The legal framework
These general notes refer to companies incorporated in jurisdictions that follow UK law.
The registrar has the power to refuse registration of any name considered undesirable, confusing, offensive or too like that of an existing company. Words including trust, investment, bank and insurance can only be used if the company is specifically licensed to undertake the indicated activity. The criteria for name selection may vary by jurisdiction.
Authorised Share Capital
This can be as high as wished and is the maximum capital available for issue. Generally a company would be incorporated with the highest authorised capital for which the minimum registration fees apply.
Issued Share Capital
This is the capital actually taken up by shareholders. It may be fully or partly paid up for cash or in kind. Once shares have been wholly paid for the shareholder has no further liability to the company. If shares were to be held by nominee or trustee shareholders they would normally be fully paid up to avoid liability for the professional shareholders.
Registered Office and Other Domiciliary Requirements
All companies must have a registered office within the country in which they are incorporated but this does not have to be the place where the company carries on business or keeps its accounts.
Most jurisdictions have a requirement for all companies to appoint a resident agent to receive official notices and legal papers. Some also require companies to have a locally resident company secretary or director.
It is usually the responsibility of the company secretary to make sure that a company is in good standing and make the necessary returns to the registrar and government. This requires a thorough knowledge of local company law and practice so it is strongly recommended that one of ICSG's locally based professional is appointed even if there is no strict legal requirement to do so.
Memorandum of Association
Historically the Memorandum of Association set out the objects of the company. Activities not set out in the memorandum were unauthorised so it was normal practice to draft extremely wide powers to cover any future activities.
Most jurisdictions have now abolished this “ultra vires” rule so the memorandum now often simply states that the objects are unlimited so the company can undertake any lawful business that is not specifically proscribed or licensable.
Articles of Association
The Articles of Association (often called ‘Bye-Laws’) represent a contract between the shareholders and the company. They provide detailed rules for the management of the company’s affairs and for the conduct of its business.
Shareholders are the legal owners of the company but responsibility for the day-to-day management of the company rests with its directors and to a limited extent with the company secretary.
Shareholders normally retain the power to remove a director and elect a replacement but do not have the power to interfere with the management of the company. Shareholders often also act as the directors of the company.
Some jurisdictions require a public record of the details of the shareholders to be maintained. In such cases, nominees or trustees will frequently hold the shares allowing the beneficial owner to retain anonymity.
ICSG frequently provides directors who reside and meet offshore. This prevents a company being considered as resident in the high tax country where the owners reside. These directors will, after carefully consideration, normally carry out the wishes of the ultimate owner but, if the tax status of the company is not to be prejudiced, those directors must be capable of demonstrating that they exercise independent mind and management.
Naturally clients may be nervous about giving over control of their business to a third party so they should only use organisations of the highest integrity and experience. ICSG employs professionally qualified staff, holds appropriate government licences and has successfully managed many thousands of companies over a period of many years. The importance of these factors cannot be overstated.
The company secretary is usually responsible for making sure that a company is in good standing and making the necessary returns to the registrar and government. This requires a thorough knowledge of local company law so we strongly recommend that one of ICSG’s locally based professionals be appointed, even if there is no strict legal requirement to do so.
Registered or Bearer Shares?
In response to the increased need for transparency and ‘know your client’, most jurisdictions have either abolished or introduced legislation to immobilise bearer shares. We recommend the issue of registered shares only.