Sometimes, a business just doesn’t work. The income is approaching zero, the investors terminate contracts and the few loyal customers can’t keep it alive anymore. The only solution is to close it and move on. But how does one do this while being the owner of an offshore business? Is it easier, or does it imply too much paperwork, and how much does it really cost?
Offshore companies are called closed in two cases:
- When being officially closed.
- When they cease being supported.
In the first case, the company may be closed voluntarily or forcibly. For the voluntary closure of the company, its owner should declare such a desire in the Commercial Register through the local administrator.
In some jurisdictions, a company is required to report liquidation in the official press. After the publication of the message, this process should take from one to several months. During this time, the company's creditors have the right to make claims for previously unfulfilled obligations. When this period ends, the company is removed from the register and considered closed. The owner of the company receives an official "Certificate of closure of the company." Forced company closure can happen via a court decision, for example, if it is declared bankrupt. In this case, the bankruptcy procedure precedes the closure.
In the second scenario, the company closes if its owner ceases to support it, meaning he refused to:
- Pay mandatory fees and duties;
- Submit annual non-financial report and other statements;
- Pay taxes (in countries where this is mandatory);
- Pay for a legal address;
- pay for the services of a nominee shareholder, nominee director and secretary.
Commercial registries of offshore jurisdictions remind companies of the need to settle the required formalities during several months. If nothing happens, the company is fined. If the owner of the company does nothing, many offshore territories simply delete it from their registry.
In other countries, you simply cannot abandon a company. For example, after several warnings and fines, the Companies Register of UK warns directors of criminal liability. After that, the nominee directors and shareholders usually quit and pass the responsibility on to the real owner of the company, who is left alone with British justice.
There are jurisdictions (for example, the Isle of Man) where, upon registration, a deposit in the amount of the cost of liquidation of the company is required. Such procedures shelter these jurisdictions from problems with closing up an abandoned offshore business.
Voluntary closure of a company is cheaper than registration and can cost from several hundred to one and a half thousand dollars, depending on the country it was set up in.
The process of closing an offshore business might be quite challenging, making some ex-entrepreneurs try shady ways of abandoning it or deleting it from the jurisdiction’s registry. This is an illegal act that can lead to big problems with the law, prison or even deportation with restrictions on crossing the border. That’s why we strongly recommend closing companies correctly.
