The Offshore Company:
Disclosure Requirements in Anguilla, the Bahamas,
the BVI and Panama
By Ian Millard, Barrister (England),
Barrister and Solicitor (Anguilla);
also, Attorney (New York), currently practising at Rougemont
Chambers, 8 Colleton Crescent, Exeter EX2 4DG
(telephone 01392-208484)
In recent years, both individuals and corporations based in
many parts of the world have found that an offshore company
or trust situated in the Caribbean or elsewhere can optimize
corporate and financial flexibility and combine that with a high
degree of confidentiality.
Several jurisdictions throughout the Caribbean, in particular,
have enacted similar legislation in order to cater for both
corporations and high-net-worth individuals who wish to take
advantage of the very favourable incorporative and trust
climate found in these jurisdictions. It might, therefore, be
thought that choice of jurisdiction is unimportant. However,
the similarities of the legislative and regulatory framework in
many Caribbean jurisdictions should not blind anyone to the
differences which exist, particularly in relation to such matters
as disclosure requirements.
This study attempts a comparison of four jurisdictions:
Anguilla and the British Virgin Islands, which are both British
Overseas Territories; the Bahamas and Panama. Of these,
the first two will be affected directly by the recent United
Kingdom Government White Paper, Partnership for
Progress and Prosperity, which may result in changes in
the regulatory framework on Anguilla, the BVI and other
jurisdictions still within the British sphere of influence.
Anguilla
Anguilla, with its state-of-the-art online registration system
(ACORN) and other cutting edge services, offers a range
of corporate and other vehicles useful for an international
clientele, of which the most usual is perhaps the
International Business Company (IBC).
An IBC can be set up very swiftly in Anguilla -- within 24
hours -- and very little information need be provided on
public record. No information on shareholders and directors
is required for public record. The service provider, however,
is required to undertake a due diligence check on new clients.
On public file must be kept only the name of the company,
the name and address of the Registered Agent of the
company, typically a law firm and the class and number of
shares (International Business Companies Ordinance
1994 s.8. It is worth noting that incorporation is itself taken
to be prima facie evidence of compliance with the statutory
requirements: s.9(2).
At the Registered Office of the company, again typically a
law firm, must be kept a minute book, adopted resolutions,
the common seal of the company and a register of
shareholders, together with such accounts and receipts as
the directors consider necessary.
The service provider is expected to display honesty and
good faith and to act with the care, diligence and skill or a
reasonably prudent person: IBC Ordinance 1994, s.48, but
no shareholder, director, officer, agent or liquidator will be
liable for the defaults etc of the company without actual
personal fault: IBC Ordinance 1994, s.6.
The simplicity of the above provisions is, however, not the
whole story, in that section 116 of the IBC Ordinance
adopts ss.261-264 of the Companies Ordinance 1994,
which permit the Registrarto assist a foreign regulatory
authority, which has requested assistance, by exchanging
documents or other information (either already in his
possession or otherwise obtained) SO LONG AS such
assistance does not extend to the imposition,
calculation or collection of taxes.
The Registrar has a wide discretion under s.261(2) in
relation to the giving of such information, though there is
reason to think that the power is used sparingly at present.
S.263 permits the Registrar to disclose in cases involving
criminal proceedings overseas or in order to facilitate the
carrying out of any duty imposed under any law in force in
Anguilla or under any international agreement to which
Anguilla is a party.
The Governor of Anguilla has the power to specify
foreign regulatory authorities with whom the Registrar
can exchange information: Companies Ordinance
1994, s.264(1).
The above must be seen in the light of the recent
White Paper, Partnership for Progress and Prosperity,
promulgated by the British Government on 16 March
1999. It can be seen that paras 5.20-5.27 of the White
Paper give a clear indication that more stringent regulation
may be in sight, as exemplified by the words of paragraph
5.27: the British Government to work closely with the
administrations of the Overseas Territories to implement
initiatives which "will require greater international cooperation
through, for example, the exchange of information on tax
matters and improved transparency." The emphasis given
on the UK authorities working closely with those of the
Overseas Territories clearly signals that the expected
changes will not necessarily be voluntary and could be
effected by very minor redrafting amendments to the
IBC 1994 or, even and arguably, without amendment,
if the UK were a party to an international agreement
on such matters and Anguilla were to continue to be a
British Overseas Territory.
It can be seen that, as matters stand, Anguilla remains
a prime jurisdiction of choice for the establishment of an
offshore company, combining effective regulation with a
high degree of confidentiality. Clients are protected from
any defaults on the part of their registered agents or public
officials by having relatively easy access to the Court,
which can make a Declaration in respect of any matter in
dispute in the disclosure field.
British Virgin Islands
In the BVI, there is no requirement to publicize an intention
to incorporate and IBC is incorporated by filing, in duplicate,·
the memorandum and articles of association of the IBC
with the Registrar. There must also be included certification
by a solicitor or by the Registered Agent of the IBC to the
effect that all the requirements of the BVI IBC Ordinance
have been complied with.
The memorandum must contain:
· Name of the IBC
· Address of the Registered Office of the IBC
· Name and address of the Registered Agent of the IBC
· Details of the capital structure of the IBC
· Objects of the IBC
· A verbatim statement that the IBC may not carry on any
of a number of activities listed in BVI IBC Ordinance
1984 s.5(1) unless licensed specially.
The articles of association of the IBC are also filed and are
available for public inspection.
No annual return need be made and no audit need be
carried out. Only such records need be kept as the
directors determine. The IBC may elect to file a register
of shareholdings, or directors or charges, but this is purely
discretionary. The only documents of the IBC which are,
therefore, always to be filed are the memorandum and
articles.
In relation to the White Paper and the possible changes it
heralds, s.112 of the 1984 Ordinance states that the
Governor in Council may regulations with respect to the
duties to be performed by the Registrar (s.112(1)), or in
respect of the conduct, duties and responsibilities of
registered agents (s.112(2), which sections might well be
construed as being wide enough to cover new requirements
to disclose information.
The Bahamas
The relevant primary legislation in the Bahamas in relation
to the International Business Company is the International
Business Companies Act 1989. Requirements are much
the same as in the previous jurisdictions examined: no
information is required by the Bahamian authorities prior to
incorporation or grant of taxfree status, no accounts need
be kept and no annual return necessary. The names of
shareholders and directors can be kept completely
confidential. The only mandated documents kept on
public file are the memorandum of the company and its
articles of association, with details of its registered office
and agent. An impression of the seal of the company is
also to be kept at the registered office.
The Bahamas now being an independent nation, any
change in the regulatory climate affecting the British
Overseas Territories would not directly affect the country.
However, the UK White Paper is but one of a number of
co-ordinated initiatives coming from the industrialized or
higher-tax jurisdictions, stemming from the European Union,
the O.E.C.D. and the G7 Group. It would be naïve to decide
at so early a stage, in what is evidently a co-ordinated and
determined international and multinational effort at tax and
regulatory harmonization, that a jurisdiction like the Bahamas
can ignore the wishes of its powerful neighbours indefinitely,
despite its political independence.
Panama
The primary corporate legislation in Panama is the
Corporation Law of 1927, which was modelled on the
then laws of the States of Delaware and New Jersey.
However, since that time, Panamanian legislators have
enacted several statutes in the commercial and banking
fields, among others, to create a matrix of law designed
to create a high degree of secrecy.
The 1927 law has been complemented by:
· Regulations permitting coded bank accounts
(Law 18 of 1959);
· Law 17 of 1961, which amended and reinforced existing
rules of confidentiality contained in articles 89 and 93 of
the Commercial Code; In 1970, Cabinet Decree 238
reorganized the banking system to create "Swiss" styles
of account.
Articles 89 and 93 of the Commercial code provide for fines
for those who disclose or even remove outside the jurisdiction
corporate records etc. In addition, articles 168 and 170 of the
Criminal Code make it punishable by imprisonment as well as
fine to unauthorizedly disclose confidential information.
Incorporation of a company in Panama requires two natural
persons to act as incorporators. These incorporators will
execute the articles of incorporation before a notary public
and at that time will be shareholders. However, these two
persons can be nominees, usually employees of a local
management company or law firm. After incorporation, they
will sign a transfer document returning their stock to their
principal.
The articles of incorporation in Panama must include:
· Company name;
· A general statement of the objects of the company;
· A statement as to the total amount of authorized capital and
also the division of total share capital into shares, with a
statement as to the par value of the shares (usually U.S.$20);
· Statement as to the nature of the shares (eg, bearer);
· Names and addresses of at least three directors and at least
three officers of the company. These can however be the same
three nominees, employees of a management company or law
firm;
· The said duration of the company, which can be indefinite;
· Name and address of the local legal representative of the
company;
· Domicile of the company (Panama).
No financial records need be kept at all, so long as the company
deals exclusively outside Panama; neither need the company
submit an annual or any tax return. The only further records which
are to be kept are company minutes and a stock-register book.
Recent changes to Panamanian law mean that now juridical as well
as natural persons, including foreign companies, can act as the
shareholders, directors and officers of a Panamanian corporation.
A form of confidential organization found in Panama which does
not exist in the same form in the other jurisdictions examined
hereinis the Private Foundation, which became legally possible
in 1995 and which is based closely on the Liechtenstein Stiftung.
This format must come close to the ultimate in privacy and light
regulation, in that there is no need for official approval of the
actual formation of such a Foundation, nor for the modification
of its foundation deed; neither is it necessary to seek official
approval for appointment of its trustees or beneficiaries. Further,
neither the management nor the operation of the Foundation is
subject to any form of official scrutiny. Once a Registered Agent
has registered the Foundation Deed, the Foundation exists and
can even carry on commercial activities consonant with its
Foundation Deed's objectives, though it should not actually carry
on a business. There again, the authorities do not regulate or
scrutinize the operations of such Foundations…The only
obligation is upon the Board of Trustees to inform the
beneficiaries of the financial position annually. No reports
are filed before the authorities in Panama. The activities of
the Foundation are completely taxfree save for a yearly fee
of U.S.$150.
One interesting possibility might be for a company in, say,
Anguilla, to be redomiciled in Panama and then for that
redomiciled Panamanian corporation to be subsumed by a
Panamanian Private Foundation which itself might have a
coded or numbered Panamanian bank account. Thus
would be ensured an extremely high level of secrecy
combined with a high degree of flexibility and control
over assets and operations.
[this article, in its present form, was written by the writer on
19 October 2003 and was based on original work and
previously unpublished articles by the present writer]
"This article was correct at the time of publishing, there may have been
amendments to the law since that date."
Any enquiries should be made of the Senior Clerk to
Chambers, David Parker
_____________________________________________
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Contact:
ianrmillard@hotmail.com
copyright 2004, Ian R Millard, Barrister, Rougemont Chambers, Exeter, Devon UK EX2 4DG
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