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Typical offshore company:
Process of incorporation

What does it take to bring an offshore company to life? Let's look at the steps of incorporation. Plus a shortcut for those in a hurry: offshore shelf companies.

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OFFSHORE-FOX.COM
with Peter Widder

The steps taken to incorporate an offshore company can be roughly compared to forming a limited company in the United Kingdom or the United States -- it is a whole lot easier than doing the same in continental Europe, for example.

The life of an offshore company begins when an incorporator files Memorandum of Association with the appropriate Registrar. In some offshore jurisdictions, incorporators are called initial "subscribers", because they subscribe their names to the Memorandum for the purpose of forming the new company.

The Memorandum of Association (called Articles of Incorporation in some jurisdictions) is usually a standard-format document : sometimes a prescribed form, but more often simply drawn up on the basis of the relevant jurisdictions' corporate legislation. The Memorandum gives the new company's name, the details of its registered office, the nature of its business, and its authorised capital.

Most people will use the services of an offshore company formation agent who will use local incorporators to prepare and file the necessary paperwork with the Registrar -- although it is sometimes possible, but not always practical, to do it yourself.

All incorporation agents will provide a registered office address for an annual fee. A registered office is the offshore company's legal address in the jurisdiction of incorporation, used for the receipt of notices from the Registrar and for keeping statutory records. Note that the registered office need not be the same as the company's principal trading office which can be anywhere in the world.

Upon successful registration, the Registrar will usually issue a Certificate of Incorporation -- a document confirming that the company commenced its legal existence on a particular date.

Subsequently, the incorporator will sign a document ("resolution") appointing the first director(s) of the company. This might be you, the person who ordered the offshore company, or a nominee acting on your behalf.

Once the initial management has been appointed, the powers of the incorporator cease and it is up to the director(s) to manage the company's affairs.

The board of directors -- or a sole director -- should thereafter hold a first meeting and pass initial corporate resolutions. Usually, the initial directors' meeting adopts the company's by-laws, its corporate seal, and appoints the company's bankers.

It is at this point that the new offshore company has been properly organised and is ready to trade.

Offshore shelf companies

Offshore shelf companies are companies that have already been formed, with the sole intention that somebody will buy them at a later date. Such companies have not traded, and are ready to to be transferred to the purchaser immediately.

Vintage shelf companies
A vintage offshore company is one that was registered some years ago.

Sometimes you can even purchase a company founded as long as 70 or so years ago and then claim quite legitimately that you are part of such and such a corporation founded in 1935. (A well-known international incorporation agent has done this themselves.)

But respectability is not the only thing on offer from a vintage shelf corporation.

Those seeking to redress financial headaches that have cropped up suddenly from the past also use them.

Occasionally, it is even possible to buy vintage companies that come with otherwise hard-to-get licences, for example for securities trading.

As far as the prospective buyer is concerned, the only drawback of an offshore shelf company is that it is not possible to select a name in advance (though it can be changed later) as shelf companies are registered under the names chosen by the incorporator.

The technicalities of forming a shelf company are unchanged from those of incorporating a "custom-ordered" company. Perhaps the only difference is that the appointment of the initial director(s) does not take place immediately after incorporation, but only once a buyer for the shelf company has been found.

If a shelf company is formed in a jurisdiction where directors must be appointed on incorporation, the first directors are nominees. Once the shelf company has been sold to a client, they remain in place (if the client so desires), or they appoint the client as the director and then resign.

 



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