it does not qualify as intellectual property business).
Distribution and service center business (which relates to groups)

FILING/REPORTING

The ES Act requires that all Entities incorporated in the BVI must inform the ITA of their Economic Substance status, within six months after the end of their financial period, by submitting a declaration for filing through their Registered Agent in the BOSSS.

The ITA’s filing system does not allow for partial or early filings, therefore all filings must be done at the end of the financial period and only takes into account the status of the Entities at the end of the financial period, (eg. if the entity was conducting a relevant activity in the first half of the financial period and the entity changes its activities in the last half of the financial period to something other than one of the relevant activities then the entity must file as out of scope at the end of that financial period).

Discontinued and liquidated entities are required to file their declaration for their last financial period after liquidation or discontinuation. If the financial period has not ended at the time of discontinuation or liquidation, the entities must lodge their declarations with the Registered Agent for submission at the end of the relevant financial period. If an entity was conducting a relevant activity prior to discontinuation or liquidation it will be required to show substance on last financial period declaration.

Entities that were struck off of the Registry of Corporate Affairs before January 1st, 2016 are not subject to the ES filings. All other struck off Entities are obligated to file their declaration with the ITA.

The ITA is currently having discussions with other local authorities to determine the best way forward for these struck off Entities. We will provide an update as the information becomes available.

FINANCIAL PERIOD

The financial period for Entities incorporated from January 1st, 2019 is one year from the date of their incorporation. Reporting via BOSSS commences at the end of each financial period. Filings must be done within 6 months after the end of the financial period.

The financial period for entities incorporated prior to January 1st, 2019 is one year commencing no later than June 30th, 2019. Reporting via BOSSS commences at the end of each financial period. Filings should be done within 6 months after the end of each financial period.

There are also provisions available for changing the standard financial periods mentioned above, please inquire if necessary.

The filing/reporting requirement is an annual requirement to assist the regulators with their monitoring obligations.

ASSESSMENT REQUIREMENTS

The ITA has recommended that Entities obtain independent (legal) assessment of their status to ensure that they adequately comply before the filing deadline, especially if they are required to show substance, which should ideally start at the beginning of the financial period. However, entities can opt to self-assess and proceed with filing without the legal assessment. It is important to note that Registered Agents are not required to make assessments. Such assessment should be done by the directors or partners of the entities or other persons within the entity that are aware of the internal affairs of the entity, eg company lawyer or accountant.

For better understanding of the assessment process, we have created a (n internal) category system below. There are three assessment categories that an entity can fall within, as follows, (please pay close attention to the special instructions for pure equity holding Entities):

Category A: Entities that do not fall within the scope of the ES Act.

These Entities are only required to file their declaration with the ITA to confirm that they do not fall under the scope of the ES Act. A resolution of the directors or declaration of a related third party and any independent legal assessment or self assessment will be required for filing.

Category B: Entities that fall within the scope of the ES Act and are tax resident in the BVI

Entities that cannot prove that they are tax resident OUTSIDE of the BVI are automatically tax resident in the BVI and are required to show substance in the BVI as follows:

(a) the entity must be managed and directed from the BVI by;

(i) having a BVI qualified director or using an alternate qualified BVI director; or

(ii) the foreign director must travel to the BVI for meetings. It is important to note that the directors do not have to reside in the BVI but an adequate number of meetings of the directors must be held in the BVI. Therefore, it is necessary for a quorum of directors to be established in the BVI when having meetings, whether by BVI alternate director or by BVI director;

(b) the entity must have an adequate number of qualified employees (which can include the use of outsourcing);

(c) the entity must conduct the core income generating activities in the BVI (which can include the use of outsourcing);

(d) the entity must have adequate office facilities in the BVI (which can include the use of outsourcing); and

(e) the entity must have adequate expenditure in the BVI.

These entities will need to restructure to move the core income generating activities of their operations to the BVI in order to show adequate substance. It is important to note that an entity is not required to move the physical operations to the BVI, but to move functions of the operations that relates to the core income generating activities, (eg if a shipping company operates in India it is not required to move the shipping services to the BVI but it can move the billing aspect of the operations to the BVI.)

We recommend that Category B entities seek legal assistance on their restructuring plans, but it is not mandatory, the entity can decide on its own restructuring.

PURE EQUITY HOLDING BUSINESS – CATEGORY B

Pure equity holding Entities are given more relaxed substance requirements. They are only required to adhere to the BVI Business Companies Act and have adequate employees and premises for holding equity participation.

Entities conducting pure equity holding business that are receiving only dividend are considered passive in nature, therefore, having a registered agent in the BVI is considered enough substance.

Entities conducting pure equity holding business that are actively managing their participation such as re-investment of dividends, converting shares, selling shares, etc., the ITA will require evidence of more adequate substance to support such activities, such as qualified staff and office in the BVI. Pure equity holding business Entities are not required to have BVI directors but can do so if they so wish.

OUTSOURCING

Outsourcing services can be used for all Category B Entities to establish substance or a trade license can be obtained to establish an independent office in the BVI. If an entity decides to establish an independent office, it will be required to obtain a (trade) license from the appropriate authorities and subsequently register with Inland Revenue, Social Security and National Health Insurance.

Filings for Entities under Category B with the ITA should be supported by a resolution of the directors or declaration of a related third party and any independent legal assessment or self assessment. The financial information of the entity will also be required to show that the entity has adequate expenditure in the BVI in comparison with its foreign expenditure.

Category C: Entities that fall within the scope of the ES Act but are tax resident in another jurisdiction.

These entities are required to submit evidence of their tax residency, e.g. a letter from the tax authority in an EU approved foreign jurisdiction, supported by a resolution of the directors and any independent legal assessment. Please take note that the ITA will be informing the tax authority in the foreign jurisdiction, that the entity has indicated that it is tax resident in that jurisdiction.

SUPPORT SERVICES

We will be assisting with legal assessments, application for change of financial periods, outsourcing services, setting up of independent office, recruitment of qualified staff, applications for licenses, and registration with Inland Revenue, Social Security and National Health Insurance. Our fee sheet is available for review.

Would you like to know more? Then please Contact Us:

www.offshoreincorporate.com

info@offshorecompaniesinternational.com

*Information current as at March 3, 2022

BVI ECONOMIC SUBSTANCE GUIDANCE NOTES

All ES filings with the ITA are submitted by the Registered Agents only via the Beneficial Owner Secure Search System (“BOSSS)”, which is the existing portal used by the ITA for private filing of ultimate beneficial owners.*

TARGETTED ACTIVITIES

Banking business
Insurance business
Fund management business
Finance and leasing business (eg. earning interest from offering of credit)
Headquarters business (which relates to groups)
Shipping business (by sea only)
Holding business, i.e. pure equity holding of shares in other entities and earning dividend or in receipt of capital gains. (Please take note that an entity holding shares and not earning any dividend or in receipt of capital gains during the financial period, do not qualify as pure equity holding business).
Intellectual property business. (Please take note that if no income is earned from the intellectual property during the financial period, it does not qualify as intellectual property business).
Distribution and service center business (which relates to groups)

FILING/REPORTING

The ITA is currently having discussions with other local authorities to determine the best way forward for these struck off Entities. We will provide an update as the information becomes available.

FINANCIAL PERIOD

There are also provisions available for changing the standard financial periods

mentioned above, please inquire if necessary.