Companies in the offshore jurisdiction are set up to create flexibility amongst the shareholders of the company, and such company formation is more straight-forward and comfortable. This article aims to make a comparison between the requirements of companies set up in offshore jurisdictions pertaining to the Cayman Islands, British Virgin Islands, Bermuda, Panama, Bahamas and Belize. Formation of offshore companies in these jurisdictions are governed by the several legislation that has been listed out below:
- Cayman Islands Company Law (Companies Law of 2013);
- British Virgin Islands (BVI Business Companies Act number 16 of 2004);
- Bermuda (Companies Act, 1981 of Bermuda);
- Panama (Panama Corporation law 32 of 1927);
- Bahamas (International Business Companies Act of 2000) and
- Belize (Belize International Business Companies Act of 1990)
In an offshore company set up in Bermuda, the shareholders must appoint an auditor who shall audit the financial statements of the company. Such a requirement can be waived, provided all shareholders and directors of the company agree in writing or at the convening of a general meeting that there shall be no auditor. For Cayman and BVI, there is no requirement for the appointment of an auditor of the company or an annual audit of the company. In Belize, no auditor needs to be appointed, and the same is the case with Bahamas and Panama. Hence, in all jurisdictions, no requirement for auditing of accounts is required, and an auditor of the company need not be appointed.
There is no imposition of taxes in Bermuda, Cayman, BVI, Belize, Bahamas and Panama. All offshore companies established in these jurisdictions shall enjoy exemption of tax, and such tax-exempt status is granted automatically without the company having to apply for it. In Panama, the company has to declare its constitutional documents to a notary public, following which tax-exempt status shall be granted. For the rest of the jurisdictions, such tax-exempt status shall be granted instinctively. A no taxation policy is highly beneficial and provides ease for a company set up in an offshore jurisdiction.
There is no imposition of corporation tax, wealth tax, capital gains tax or any other tax applicable to a business company.
Minimum paid-up share capital
There is no requirement of a minimum paid-up share capital in an offshore company set up in Bermuda, Cayman, BVI, Belize, Bahamas and Panama. There is no minimum authorized or issued share capital requirement in any of the offshore companies set up in these jurisdictions.
Under the Cayman Islands Company Law (Companies Law of 2013), a majority of at least two-thirds is required for approving a decision in a general assembly of an offshore company, unless the articles of association specify that the required majority shall be a number greater than two-thirds. Under the British Virgin Islands (BVI Business Companies Act No 16 of 2004) a resolution passed by the general assembly in an offshore company shall be approved by a majority in excess of 50% or in case the memorandum of association requires a higher majority. In Bermuda, as per the Companies Act, 1981 of Bermuda, resolutions of shareholders generally need to be approved by a simple majority. The articles of a company have the power to decide if holders can have voting rights in Panama.
Every company must have a registered office in the respective jurisdictions, the address of such company shall be registered with the registrar. Such registration shall be a matter of public record. Registration of the company must be filed at the registry and shall be available in the public domain. For instance, pursuant to Section 37 of Companies Act of Bahamas, a company shall have a registered office in the Bahamas, and the address of the registered office shall be submitted to the registrar. Article 6 of Panama Corporation law 32 of 1927, the registration of the company shall be in the public domain.
In Panama, a minimum of three directors and one shareholder is required for the setting up of a company.
For Bermuda, a minimum of 1 shareholder is needed, and the names of all shareholders shall be maintained in a register of members. At the same time, nominee shareholders are permitted. For Cayman and BVI, at least one shareholder is required, and nominee shareholders shall also be permitted. The names of all shareholders shall be maintained in a register of members for both the companies. Similarly, for Belize, a minimum of one shareholder is required, and the same is the case with the Bahamas.
Transfer of shares
Shares may be transferred by a standard instrument of transfer signed by or on behalf of the transferor and usually the transferee. Transfer of shares is governed by Article 29 of Panama's Act, where shares shall be transferable by the bye-laws of the company. Transfer of shares is governed by Section 31 of the Bahamas Act, where registered shares of the company may be transferred by the transferor via a written instrument. Similarly, shares can be transferred to other jurisdictions.
No stamp duty is payable in respect of an instrument executed in an offshore company in Bermuda. In the Cayman Islands, certain documents shall be subject to stamp duty, and it shall be payable if the document is executed in the Cayman Islands. For BVI, no stamp duty shall be applicable, and the BVI Stamp Act (Cap 212) exempts the company from registration or payment of any stamp duty on instruments executed in an offshore company. In the Bahamas, no stamp duty is applicable, and the business license fee and in Panama, no such stamp duty is applicable as well.
There are no exchange controls applicable in the Cayman Islands or BVI. In Bermuda, there are exchange controls applicable, but that is in particular with local persons and businesses and shall not be applicable to offshore companies. In the Bahamas, the exchange control regulations shall not be applicable to offshore companies.
An annual general meeting shall be held once a year in Bermuda. The notice shall be sent with respect to such general meeting and such notice period might further be extended as well. For Cayman, no annual general meeting is required, and such meetings may be convened, but if the same is provided in the articles of the company. Such a meeting can be called upon the written request of the shareholders in accordance with the articles of the company. The BVI act does not pose any requirement for the convening of an annual general meeting, and the same is not necessary.
In Bermuda, one director is required to be appointed. Such a director can be an individual or any type of legal person that can include a company. It can also include an association or body of persons. The minimum requirement of directors in Cayman is at least one director. In BVI, the minimum number of directors is one, and the same is the case with Bahamas and Panama.
The notice of the registered office has to be a public record. Such is the case with Cayman, BVI and Bermuda. In BVI, the memorandum and articles of association which include the name and its registered agent and registered office have to be in the public record. The certificate of incorporation also has to be in the public record in BVI.
In Bermuda, the constitutional documents of an offshore company are its memorandum of association and bye-laws. Such memorandum sets out the objectives of the company, and the company shall have the power to formulate such memorandum. The bye-laws will prescribe the rights and duties as between the company, the shareholders and the director. However, such bye-laws shall not be in the public domain and not available for any public inspection. In Cayman, the constitutional documents will be memorandum and articles of association which must specify the name and registered office of a company. Such articles shall bind the company and its members who are registered with the company. Such articles can be registered but are not available for public inspection. In BVI, the constitutional documents and memorandum must include the company's name and address along with the registration of the office and the agent. The articles must be included when the memorandum is submitted for registration with the registrar and such will be available by public inspection. In the Bahamas, the constitutional documents shall include articles of continuation accompanied by memorandum and articles of the company and the same shall be registered with the registrar.
No governmental approval is required for incorporation of a company in Cayman and BVI. However, certain business activities may require licensing or registration. In Bermuda, the approval of the Bermuda monetary authority must be obtained in regards to the transfer of shares and certain other business activities may require special approvals or license. In Panama, the incorporation of a company is not required.
Originally published by STA Law Firm, July 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.