Nominees in offshore jurisdication with no public record: why?

[user9823671]

I keep seeing nominee services offered for Belize / Seychelles for director / shareholders. But if this information is not available to the public, what is the point of it? Just so the government of these jurisdications are not aware at a cursory glance? I would assume that a court order in these jurisdictions can see the owner, so it would protect against that? But then I would imagine it is obvious it is a nominee setup and another court order would reveal the UBO?

OR have I misunderstoof the benefits of having nominees in such a jurisdiction, as I cannot see why the hassles (and cost) of it are worth having

 

[TacitusKilgore]

Agreed, would love to hear other users' thoughts. One possible advantage I see is if the company ends up implementing a public register system and digitizing existing documents, you are future-proofed. For example BVI is eventually going to have a public register system but it wasn't even a thought 10-15 years ago - so if you set up in BVI with a nominee from the get-go (eg. 2003) you will be save when they implement that public register system. Same kind of concept applies here I guess just with another jurisdiction.

 

[user9823671]

Also if private register gets hacked, or you want to protect yourself against those who have access to it.

But I have a feeling it is just a way to get more money out of customers by not explaining things clearly, then you can charge more for Every.Little. Thing the nominee has to do.

But as you say, be nice to hear from those more knowledgeable

 

[James Turner]

There are several benefits to using nominees where a public register does not exist. Firstly, in a lot of cases it is the denial that appeals to people. The fact that a particular person is technically not the Director or Shareholder of a company that matters and using nominees gives you ground to state that you are not acting. The actual relationship is then documented outside the offcial company documentation. There is the second level of privacy whereby if the local legislation changes and as @TacitusKilgore states they digitalise the records you are future proofed, or where a court order is obtained to establish the Directors that are not published publicly the nominee information will be displayed. In some cases this is the end of the road depending upon jurisdiction as the person the nominee acts for is not always retained locally. There is the fact that a nominee can sign documents (contracts, property transfers etc) on behalf of the company without involving the UBO in signing.

Hope this helps.

 

[JimBeam]

The real benefit is the taxing. Let me try to explain. The nominee will sign documents for you and bring business decisions (there on the island). So you won't sign anything on the mainland sitting in Germany or France. So in case taxman asks you about that company or where is businesses taking place, where are decisions being made - it's not in your country and your signature is on none of the documents (contracts etc) so you can't be taxed in your country and it's hard to prove that you run the company. It looks like it's a local company with a local director doing their thing. That's the idea behind it and apart from privacy, it has another function.

 

[TacitusKilgore]

This sounds good on the surface, but anywhere with reasonable tax law will determine that a company is a tax resident of that jurisdiction if it's controlled from there, regardless of who the official directors are. Australia for example has tax policies in place that will classify you as a controller of the company even if you aren't legally affiliated with the company in any way.

 

[user9823671]

This sounds good on the surface, but anywhere with reasonable tax law will determine that a company is a tax resident of that jurisdiction if it's controlled from there, regardless of who the official directors are. Australia for example has tax policies in place that will classify you as a controller of the company even if you aren't legally affiliated with the company in any way.

how?

 

[TacitusKilgore]

how?

If the tax authority suspects anything is fishy and they actually start an investigation on you, you can bet they'll talk to the agent and find out that you're the beneficial owner.

As for my specific example of Australia, the ATO has issued a ruling on the rules around "central control and management" of determining whether there is a controlled foreign company (CFC) relationship. Check out this link: https://www.ato.gov.au/law/view/document?docid=TXR/TR20185/NAT/ATO/00001

Paragraph 19 is interesting: "Identifying who exercises central management and control is a question of fact. It cannot be determined solely by identifying who has the legal power or authority to control and direct a company. The crucial question is who controls and directs a company's operations in reality." Also, specifically para 23 is what I'm talking about: "A person who has legal power or authority to control and direct a company, but does not use it, does not exercise central management and control."

In other words, if they examine the situation and find a nominee director who simply follows your instructions and signs documents, the nominee will not be considered the one who manages and controls the company -- you will.

Not all countries will be as strict as Australia, or even have CFC rules (eg. Singapore does not), but just be sure to do your research where you are a tax resident because you don't want any trouble if the worst comes to worst!!

All the best,
Tacitus

 

[user9823671]

I understand that in theory, but how does it work in practise?

Keeping with your example of Australia (I assume it is similar for all other western countries). Do they actually do this? What would cause them to investigate a foreign company and lean on the agent who registered the company (how do they even find this out?) to find out the nominee director (this is not public) and then lean on them to get the UBO?

The Aus tax office surely doesn't have the resources to check companies at random surely?

Perhaps if you are doing a large amount of business with Aus companies that could light up some warnings that it needs to be investigated.

But for an online company doing business around the world? (example software sales), how would it ever come to their attention?

 

[TacitusKilgore]

Agree - like you say they don't have the resources to check companies at random. What the ATO does specifically is find a few people to make huge examples out of, and scare the general population into complying with the rules. I guess watching the money coming into your personal bank accounts (if you're not being careful enough) is one of many giveaways that something else is going on in terms of your income.

And yes business with too many Aussie companies will probably set off some alarm bells down the track.

You're right, software sales does sound quite safe. My posts were more a "just be careful and pick something smart like software sales" rather than discouragement.

 

[user9823671]

I guess watching the money coming into your personal bank accounts

Follow the money! I imagine that flags up enough people for closer inspection. If you get are getting paid from offshore banks to personal account, they are fairly sure something is going on

 

[Spinat]

Nominee director and shareholder is as already explained here well used for hiding the real director and shareholder in connection of partnership agreements, contracts and what else that would require the real owner to be visible to conduct business.

 

[user9823671]

Nominee director and shareholder is as already explained here well used for hiding the real director and shareholder in connection of partnership agreements, contracts and what else that would require the real owner to be visible to conduct business.

That makes sense, not thought of that. So is more relevant to some kinds of business than others. As for my example above of online software sales, where no contracts / partnership agreements it doesn't make sense and a non-public register would be enough for privacy from the general public.

 

[TacitusKilgore]

That makes sense, not thought of that. So is more relevant to some kinds of business than others. As for my example above of online software sales, where no contracts / partnership agreements it doesn't make sense and a non-public register would be enough for privacy from the general public.

Yes from what I have read it sounds like that's the case - non-public register is enough if you just want to hide from [possible] customers. Obv if you don't mind the government knowing who you are I would go for this setup as it's a fair bit cheaper than paying for nominees.

 

[JohnSeed]

That makes sense, not thought of that. So is more relevant to some kinds of business than others. As for my example above of online software sales, where no contracts / partnership agreements it doesn't make sense and a non-public register would be enough for privacy from the general public.

Yes true, only if you have to sign contracts, agreements and such like you will need to have nominees in your case or if you are going to buy a company secretly.