Offshore Investment Businesses And The Arm's Length Principle
The arm's length principle is an important legal strategy to ensure general equity in the community
. It is employed to especially good effect in offshore investment businesses; one of the main objectives is privacy, and if a company is seen not to be operating at arm's length from its beneficial owner, investigation will eventually result.Having close personal or business ties between the owner and director is not a problem in maintaining 'arm's length' - the parties simply need to ensure that an equitable arrangement that will stand up to legal scrutiny is created. Business consultancy services have plenty of experience in this area - we look at the ownership and management issues to consider in maintaining the arm's length principle in your offshore investment business.
Sharing information about the company
One of the min reasons that most offshore companies are incorporated is privacy. However, it bears repeating that there will be some people who can be appropriately informed of the company's existence, and those that may cause problems down the track. No matter how strictly compliant with the law your offshore investment business is, investigative action almost always results in expense and hassle. Knowledge of the company should be on a 'need to know basis', business consultancy services believe.
Shareholders
Companies with multiple shareholders should implement a shareholder's agreement. This will specify how shares are to be disposed of, and how the company will be run commercially. The company's articles of association usually do not give enough detail. Look to investment management services rather than general legal advisers for the most effective solution here.
For estate planning purposes, if shares are held by an individual there may be substantial tax to be paid in the event of the death of the shareholder. A trust arrangement is the ordinary solution that business consultancy services use, but you will need to get local expertise for your country of incorporation; every different jurisdiction has different rules.
In areas where the shareholder must be disclosed publicly according to company law, the real name can either be disclosed, or a nominee used if privacy is desired. When nominees are used, the beneficial owner needs greater explicit legal powers, which should be set down in writing.
Company administrator
The company administrator's role varies incredibly across different companies. In some it is a nominal role, while in others it requires an enormous amount of skill and time and carries the responsibility for the company's success. Having an agreement that sets out exactly what level of responsibility and interaction will be undertaken is recommended by business consultancy services - this is a highly personalized part of an offshore investment business.
Bank accounts
The signatory to bank accounts should be determined jointly by practicality, security and privacy needs.
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