Offshore financial centers provide a selective international clientele with tailored services to set up international business corporations, the IBC. Contrary to several other more traditional locations, offshore IBC’s have a lifespan of one year. At the end of this term beneficiaries can continue their operations and extend their company for another year. Active IBC’s enrol in the corporate registry. The public registry contains limited information on the applicable IBC’s.
Service providers, customers and financial institutions need to know who they deal with. Where public registries provide limited information, these counterparts may require additional evidence of the legal standing of the offshore company. Furthermore, an offshore company that is not in good standing loses its right to trade. As such, corporate assets may be blocked when the required dismantling procedure is not followed.
An offshore IBC is active and in good standing when all the requirements in the applicable jurisdiction are met. These requirements can differ per jurisdiction but often include the payment of annual fees and the periodic compliance with administrative requirements. Offshore companies that are in good standing may request the registrar to provide evidence of this status. Such evidence is obtained via a Certificate of Good Standing and a Certificate of Incumbency.
When offshore companies lapsed, seized trading, or the beneficiary stopped paying the annual fees, reactivation or reinstatement may be necessary. Beneficiaries of offshore companies have no rights to the corporate assets after the company stopped and may even be personally liable for acts of the company. The question whether one needs to reactivate an offshore company is therefore often triggered by a request from a third party.
Reactivation or reinstatement of an offshore company is straightforward but takes time. The price of reinstatement is non-negotiable and covers annual fees for the years the company was inactive, late fees, penalties and charges for reactivation. Depending on the number of years that must be covered, intervention of the local court in the country of registration might be needed as well. As such, reactivation or reinstatement of an offshore company is an expensive exercise. Consequently, beneficiaries must make an educated calculation of the feasibility of this process. Legal Floris LLC and Equation CS are here to assist you with the procedures for the reactivation and reinstatement of your offshore company.