Gian Gandhi highlights how Belize is positioning itself as the jurisdiction of choice for international entrepreneurs.
Strategically located in the heart of Central America, Belize is rapidly positioning itself as a jurisdiction of choice for international entrepreneurs. Starting with international business companies in the early 1990s, Belize has lately witnessed an offshore ‘explosion’ and now offers an array of products, including international trusts, international foundations, protected cell companies, international banking, international insurance, mutual funds and an open ships registry. Soon to be added to this list is an international limited liability company (LLC), which is known to have a special appeal for US investors. What follows is a review of the progress made during the past year to further promote and regulate Belize’s offshore financial services sector.
International Limited Liability Companies Bill, 2011
In October 2011, a Bill was introduced in the country’s House of Representatives to provide for the establishment and administration of international limited liability companies. A limited liability company or an LLC is a hybrid between two familiar business structures, namely, a corporation and a partnership. An LLC combines the best of both worlds by offering the advantages of a corporation and a partnership without the disadvantages of either form.
The Bill is designed to give statutory certainty to some of the key issues of concern to US attorneys using domestic LLCs. It introduces several unique asset protection features, consistent with the growing importance of this industry in conducting international business.
It provides a broad foundation to structure an LLC according to its own rules, rather than being mandated by statute. The operating agreement may contain any provision for the conduct of business that is not contrary to law and relates to the business of the company and the conduct of its affairs.
An LLC shall be a legal entity with separate rights and liabilities distinct from its members and managers. No manager, officer, member or employee of an LLC shall be liable for the debts, obligations or liabilities of the LLC unless he has assumed such liability by written contract.
Like most LLC jurisdictions, a creditor of a member is permitted to apply for a charging order against a member’s interest. To the extent so charged, the judgment creditor shall only have the rights of an assignee of the member’s interest and shall have no right to participate in the management of the company. The charging order remedy shall be the sole and exclusive remedy available to a judgment creditor or other creditor of a member.
Only the judgments delivered by a court in Belize shall be enforceable against an LLC or any manager or member thereof. This would, of course, include judgments rendered in appellate courts not located in Belize but which relate to actions commenced in a court in Belize, eg, the Caribbean Court of Justice (CCJ).
An assignee of a member’s interest shall in no event have any right to interfere or enquire into the management or administration of the company, or to become a substituted member except as may otherwise be provided in the operating agreement. An assignee shall only have the right to receive distributions attributable to a member’s interest in the LLC.
LLCs from other jurisdictions may transfer their domicile to Belize and Belize LLCs may move to another jurisdiction. However, by redomiciliation, LLCs would not be able to escape existing corporate debts. The Bill specifically provides that the transfer of domicile of any foreign LLC to Belize or of a Belize LLC to a foreign jurisdiction shall not affect any obligations or liabilities incurred prior to redomiciliation.
The Bill is confined to international LLCs and, as such, only non-residents would be able to form LLCs. There are also restrictions on doing business in Belize. LLCs would not therefore compete with domestic companies or other local entities.
The Bill exempts LLCs from taxes, duties and exchange controls in Belize except with regard to an instrument relating to a transfer of property situate in Belize, including any shares in a local company, which shall not be exempt from stamp duty.
Provision is made for the usual confidentiality requirements. All proceedings, other than criminal proceedings, relating to LLCs shall be held in camera and information may be divulged only in limited circumstances. There are penalties for unauthorised disclosure.
Every LLC shall at all times have a registered agent resident in Belize. Any person licensed by the International Financial Services Commission (IFSC) to provide company formation and management services would be eligible to act as a registered agent for LLCs.
There is no requirement in the Bill for an LLC to prepare annual accounts or to appoint an auditor. However, a simple annual return in the form to be specified by Regulations would be required to be lodged with the Registrar setting out the name of the LLC, the address of the registered agent and certain other ancillary matters.
On the whole, the Bill provides a comprehensive but not cumbersome framework for the establishment and operation of LLCs. A Belize LLC would be ideally suited for those needing a flexible business entity with strong asset protection features, which can accommodate personal organisational requirements, achieve the minimum imposition of tax in the jurisdiction where business is conducted, and provide statutory limited liability to the owners.
The Bill is expected to be passed by the National Assembly of Belize before the end of 2011, thus making it possible to market this new product early in 2012.
Belize’s International Foundations Registry, which opened its doors for business in November 2010, has made steady progress. As many as 50 foundations have so far been registered, while more are in the pipeline. This number is expected to grow in the coming years as the advantages of a foundation over a common law trust become better known to the investment community.
International Trusts Registry
Despite stiff competition from other jurisdictions, the International Trusts Registry of Belize continues to grow. During the past year, another 200 trusts were registered, bringing the total number of registered trusts to almost 1600.
Tax Information Exchange Agreements
Belize signed a Tax Information Exchange Agreement (TIEA) with France in November 2010, bringing the total number of TIEAs signed so far to 14. The complete list includes: United Kingdom, Australia, Belgium, Netherlands, Sweden, Norway, Denmark, Finland, Iceland, Greenland, the Faroes, Portugal, Ireland and France.
Texts of these TIEAs are available on our website www.ifsc.gov.bz .
In addition, a TIEA with Mexico has been finalised and is expected to be signed before the end of 2011.
Seminar on AML, HIRE and FATCA
On 19th October 2011, the Belize Offshore Practitioners Association, in collaboration with the International Financial Services Commission and the Financial Intelligence Unit, conducted a Seminar for offshore practitioners with focus on anti-money laundering laws of Belize (AML) and two recently-enacted United States laws, namely, Hiring Incentives to Restore Employment Act (HIRE Act) and Foreign Account Tax Compliance Act (FATCA). About 100 people attended the Seminar and heard presentations from both local and foreign experts, including a senior financial sector expert from the IMF. The seminar was primarily designed to prepare the practitioners for the adjustments that may be necessary as a result of the said US legislation.
French President Nicolas Sarkozy’s speech at the conclusion of the Cannes G20 summit held in November 2011, declaring that “we do not want tax havens any longer” has sent a strong message that time is running out for offshore financial centers (OFSs) to bring about transparency and exchange of information in tax matters. His new blacklist of 11 countries, which he said should be ‘shunned’ by the international community as having declined to exchange all tax information automatically, does not include Belize, as Belize has taken all necessary action to comply with the OECD standards in this respect. OFCs must face the present-day reality and be prepared to make the necessary adjustments to their laws and practices if they want to survive.
Belize has demonstrated that a country can build up a roaring offshore services industry without necessarily being secretive.
Gian C Gandhi, SC, Barrister-at-Law, Director General of the International Financial Services Commission of Belize