This is an often confused matter, but there is simply no such thing as a “nominee” director even though many service providers advertise such services. A director is a director. Even worse some providers will offer the services of a “nominee” director along with provision of a General Power of Attorney to the client or another third party to do any act on behalf of the company without the knowledge of the directors. As this is often a deciding factor for a client when choosing a service provider it is important for prospective clients to clearly understand the risks and other considerations in relation to provision of director services by the chosen service provider.1. Considerations/Risks for the Client – the provision of director services for an offshore company by the service provider is usually necessary to ensure that “management and control” of the company is deemed to be in a favorable jurisdiction for tax purposes (usually where the offshore company is incorporated) rather than where the client is located for instance. This location of “management and control” determines the tax residency of the company in the case of an otherwise exempt company such as an International Business Company. There is typically no public record of the directors of such an offshore company. Therefore, logically where this would be important would be in a situation where there is a tax inquiry into the affairs of the company under a bilateral tax information agreement or the upcoming multi-lateral framework being adopted and implemented by countries. In such a case, the framework of the company and oversight by the directors must be consistent with them maintaining “management and control” of the company in the low tax jurisdiction and this “nominee” along with a General Power of Attorney given to the client by many firms will simply not stand up to this requirement. Exchange of information for tax purposes is simply a new global reality being led by the G8 and OECD that everyone must understand, embrace and prepare for to be sure it does not cause any adverse consequences.
2. Considerations/Risks for the Service Provider/Director – it is important for clients to understand that the service provider and appointed director provided by the service provider have risk as well and thus must be comfortable with the level of oversight and operations of the company. Directors provided by service providers are legally expected to think and act in a way consistent with what is expected of company directors of any company. As such, the directors of any company have a legal obligation to maintain a certain level of oversight regarding the affairs of the company. If a client company is found to be engaging in illegal activities, committing tax evasion or similar the service provider and director can both face fines, criminal prosecution and the possible revocation of the license to provide such services in the future putting the firm out of business.
Sterling’s Professional Director Services
Sterling Offshore provides professional director services carried out by senior level employees approved by the Financial Services Authority as “fit and proper” to act in such a role. The services are provided under strict terms of business and a services agreement to give comfort to the client. While we cannot provide director services on a company that issues a General Power of Attorney, it is usually possible for the company to issue a Limited Power of Attorney to the client or other designated third party which provides appropriate oversight such as requiring that the directors be made aware of any contracts before signing by the LPOA holder and other similar provisions.
A nominee shareholder may be corporate or individual and merely takes the place of the true shareholder on corporate documents and applications helping to maintain an extra level of privacy. Sterling does not utilize third parties for this purpose and generally utilizes a wholly owned corporate body for this purpose. The true beneficial owner receives a Declaration of Trust ensuring that it is clear the nominee has no beneficial interest in the shares and must only act on direct instruction of the beneficial owner.A particularly attractive alternative to the nominee shareholder for private clients is to set up an an offshore private foundation or offshore trust to hold the shares of the offshore company.
Every person and every company should pay their fair share of taxes and we do not advocate tax evasion or tax fraud of any kind. However, everyone has a legal right to minimize their taxes through legal tax avoidanceas well as to protect their hard earned assets. Citizens of many countries now find themselves with increasingly encroaching governments, uncontrolled government spending, rapid currency devaluation, rising taxes and unbridled litigation which are all spiraling out of control. It is a fact that as one’s income and assets increase, one becomes an exponentially larger target of governments, hungry lawyers, fraudsters and generally those that do not contribute to society but rather spend their time devising strategies to extract from the “rich”.So in short, yes it is nearly always legal to utilise offshore companies, trusts, foundations, etc. for asset protection and it is very often possible to also achieve legal tax minimisation.
“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue”
Law Lord, Lord Clyde, (Ayrshire Pullman Motor Services v Inland Revenue
 14 Tax Case 754, at 763,764)
“There is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; all do right. Nobody owes any public duty to pay more than the law demands; taxes are enforced extractions not voluntary contributions!”
US Judge Learned Hand
There is no universal definition of an “offshore” company, but in its most basic form it is merely a company established in any jurisdiction other than your place of residence or domicile. Offshore companies are broadly broken down into three different categories:
The expression “I need this yesterday” is literally possible with a shelf company. Some jurisdictions take a few days to weeks to register a new company and shelf companies can save critical time in these cases.Additionally, companies which have a bit of longevity often find it easier to obtain credit, bid for contracts and conduct international business since many entities are wary about engaging in business with companies having a short business history. Therefore, an aged shelf company or “vintage company” can often provide a solution to this problem.
Absolutely. Sterling Offshore follows very strict internal procedures regarding client confidentiality. We will not disclose any client information except as required by prevailing legal and regulatory requirements.We implore you to keep your offshore matters to yourself. Many are tempted to talk about their offshore structures and activities, but please consider that colleagues, business partners, friends and unfortunately even family can unwittingly pass sensitive information along that can lay bare your business practices and/or overseas assets to everyone.
In short, no. Sterling consults with each client regarding the legal uses and tax consequences of offshore companies as described in the jurisdictions in which we operate.We cannot offer tax and legal advice to clients in their jurisdiction of residence/citizenship/domicile. Sterling strongly urges all of our clients to seek legal and/or tax advice from a qualified professional in their own country prior to entering into a relationship with us. We are happy to offer our clients professional recommendations in places where we have relationships established. Similarly, we prefer to work with your attorney or accountant directly.