Company Formations: A jurisdictional guide to setting up a business

QUESTION ONE – What are the most common structures used when international clients want to form a company in your jurisdiction? Any examples?

A branch often referred to as a UK establishment, can work well for companies testing the market, or those wishing to set up on a short-term basis. It can also be de-registered swiftly if no longer required. The branch may be able to offset some of its losses against profits from other territories (if applicable).

Sometimes it is advantageous to start with one structure and then to transfer the UK business to the other structure. For example, the start-up costs and initial trading losses of a branch may be deductible from the taxable profits of the overseas company in its home country, but this advantage will be lost when the UK branch becomes profitable in its own right. A UK branch operation must disclose the accounts of the overseas parent company to Companies House in the UK.

Along with the balance sheet, the full profit and loss statements will also be pub­lished to Companies House. This means any interested party to the UK branch may have access to this data – including potential customers and employees. If the accounts of the holding company are in a foreign language, they must be translated. Those overseas companies who are not required to file in the home territory may find this particularly unwelcome.

A limited company, whether owned by a parent company (a subsidiary) or owned by individuals, is a very effective vehicle, governed under UK law. An overseas sub­sidiary setup in the UK is a UK limited company whose shares are wholly-owned by the overseas parent company.

The UK subsidiary is a separate legal entity, governed under UK law. The UK subsidiary is separate from its parent company owner. The minimum share-capital requirement can be as low as £1. This differs in other neighbouring European countries where the requirements are much more rigorous and costly.

Year-end accounts and annual filing of a Confirmation Statement must be made. The latter being a snapshot of the directors and those with a controlling interest.

Partnerships (LLPs) and joint ventures are also available. Each individual member must register for UK tax and pay UK income tax on its share of the LLP’s prof­its. This also includes corporate members. The partners cannot be on a payroll scheme and draw salaries.

QUESTION TWO – Please detail some of the favourable and unfavourable legislation that businesses considering establishing a presence in your jurisdiction should be aware of? How can you help them to streamline the process?

This depends on a variety of factors, such as a client’s ultimate beneficial own­ership structure, their objectives for the UK and beyond – including whether to expand into other EU jurisdictions from the UK.

Opening a bank account is key for a successful UK operation. We estimate this will take two months (at least) from start to finish. Once we have completed our required anti-money laundering and know your client checks, we operate a designated client trust account on our client’s behalf. A specific bank accounts for utilisation until the real bank account is operational. We are also appointed a company secretary for our clients, where there are no UK-based directors (which is not a requirement to set up a UK company), and our address is usually the registered office.

A common misconception – you do not need to have a UK based resident director to have a limited (Ltd) company in the UK.

QUESTION THREE – What due diligence is required to be undertaken by company formations agents under anti-money laundering laws in your jurisdiction?

We are required to be satisfied as to our client’s identity. This is namely a notarized copy of passport, together with two separate forms of home address documenta­tion. This is required for those individuals with more than 20 per cent shareholding, or more than 10 per cent, if a high-risk operating entity. It will be required for some if not all, directors or partners of the UK entity.