Offshore Companies
All of the offshore jurisdictions offer at least one type of company often they offer several types of company. The different types of company vary from jurisdiction to jurisdiction. Incorporated in the same way but offering different tax benefits and limiting some activities. Companies are most commonly limited by shares or by guarantee some are hybrid companies that are limited by both shares and guarantee. They can either be public or private.
Offshore companies are used predominantly to:
- Separate personal debt from business debt, providing limited liability for the shareholders
- Limit Liability
- Provide anonymity
- Raise capital
The four main characteristics of a company are:
- Limited Liability - The company itself has unlimited liability but the shareholders have limited liability - shareholders can lose only the amount which he has paid for his shares. His personal assets are safe in the event of the company becoming insolvent.
- Separate Personality - Limited liability is only possible because of the principle of “separate personality”. The company is treated by law as being an individual in its own right. It can sue and be sued, it can enter into contracts etc. Therefore a person entering into a contract with a company does just that. He does not have a contract with the shareholders and cannot sue them.
- Perpetual existence - A company cannot die there can exist forever
- Transferable ownership - Easy to transfer shares.
Trusts Structures - The use of underlying companies
It is very common for a trust to be established as part of a tax or estate planning strategy. A trust may own all or part of the share capital of a company which in turn owns the assets, originally settled on the trust. It may be desirable to segregate certain types of assets or assets located in a certain country into a company. The place where an asset is situated for tax purposes may change depending whether it is directly owned by a Trust, company or an individual.
Example: In the UK, a property placed into a Cayman company is no longer classed as being situated in the UK and becomes an asset of the company and hence a Cayman situated asset. This may be critical importance for UK inheritance tax.
