Procedures

A common feature of offshore jurisdictions is that a business model is created for local service providers to offer access to its corporate registry for foreigners who want to incorporate International Business Companies (IBCs). Additional services trigger an expansion of the domestic legal and financial services industry and give a boost to the local economy, whilst drawing on foreign direct investment. Offshore jurisdictions allow IBCs to benefit from their local infrastructure. This often includes, for those IBCs that refrain from operating in the country of registration, incentives such as low administrative requirements and minimal taxation.

To emphasize on the domestic legal framework in offshore jurisdictions, the common law tradition of periodic renewal of limited liability companies divided by shares is followed. This means that the registry charges annual fees to maintain the good standing of IBCs. Local service providers submit the renewal against a mark-up fee, thus creating recurring income for the country. Where a business owner fails to follow up on the request of the registry and fails to honour the required annual payment, the IBC is eventually struck of the registry. Yet, since such inadvertence happens frequently, the company name stays reserved for the initial owner after the company is struck off.

Some confusion exists where the IBC is liquidated. A liquidated company ends all commercial and contractual relationships with its counterparts. This also means that a banking contract ends when a company is liquidated and the lack of this relationship prevents the beneficiaries of the offshore company from starting legal proceedings against a financial institution for alleged wrongdoing. A crucial difference between formal liquidation of an offshore company and the removal of a company from the registry is the possibility to reactivate (the consequent rights of) the company, which exists in case of the second scenario.

Offshore companies may require reactivation for a variety of reasons. The most common reasons for reactivation of an offshore company relate to the collection of forgotten assets, the honouring of legal requirements of inheritance, the protection of a beneficial owner and director from personal liabilities and the need to follow the liquidation guidelines of a third party, such as a bank or investment firm.

The procedures to reactivate an offshore company can differ per jurisdiction. However, there will always be late fees and penalties involved. Sometimes, when the offshore company was struck off the registry in the distant past, the court has to approve the reactivation. This is also required when the offshore company is mistakenly liquidated and needs reactivation. The latter needs a proper analysis though, because it is uncertain whether there is a realistic chance of reactivation for liquidated offshore companies. For an extensive outline of the procedures for reactivation of companies in the most common offshore and onshore jurisdictions, please visit the ‘products’ page on this website.

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