A tax haven is a place where certain taxes are levied at a low rate or not at all eg Seychelles tax for an offshore company is zero. This encourages wealthy individuals and/or firms to establish themselves in areas that would otherwise be overlooked. Different jurisdictions tend to be havens for different types of taxes, and for different categories of people and/or companies.
A Seychelles offshore company formation is allowed when the company incorporated does not conduct substantial business in Seychelles. This type of International Business Company [I.B.C] is known as a Non-Resident company.
A Seychelles offshore company formation may bring a number of benefits to individuals or companies incorporated under the Seychelles offshore laws.
* Taxation: Business may be structured so that profits are realized in ways that minimize their overall tax liability.
* Simplicity: Except for regulated businesses, such as banks or other financial institutions, a Seychelles offshore company formation is relatively simple to set up and maintain.
* Reporting: The level of information required by the registrar of companies varies from jurisdiction to jurisdiction.
* Asset protection: It is possible to organize assets and transactions in such a way that assets are shielded from future liabilities.
* Anonymity: By carrying out transactions in the name of a private company, the name of the underlying principal may be kept out of documentation. Having said that, current anti money laundering regulations often require banks and other professionals to look through company structures. Documentation for Seychelles offshore company formation is relatively uncomplicated.
* Thin capitalization: Seychelles offshore company formation allows “thin capitalization” rules for its IBC companies (except for regulated entities such as banks and insurance companies) so that they can be incorporated with nominal equity.
* Financial assistance: Seychelles offshore company formations are usually not prohibited from providing “financial assistance” for the acquisition of their own shares, which avoids the needs for “whitewash” procedure in certain financial transactions.
* Seychelles offshore company formation is usually prohibited from conducting business in their jurisdiction of incorporation. They are not allowed to invest in property Seychelles either.
* For regulatory reasons, there are certain restrictions on the type of business which a Seychelles offshore company formation can engage in. For example, it is quite common for there to be general prohibitions against offshore companies engaging in banking business, insurance business or operating as a trust company.
* Because of the limited amount of publicly available information in connection with offshore companies, there is usually a high level of hidden costs at the administrative level.
For example, to open a bank account in the name of an offshore company, to comply with relevant anti money laundering regulations, the bank will normally require large quantities of corporate documentation to be notarized in the jurisdiction of incorporation, and may require opinions from local lawyers in that jurisdiction as to the capacity and power of the company to open and operate a bank account.
* Certain countries have “anti tax haven” legislation which makes it difficult to conduct business in those countries using an offshore company. For example, capital markets regulations in France prohibit using offshore companies as bond issuing vehicles.
* Where a shareholder of an offshore company formation dies, it is usually necessary to have the will admitted to probate in Seychelles as well (or, if intestate, to have the letters of administration re sealed in that jurisdiction), which can add to cost , delay and inconvenience in administering the deceased’s estate.
Features of Seychelles offshore company formation
* Memorandum and articles of association or bylaws – these documents are fundamental to the existence of the company, and detail the rights of the members, the objectives of the company and the internal processes of the company.
* Certificate of Incorporation: This is issued by the Registrar of Companies, and is proof that the company has been brought into existence. Other information may be necessary to prove that the company has not been liquidated or struck off.
* Registration Agent: It is normal for an agent to be appointed in the jurisdiction in which the company is incorporated for the purpose of dealing with official communications with the registrar.
* Registered Office: This is the official address of a company, to which official documents are sent and legal notices received. It is normal for the registration agent to provide a registered office. A company may have other business and correspondence addresses.
* Members: These are the legal owners of the Seychelles offshore company formation. For administrative simplicity, or for anonymity, a corporate service provider may supply nominees who will hold shares on behalf of a beneficial owner, and act on his instructions.
* Directors: The individuals who manage the routine affairs of the company. In many jurisdictions it is possible for companies to be directors of other companies. Corporate service providers in offshore jurisdiction of Seychelles will often provide directors.
The company is generally considered to be resident for tax purposes at the place where the decisions are made.
* Nominee directors: In some cases, it has been shown that the formally appointed directors merely act as the alter ego of others, blindly following their instructions. In these cases, the courts have considered that those instructing the named directors really control the company, and that the named directors merely rubber stamp decisions.
* Company Secretary: This is the person who is responsible for ensuring that the Seychelles offshore company formation meets its statutory obligations. Corporate service providers often provide this service.
* Statutory Records: A company is obliged to maintain records setting out certain information about the company. The mandatory records vary from jurisdiction to jurisdiction, as does the level of public access to the information contained in the records. Many jurisdictions require that the records are kept within the jurisdiction in which the company is incorporated. The records required may include minutes of meetings, register members, directors, officers and charges.
* Bookkeeping: Directors are generally required to keep proper records. They may be required to prepare audited accounts. Specific requirements vary between jurisdictions and may depend on the nature of the company’s activity. For example all banks will need to prepare audited accounts, whereas a private investment company may not have such an obligation.
Types of Seychelles offshore company formation
To facilitate business in Seychelles, different types of company formation have been allowed by the authorities. Examples of offshore companies include the Limited Liability Company (LLC) and the International Business Company (IBC). The following types of companies are common in offshore jurisdictions:
* Company having a share capital: These companies issue shares. Once the initial cost of a share (capital and premium) has been paid, the shareholders have no further obligation to the company. The shares may, subject to the rules of the company, be sold or transferred, and the shareholders have the right to enjoy the profits of the company or any proceeds of liquidation.
* Company limited by guarantee: The members of the company agree to pay up to a maximum limit an event that the company becomes insolvent. They may acquire certain rights against the company, such as the rights to a dividend and the specific rights will be set out in the rules of the company. Membership may terminate on death, and guarantee companies have been used for not for profit organizations. There are also sophisticated estate planning schemes which make use of guarantee companies.
* Protected cell companies: Some jurisdictions eg Mauritius and Seychelles permit cellular companies, where particular assets and liabilities are segregated into “cells”, in such a way that the assets of one cell cannot be used to satisfy the liabilities of another. Cell companies are particularly used for umbrella mutual funds or unit linked insurance bonds.
Many offshore jurisdictions offer increasingly specialized forms of companies as well as specialized trusts and partnerships, seeking to increase their share of the market.
Examples include limited duration companies, unlimited liability companies, companies limited by guarantee and with a share capital, restricted purpose companies and hybrid entities such as limited liability partnerships, which are more akin to companies to actual partnerships, and foundations, which are nominally trusts but are more akin to companies than trusts.
The traditional method of merging companies is for one company to acquire the assets of a subsidiary on its liquidation. This sometimes creates contractual difficulties, and requires third parties to accede to the transfer of obligations from the liquidated company. Some jurisdictions have tackled this issue by allowing companies to merge, forming a new combined entity, which represents a continuation of the businesses of each former company.
Relocation of companies
Some jurisdictions permit companies to re domicile. They may do this to take advantage of particular features of the new jurisdiction, such as merger legislation, or tax treaties with other countries. The law in both the old and new jurisdictions must permit re-domicile. The business of the company is deemed to continue without interruption on re-domicile.