Company Formations: A jurisdictional guide to setting up a business Company Formations: A jurisdictional guide to setting up a business

Multinational corporations require a range of different structures in order to maintain a global presence. These structures can be used for different purposes, whether it is developing a trading operation in a country, or establishing a holding structure for wider business interests in a region. Before taking the plunge and forming a company, there are a number of important considerations to take into account, in order to find the right structure with the right flexibility for your needs.

Initially you must consider the incentives available for setting up a new operation in a country. This includes things like enterprise zones and tax breaks. Many countries will make it attractive for foreign investors to establish in their country, subject to certain conditions such as investment in underdeveloped regions. Double taxation treaties can also be important to reduce withholding and corporation tax, while ensuring profits are not taxed twice. Once you have established these parameters, then it is time to choose the type of structure required to meet your needs. Issues such as speed of formation, disclosure and compliance are critical to making sure the company form is fit for purpose.

If you are testing the market in a certain jurisdiction, you may decide that a branch office of an existing operation will suffice. If a more permanent establishment is required, then a limited company or partnership may be a better fit. Each will have different requirements around start-up capital, registration documentation and ownership.

As an example, limited companies will usually require directors, shareholders and articles of association to be drawn up, while branches don’t have those stipulations. In some jurisdictions, such as Qatar and other Gulf states, there is a restriction on how many shares a foreign national can own. This means thought must go into finding a local partner to act as an investor.

If a holding structure is required for managing wealth or trading operations in a region, then international business centres with favourable rates of taxation are usually most attractive. These structures can be limited companies, foundations or trusts and their effectiveness will differ depending on use. In most cases the ideal location for a holding structure will be tax efficient, but also subject to a strong, internationally-recognised, regulatory framework in line with Organisation for Economic Cooperation and Development (OECD) standards.

One area that touches all forms of company formation is compliance around anti-money laundering and know your customer (KYC) regulation. The OECD has set global standards on this, that all reputable jurisdictions adhere to. The Financial Action Task Force (FATF) advocates a risk-based approach to KYC, suggesting that resources are allocated so that the greatest risks receive the highest attention. Businesses that do not cooperate fully on this, with regard to ultimate beneficial ownership (UBO), are likely to find it harder to establish companies in the jurisdictions they want to operate in. They will also find it difficult, if not impossible, to open bank accounts, since banks are subject to some of the strictest compliance procedures around.

The upshot is that establishing a presence in another jurisdiction can be a very difficult and complex procedure, that requires the advice of a professional ‘on the ground’. Attempting the process without help, will likely result in inefficiency and even failure.

The following brochure features jurisdiction-specific advice from 24 firms with expertise in company formations. They guide you through the various formation vehicles available in their jurisdictions, and offer advice on regulatory hurdles you need to be aware of, or opportunities you may find useful. They also discuss various KYC compliance regulations, describing the best ways to streamline these onerous obligations.