How does the reinstatement of my company work?

The pursuits and operation of offshore companies can stop or pause for several reasons. Sometimes there is a need for the reactivation or reinstatement of the legal entity. These reasons find their origin in the common law doctrine of the separation between the legal entity and its controlling persons. Assets belonging to the company do not necessarily move to the beneficial owner after closure, but liabilities allow the courts to ‘pierce the corporate veil’. As a consequence, personal liability of the beneficial owner for the acts of the company may appear when the company is shut down.

Offshore companies utilize the various advantages of foreign incorporation. For example, qualifying International Business Corporations (IBC) may receive permission for limited administrative requirements and advanced privacy protection for beneficial owners via, among other things, a confined public corporate registry. The downside of these advanced resources is that counterparts have difficulties to verify the existence, ownership and legitimacy of the applicable offshore company.

The combination of the limited liability of beneficial owners and shareholders with the advantages of the applicable offshore framework and IBC law encourages foreign jurisdictions and overseas service providers to take appropriate measures. Financial institutions for example may request beneficial owners to submit a periodic apostilled certificate of incumbency and a certificate of good standing to demonstrate ownership, existence and validity. Similar procedures are often required in insolvencies and matters of inheritance.

Civil and criminal against the company require the court to intervene. Inactive and closed offshore companies cannot be sanctioned. Consequently, the court can decide to pierce the corporate veil. This requires exceptional circumstances. Caselaw and jurisprudence however explains that (offshore) companies set up as a ‘façade’, where a pattern of misconduct is established, where attempts to evade specific performance, to avoid fiduciary duties, or where impropriety linked to the use of the company structure is needed to avoid or conceal liability for that impropriety, allow for veil piercing. Most civil cases against the legal person would not justify veil piercing. Criminal cases against the company only lead to monetary fines and other sanctions. As such, reinstatement or reactivation of the offshore company to avoid personal sanctions and criminal convictions is often recommended.

Beneficial owners who wish to reactivate or reinstate their offshore company must consider the following charges: all the annual fees for the pending years, late fees and penalties for the unpaid years, reactivation or reinstatement fees, and depending on the jurisdiction the court might need to allow the reactivation or reinstatement.

To start the reactivation and reinstatement procedures for an offshore company, or to gather further information, you can reach out to Legal Floris LLC or Equation CS via the contact form here. You can also give us a call at 00357 22257680.