The main feature of the offshore company management is that the owner does not maintain all the required relations with the governmental authorities on its own, but with the help of the authorized agent. This statement is relevant for all cases since the date of registration or the shelf company acquisition.
The agent who may be an individual or a legal entity acts by virtue of the license issued by the of-shore regulating authority. The agent’s duties include the communication with the following:
- a registration authority;
- any other authorities of an offshore country;
- legal address provision;
- preparation, submission, storage of all reporting required;
- taking certificates, licenses and etc. as required
The company owner communicates with the employed agent through the relevant agreement. In most cases, such agents perform with no claims and they usually act in favor of those companies for the long-term period. However, cases differ, and therefore from time to time agents are changed, and the main reasons for that are the following:
- Ceasing of the agent’s operations;
- Unfair performance of duties by the specialist;
- Unreasonable increase of the service cost.
Moreover, the offshore company owner may have personal reasons to terminate relations. For example, they failed to interact. There may be other reasons, but one should note that the transfer procedure is almost always labor-intensive and time-consuming; yet, in most cases, it is cost-intensive.
How the transfer works
Pursuant to the legislation applicable in offshore countries, the agent may be replaced at any time without any restrictions. However, in theory, this simple procedure is impeded due to the following:
- certain legal details;
- considerable “hidden pitfalls”.
Yet, all these provisions must not be underestimated.
The transfer procedure might be initiated if and where:
- All the required documents are collected;
- The company runs, in fact, and has no debts.
It means that no agent may be replaced if there are no required contracts, certificates and licenses. Another reason that makes the transfer impossible is the change of the owner, since such action must be legally executed; moreover, it should be performed within the area of the offshore country.
As for the debt, all taxes (if any), duties and so on should be paid out; in addition, no accounting arrears should be there. On the top of it, the company owner is obliged to pay for the agent’s services. What is more considerable, in most offshore countries such specialist delivers their services being pre-paid, and in most cases, for a year in advance.
As a result, if the transfer is not made for the twelve (12) months pre-paid and there is, at least, one-day delay, the agent should be paid again for the period specified. And there is no another way to work, since such provisions are specified and agreed between the parties in their contracts.
The company transfer procedure to any other agent is significantly complicated by communications between the colleagues. The reason is that if a specialist is required to be replaced, one should address to the state Registrar. In such a case changes are made to the legal address, in addition, the new agent is entered with the register as a trustee.
Problems might be faced when performing such a simple operation, if the transfer is made with no case management with the previous agent, and such difficulties are not sometimes overcome. This is due to the following:
- the registrars often required a letter of exemption to be submitted to confirm zero arrears of the agent. In fact, it is easy to solve this. This only requires a written document to be submitted on behalf of the owner that the owner no longer cooperates with the agent. However, such an act poses problems with the choice of a new specialist. This is because the agents ethics does not allow to cooperate with a person or an entity that wrongly performed towards their colleague. It should be noted that wrong actions include even late notification;
- a new address should be specified instead of the old legal address and this may be provided by only a newly hired specialist. But, as mentioned above, you may face problems with a new agent finding.
As a result, you are at the risk to fail the company transfer. To avoid difficulties above, the company owner should first agree with the previous agent on termination of mutual relations. In fact, he owner should conclude the so-called “amicable settlement”. Moreover, the owner is recommended to do the same even when the agent performed unfairly.
The difficulties above are not unique; for instance, the previous agent may require certain amount of reimbursement for employment termination, finding out that the offshore company is transferred to another agent. It is worth to note that the company owner is eligible to avoid payment of reimbursement, but doing so, he may face problems with mutual understanding with other agencies. And vice versa: in case of reimbursement paid, the owner might put high hopes to collaborate with the best specialists, since appropriate, amicable and generous customers are sought-after.
In most cases, agents from Cyprus and the Virgin Islands require compensation, though there are places where this is not practiced. For example, this is not common on the Islands of Jersey, Isle of Man.
In view of the above, a person concerned in a company transfer needs early support by a new agent in advance. Moreover, this should be on the contractual basis, and prior to it the following should be discussed:
- cost of services. It is good to note that prices may differ significantly, especially if the owner of the company terminates labor relations with the previous agent not for amicable reasons;
And as the parties are satisfied, the relevant agreement is executed and signed. This is followed by the minutes of meeting where the issue of the agent replacement is filled in and submitted to the Registrar for subsequent re-registration.
In case of scandalous termination of relations, the owner should bear in mind that since then he may rely only on displeasing agents to cooperate. For example, the owner might choose an agent who will perform his transfer duties, get payments for the year ahead and will disappear.
That is to say, that those who fail to comply with rules will have to cooperate with agents of same policy. The reason is that offshore lands are mostly small countries and they are scarce in agents, while buzz marketing really works there.
It is quite difficult and labor-intensive to transfer the company to the other agent, especially when the owner intends to maintain the company history. Therefore, the owner should initiate this only when all pros and cons are considered. The Private Financial Services specialists are willing to help you take the good decision and implement it.