Internet is a principally global facility. Your freedom in most cases is limited only by the lack of knowledge of foreign languages but if you know at least English which is now the universal language of the globalizing civilization, you will be able to get access to most net resources. But beside virtual freedom, you will need a real economical freedom for international business. Such freedom which does not violate international legal norms and the legislation of the country of residence is provided by the so-called off-shore territories.
Now off-shore business is in the foreground of the world economy. Off-shore schemes are based on foreign economic contracts, leasing, trust, commission and other legal forms of commercial project implementation. Off-shore companies are widely used in export-import operations, in investment activity, insuring and re-insuring, property control, property management, ship owning, transport operations, leasing, stock markets, stock exchanges, etc.
Choice of jurisdiction is usually made on the basis of price, confidentiality of information, prestige of jurisdiction, convenience of getting various certified documents (or simply official copies) from the companies’ register. A standard set of documents for an off-shore company includes originals of all documents stipulated by each jurisdiction, (a standard set of documents for an off-shore company includes originals of all documents stipulated by the legislation of each country, not copies with apostiles or otherwise certified copies) which are required, for example, when opening an account with a bank.
Price has a significant effect on determining the jurisdiction in case of limited financial resources when one should sacrifice confidentiality and prestige for low prices or chose the jurisdiction where it is difficult to get the documents. In most countries the price and the term of payment according to local legislation are known.
The price consists of the cost of registration, the cost of legal services (usually paid in advance for a year), duties, charges and payments of any kind, the so called “duty for tax release” (also paid in advance for a year), postal costs (courier delivery of mail), cost of additional services.
Confidentiality is determined by the fact whether the authorities of third countries can get access to the information from the companies register or other information sources of the jurisdiction in which the off-shore company is registered. The jurisdictions differ in the extent of openness (i.e. publicity and availability) of the companies register, in the quantity and the volume of information concerning the entrepreneur and/or the off-shore company, and in the presence of the possibility to get the information privately. With the purpose of ensuring the safety a nominal director is usually appointed, whose name is shown in the register and who signs all documents delivered to him. This service is included in the category of additional services and shall be paid for a year in advance. In some countries there is no sense to employ a nominal director (Belize can serve an example of this) because the register is confidential and the information thereof can be received only on the decision of the Supreme Court of the country. An open register (in the countries of European jurisdiction) allows to get the information of the company and its functions quite freely (as usual the register contains the names and addresses of all directors and shareholders).
Prestigiousness in many aspects depends on fashion, subjective evaluation of the entrepreneur by his surroundings, whose opinion he values and whose recommendations he follows. For example, when somebody has recommended to the entrepreneur to buy a company on the British Virgin isles, it is difficult to explain that the British Virgin isles are only a worsened version of the Bahamas but still more expensive. The term “prestigeousness” also includes inconspicuousness of the jurisdiction – the entrepreneur sometimes does not want that the documents of his company at first glance showed that it is the off-shore (which is absolutely evident by the documents of the companies registered on the Bahamas or in the state of Delaware, USA). Actually, there exists welll-known off-shore jurisdictions less popular among the entrepreneurs (the state of Wyoming, USA, has almost identical laws). This is why the states of Wyoming, Nevada, Utah, Florida are more preferable for entrepreneurs because there exist more beneficial laws as compared to other states of the USA.
The prestigiousness influences the prices and the terms. Let us assume that the given off-shore jurisdiction and the country for which the entrepreneur receives the certified documents has signed the Hague convention, under which the countries mutually acknowledge the issued documents if they include the so-called “Hague clause” (another name – apostile). A notary shall certify the copy, and the notary’s signature is certified by the apostile. This document issued according to the special form is usually signed by a top official of the Ministry of Foreign Affairs of the issuing country, occasionally by an official of the companies register. If the country for which the set of documents is intended has joined this convention, the apostile shall quite suffice, if not, the apostile should be legalized for this country in the issuing country or vice versa. Among the CIS country only Russia, Ukraine, Belarus, Armenia and Kazakhstan have joined the Hague convention; (the total number of countries which have joined this convention is 81 – all main countries and off-shores), other countries require the legalization of the documents. Among the tasks requiring the documents certified by apostile or the legalized copies of the constituent documents are the establishment of branches or joint enterprises, the opening the companies’ accounts with banks. For example, in the Netherlands the authorities require that the documents in the set presented to the bank for opening an account (copies of the certificate of registration of the company, Articles of Association and constituent agreement, protocol of appointing director, director’s decision of opening an account in the given bank, Power of Attorney) should be apostiled or legalized separately, each apostile being paid separately and no wholesale discounts are given.
Unfortunately, there does not exist an ideal jurisdiction conforming to all criteria, this is why something should be sacrificed: either the easiness of receiving documents for confidentiality or prestigiousness for the detriment of everything else. However, financial limitations always make choosing the optimum jurisdiction more difficult: in this situation almost all drawbacks of the chosen jurisdiction can be compensated with money.
When choosing the bank and opening accounts several variants are distinguished: a) an entrepreneur opens the account himself; b) a lawyer opens the account for the entrepreneur and with his signature; the lawyer opens the account for the entrepreneur’s company and this account is operated by an authorized person.
It should be taken into account that the majority of the largest banks of the world do not open accounts without the physical presence of the client in the bank. For example you cannot open a valuable account without the prese nce of a client in any bank in te territory of the USA.
In case (b) each lawyer cooperates with several banks, forwarding a set of documents by mail, some lawyers being the agents of the banks who are entitled to certify the client’s signature sample. Sometimes this certification should be executed by a notary of the country where the bank is located.
In case (c) the lawyer or the entrepreneur himself has an authorized person in the country in which the chosen bank is located, who shall operate the account on commission. The services of the account operator are usually paid by the commission fee in the amount of 0,1 – 2% of the turnover on the account for a certain period.
The process of choosing the bank is also determined by the languages in which the bank corresponds with the client. All banks of the CIS countries, Lithuania, Latvia, Estonia, sometimes Hungary, Poland, Czechia, and Slovakia, individual banks of Finland, Cyprus, USA and France can communicate in Russian. Almost all Baltic banks open accounts without the presence of the clients and they are less expensive. This and the availability of correspondents in all CIS countries with soft currencies explain their popularity. One more argument having the influence on choosing the bank is the quantity of the documents required to open an account as mentioned above. Sometimes an entrepreneur wishes that the nominal director of his company did not know in which bank the account was opened; in such case the bank requiring the director’s decision of opening the account in this bank and authorizing the indicated person to operate the account printed on the bank letterhead and certified by the notary disappear from the field of choice.
One more criterion is the presence or the absence of the so-called “minimum deposit”. In other words, the banks use property census when selecting clients. This deposit can be of two kinds: non-reducible balance on the account (if the balance is less than the limiting amount, for example $ 40000 or 50000 francs – an average amount for Swiss banks, the account is closed) and minimal deposit for activating the account – initially the bank opens a temporary account which may become a permanent one after the entry of a definite amount (usually USD3 – 5 thousand), and thereafter the interest on the balance on the account shall be added only in case of exceeding this amount. If the balance is less, the interest is not calculated.
The next circumstance to be considered when choosing the bank is the cost of the bank’s services – commission fees for various operations and the tax on the interes in the country of the bank residence.
When choosing the bank it is important to have the possibility to operate the account via modem and fax. The Swiss bank UNION BANKAIRE PRIVEE does not sell their software for operating the account via modem in the CIS countries referring to the absence of confidentiality of telephone communications. The UNIBANK (Denmark) waivers the responsibility for leakage of information in transfers over telephone channels from the CIS countries even if a scrambler utility is available.
The terms of registration are also connected with the chosen jurisdiction, the bank, the set of additional services and the financial situation of the entrepreneur.
In several well-known jurisdictions popular lawyer companies have already registered companies available, the so-called “off – shelf” companies. Reregistering such companies in the name of the entrepreneur takes 1 – 2 hours (for the countries with the closed register); the delivery of the documents from the lawyer company by courier – 3 days on the average. But this is justified only if the entrepreneur does not require additional services. If he needs, for example, to legalize an apostile for Moldova, the set of documents shall be divided in 2 parts and the documents shall arrive by lots. Breaking up the set of the documents and their separate arrival after completing the ordered work can arise at the time of opening the account with the bank when getting additional apostiles or their certifications, at registering nominal functionaries, etc. In the countries with the open register it takes one week to re-register a ready company without appointing a nominal director and one more week if you appoint the director.
Naturally in all countries you may order the company with its own name “from nothing” which takes 2 – 4 weeks without additional services. In this situation the terms for performing such services shall be somewhat shortened.
The process of executing the order is shown below on the example on a Bahamian company – a set of documents for establishing a joined enterprise in Moldova was ordered (apostiles are not recognized), an account with a Swiss bank, a nominal director and a secretary, shares to bearer. The process of execution follows the scheme shown below (approximately 35 days):
The set of documents with a seal, original certificate of registration, 1-2 copies of Articles of Association and the Constituent agreement, other documents in copies, a set of bank documents arrive. The samples of signatures on the bank forms are certified by the Swiss consul, seals are affixed and the forms are sent back together with the letter of recommendation to the country of residence of the nominal director (most often it is Great Britain).
From the Bahamas to London arrives additional apostile which should be legalized in the consulate of Moldova. The nominal director gets the Power of Attorney for performing all actions necessary to register a joint enterprise in Moldova in the name of the person at the discretion of the entrepreneur, and then he certifies it by an apostile and sends it to London for legalization at the consulate of Moldova. Additional apostiles required by the bank are delivered to the Lawyer company from the nominal secretary in the Bahamas.
The nominal director has his signature certified by the notary on the decision of the company’s board of directors as to the opening of the account with this bank and sends to the nominal secretary on the Bahamas, a part of documents is sent to the lawyer company for preparing the documents to the bank.
The set of documents (original protocols of appointing the nominal director, application on dismissal without a date, certificate of shares, registers of directors and shareholders) arrive from the nominal director.
Apostiled decision of the board of directors as to the opening of the account is delivered to the lawyer company from the nominal secretary on the Bahamas.
The lawyer company forwards all documents for the bank to Switzerland.
The lawyers receive from the consulate of Moldova the legalized documents and deliver them to the entrepreneur.
The entrepreneur receives the documents. The documents from the bank of opening permanent account and the set of codes arrive.
Additional services. Among the most necessary services are: the acquiring of the set of copies (certificate of registration or replacing documents, local equivalent of Articles of association and the constituent agreement, the documents of appointing director, Power of Attorney signed by the director in the name of a concrete person). Then the services of professional directors, shareholders, secretaries and other officials of the company may be required, if the entrepreneur does not wish to appear in the register of companies under his own name. Besides, the services for translating the documents, for re-registering the shares class, for forwarding mail, etc., can be required. There often arises the necessity to purchase a nominal office because the entrepreneur can certainly write his legal address in his letterhead, i.e. the address of his registered agent but the agent does not forward the incoming mail and does not answer telephone calls. Besides, if the counterparts should check up the address of the company, they shall reveal that it belongs to a lawyer office. The nominal office is a secretarial company answering the calls (“Yes, this is such company, but the management is absent at present. Leave your message, please”) and forwarding mail for an agreed amount plus actual mail and telephone expenses. Additional services also include receiving VAT number which is required for business in Europe. The registration of the companies with chambers of industry and commerce of the corresponding countries is also available.
Maintenance of the company. Beside standard payments there may arise various banking charges, expenses of the secretarial company at the nominal address, expenses for employment of auditors and payment of taxes (in those countries where it is required by the law). For example, an hour of auditor’s work in Cyprus costs on the average 50 Cyprus pounds, average expenses for completing and delivery of accounts – USD 700-1200, taxation – 4,25% of the profit.
Standard conditions suggested by most popular off-shores include: non-inclusion to the FATF “Black list”; minimal number of directors –one; the requirement for the residency of directors are not included; directors — legal persons are allowed; the presence of the local registered agent/secretary and the office is necessary; minimal number of shareholders – one; nominal shareholders and directors are allowed, accounting and taxation are not used. Among such off-shores are Gibraltar, the Seychelles, and Dominica, the states of Delaware, Wyoming, New Jersey, and South Dakota in the USA. Additionally Gibraltar is an EC member. A number of other off-shores suggest more strict conditions. The price for opening an off-shore varies from USD600 to USD1500. Annual contributions — from USD500 to USD1000. The cost of opening an account with a bank comprises USD200 (Baltic states) to USD1000 (USA, Europe).
Internet. All actions for the registration and management of the company, operation of the banking account, the payment and receipt of money are carried out the Internet.