Offshore companies are incorporated in jurisdictions that are known as offshore financial centers. These jurisdictions have a business friendly environment for international businesses and entrepreneurs. The local market in offshore financial centers benefits from the inflow of global business people willing to incorporate overseas. The popularity of these offshore jurisdictions attracted both legitimate enterprises and obscure businesses. Over time, the rules got stricter and private, public and commercial counterparts often want to understand who they transact with. As such, the requests for company documents to prove beneficial ownership are growing.
The company formation and incorporation procedures for an offshore IBC grant the beneficial owner with several documents. However, before the company is established, the controlling must pass several Know Your Customer (KYC) procedures and define the organizational and administrative structure of the company. To achieve maximum effectiveness offshore companies have a character of limited liability. This can be in the form of a Private Limited Company, Limited Liability Company, or anything with the same purpose.
After the compliance and formation procedures are finished, offshore incorporation can start. When the preferred company name is approved and the administration completed, company documents are send to the beneficiary. Depending on the chosen jurisdiction the following documents can be submitted. Depending on the company type, size and location, the Certificate of Formation (US based companies only), the Certificate of Incumbency, the Declaration of Trust or Trust Deed, and the Register of Directors and Shareholders, and the Power of Attorney can prove the beneficial ownership of the offshore company:
Certificate of Incorporation: The original Certificate of Incorporation of an offshore company refers to the latest version of the local International Business Companies Act. It further mentions the company name, the date of incorporation, the company number and the original signature of the registrar or deputy registrar for the official company register.
Certificate of Formation: Certificates of Formation are the equivalent of the Certificate of Incorporation. Contrary to the Certificate of Incorporation, the Certificate of Formation also includes, alongside all the information presented on the Certificate of Incorporation, the local registered address of the company, the purpose of the company, the initial members or directors and the name of the person who formed the company.
Certificate of Good Standing: This certificate certifies that the subject company named on the certificate appears on the register of international companies maintained by the local registrar of companies and that all fees, license fees and penalties due and payable have been paid. The Certificate of Good Standing may also acknowledge or decline that mergers, consolidations, insolvency, or dissolvement procedures commenced or are planned. The official certificate that is provided for by the local Registrar of Companies is signed by the registrar and identifies the company registration number and the date of issuance.
Certificate of Incumbency: The Certificate of Incumbency is an all-embracing document showing the current administrative status of the company. Although the Certificate does not reveal the active status and good standing of the company, it does reveal the current director, shareholder and beneficial owner. For increased assurance, the Certificate of Incumbency is often apostilled.
Memorandum and Articles of Association: Offshore IBC’s often use standard and uniform, but extensive memoranda and articles of association. This booklet regulates the external affairs of the company. Furthermore, the memorandum compliments the articles of association and covers the internal constitution of the company. The memorandum and articles contain the fundamental conditions under which the company is allowed to operate.
Bylaws: The Bylaws of a company provide the framework under which the company regulates itself. The articles govern the organization they apply to and define the operational part of the organization. Bylaws are crucial for the company since they can restrict or advance possible civil claims. Most offshore service providers deliver standard, but extensive bylaws. These are often sufficient for a small operation, but large scale entrepreneurs might want to consider drafting the company’s bylaws themselves.
Minutes of the First Meeting: The first meeting of the company decides on the name of the company, its incorporation, the date of incorporation and the appointment of the first director of the company. The first minutes also pass several resolutions. These may include the designation of a registered office, the name of the registered agent, the location of the companies books and records, the issuance of the first share certificates, and the provision of the corporate seal.
Operating Agreement: An operating agreement is crafted by members of a member managed corporation. The agreement defines the formation, members information, capital, profit, losses and distributions, administration of company business, accounting and records, dissolution and winding up, indemnification and liability limitation, and other miscellaneous provisions. The operating agreement is signed by the member(s) themselves and therefore has limited legal standing to prove beneficial ownership.
Resolution of the Subscriber: The resolution of the subscriber is a simple document provided for by the registered agent. The single page document shows the appointment of the director of the company, the issuance of the shares in the company, the appointment of the companies secretary, and the authorization of the share certificate. The resolution of the subscriber is provided once, at the incorporation of the offshore company.
Register of Shareholders: The shareholder register is a private document held by and kept up to date by the beneficial owners. It is initially provided for by the registered agent or corporate service provider. The register contains the company name, company registration number, authorized share capital and the name of the shareholder(s).
Share Register: The share register is identical to the register of shareholders but used in most US States.
Register of Directors: The register of directors contains the company name, incorporation date, registration number, the name(s) of the director(s) and the date of their appointment. This register is provided for by the corporate service provider or the registered agent and must be kept up to date by the owners of the company.
Declaration of Trust or Trust Deed: The trust deed or declaration of trust is a civil agreement between a nominee shareholder and beneficial owner of a company. The confidential agreement defines and confirms the relationship between the nominee and the beneficiary. The trust deed includes a declaration of trust and the instrument transfer.
Power of Attorney: The corporate structure of IBC and offshore companies allows for nominee directors and shareholders. As such, the beneficial owner has no official status in the offshore company. A Power of Attorney (PoA) gives the ultimate beneficial owner of the company formal rights to act on behalf of the company. This PoA is issued by the company directors and shareholders and authenticated by an apostille. The PoA has a limited validity.
Letter of Surrender of the Subscriber Shares: Nominee shareholders hold the shares in an offshore company on behalf of the beneficial owner. The beneficiary pays the corporate service provider for this nominee service. Since the nominee agreement is a civil understanding, the beneficiary can decide to terminate the agreement at any moment. The signed letter of surrender of the subscriber shares allows the beneficiary to terminate the nominee agreement at any moment in time.