The TCI Limited Life Company (LLC) is designed principally to enjoy the benefits of a partnership, where for income tax purposes profits and losses are treated as attributable to the members of the company rather than o the company itself, whilst at the same time enjoying the advantages of a corporate entity.
With the passage in 1993 of an amendment to the Companies Ordinance 1981, it became possible to register an exempted company in TCI with the status of a Limited Life Company, or LLC. The amendment was designed to facilitate the growing demand, particularly in the United States, for the LLC, known there as a "limited liability company'. The central purpose of the new legislation is to permit companies to be incorporated without one or more of the corporate characteristics of perpetual life, free transferability of ownership interests and centralised management, while still retaining the principle of limited liability of members.
REQUIREMENTS FOR REGISTRATION The requirements for registration as an LLC are similar to those for an exempted company and are:
1) The company must have at least two subscribers.
2) The memorandum of association must limit the life of the company to a period of 50 years, which may by. a special resolution be extended to 150 years.
3) The company name must include at the end "Limited Life Company" or "LLC".
4) Payment of the prescribed incorporation fee.
5) Any prospectus advertising the sale or the issuance, of shares, stock or debentures requires the prior approval of the Registrar of Companies.
6) Where the company already exists, its name and memorandum of association must be changed and the relevant special resolutions submitted along with a declaration to the effect that the company has at least two members.
TCI legislation was drafted primarily to comply with the United States Internal Revenue Service (IRS) criteria for treating the entity as a partnership. In terms of utility to the US practitioner, these may be summarised as follows.
Under TCI law, the commencement of the dissolution of the LLC is automatic upon the occurrence of one of several specified events, although it is possible to provide otherwise in the articles.
TCI law specifically provides that an LLC may be managed by its members in their capacity as such, or by a designated manager and, in such a case, the LLC is relieved of the requirement to have a board of directors. Thus, the company is divested of the corporate characteristic of centralised management and resembles more closely the common law partnership.
TCI law expressly contemplates the prohibition of transfer of ownership interests and the cessation of membership upon the occurrence of prescribed events.
The LLC allows for a wide variety of capital structures and the members may be ascribed differing levels of liability upon the winding up.
The LLC can have a specified life of up to 150 years. This, together with other facilitative provisions, is seen as offering wide scope to the US practitioner in tailoring the incorporation documents of each company to fit particular circumstances.
As a zero-tax jurisdiction, TCI is not party to any double-tax or exchange of fiscal information treaty with any other country.
Incorporation costs in TCI are most competitive and registration can be achieved within twenty four hours.
The information provided was correct in July 1996.
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.