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Tax Engineering

How to close an offshore company?


Question

How to close an offshore company? Where should I go to close the company? Who has to close the offshore company and what is the procedure to close an offshore company?

Answer

Closing down an offshore company is the process of liquidation of a company (or a part of it) and distribution of liabilities and assets that company possesses. The term “closing down a company” can also mean the dissolution of a company. However, technically speaking, the dissolution is the last phase of the whole process of closing down an offshore company

The procedure for closing an offshore company highly depends on the country where the company is registered, its laws and governmental regulations. In some countries such as France and Spain the process of closing a company can be overlong and expensive. But in other countries, such as Belize or Seychelles, the same process is much simpler and consists of paying the closing fees and notifying the resident agent who in return will present the official closing forms to the Registry of the Companies on behalf of the beneficial owner of an offshore company. 

There are some financial centers that have a special policy in order to prevent the frauds committed by the beneficiary of an offshore company. One of the examples of this kind of jurisdiction is Bahamas where, once the company is closed, all the assets that are in its possession get frozen for 6 months and are not returned to the beneficial owner until this period time passes. The authorities carry out this policy mainly in order to prevent the usage of offshore companies that get opened only for the short period of time with an objective of using it for fraudulent transactions and money laundering. Once this period of time has expired and there is no any injunction order presented by other country, only then the information about the offshore company will be deleted from the commercial register forever. 

If you own an offshore company and want to close it, the resident agent that you have hired should help you throughout the process of liquidation. There are two legal ways to close an offshore company:

Striking company off from the Companies Register

For an offshore company to exist legally in an offshore jurisdiction, it must pay the annual fees imposed by the government. If these fees are not paid for 5 years the offshore company will be erased from the commercial register. By not paying the closing fees and having a debt with the government of the offshore jurisdiction the information of directors and shareholders of the company will not be erased from the mercantile registry and the responsibility will be perpetual. If the client wants to close the company definitively, he will only have to reactivate it, pay all the taxes to the government for the delayed payments and start with the legal process of dissolution of the company. Having an offshore company in a tax haven has its responsibilities and the abandonment of its obligations may incur problems in the future. Therefore, we advise that if the client has really finished his activity with the company, it is advisable to go through the process of complete closure of the company.

Voluntary closure of an offshore company

In order to request the voluntary closure of an offshore company, the resident agent must begin with the commercial liquidation procedure established by the country where the company has been registered. The most important steps to close an offshore company voluntarily are:

  1. The resident agent of a country where the company was registered has to initiate the closing process. It is advisable to use the service of the same agent who was hired for company formation since he is the person who knows the real situation of the company and the possible problems that may arise in the future. The final beneficiary of the company has to pay all the fees or delays related to the offshore company  together with the corresponding expenses of liquidation. Once all the delays have been paid, the mercantile registry is informed that the process of closing the company will be executed and the distribution of assets by the shareholders will be carried out.
  2. To voluntarily close the company, it is necessary to publish in the national press of the country where the company has been registered information about the closing process so that it is publicly notified.
  3. Once these 2 steps have been completed, the resident agent must issue a certificate of liquidation certifying that both steps have been carried out correctly.

The time it takes to complete the process of a closure of an offshore company depends on the offshore jurisdiction. Normally the whole process can take between 1 and 2 years.



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