The Companies Ordinance (S. 205) effectively allows companies
to be continued into TCI as exempted companies providing the
laws of the jurisdiction of incorporation are reciprocal (most
countries). Companies continued into the jurisdiction are
treated as though they had been incorporated under the laws of
TCI when continued. It should be noted that this does not have
the effect of creating a new legal entity.
Why Continue a Company into TCI?
Companies (both public and private) carrying
on with international business (not including TCI) should
consider whether the following features of TCI exempted
companies would be beneficial to their businesses:
Automatic exemption from any direct taxation
in the form of income, capital gains, dividends, inheritance or
gift tax in TCI for 20 years from the date of its incorporation.
Meaning that TCI taxation will not have to be considered after
continuation for as long as the exemption lasts allowing
management to concentrate on more important issues;
TCI companies are not required to have their
mind and management resident in TCI. This makes TCI attractive
for companies with operations in different jurisdictions (e.g.
software companies; oil and gas exploration companies; etc.)
which require the oversight of the directors - allowing such
companies to select the most qualified persons as directors
irrespective of their place of residence;
In jurisdictions with tax systems based on
residency continuing a company into TCI will often have the
effect of making the company non-resident for tax purposes which
may in some instances result in favorable tax treatment;
Requirements such as where, when and how a
company must call and hold its annual general meetings and
extraordinary general meetings are not fixed by statute and are
a matter for internal regulation (typically set out in the
articles of association). Contrary requirements imposed by the
legislation of many jurisdictions relating matters such as
notice, quorums, which types of decisions require special
resolutions, etc. can involve companies in inordinate expense
over time, which can be avoided by making the company subject to
the laws of the TCI.
The articles of association of TCI companies
may allow for the staggered appointment of directors
Many high tax (and regulatory) jurisdictions
have some form of corporate emigration rules which apply to
companies moving their operations to another jurisdictional base
such as TCI.
[An example of this would be Canada, where a company being
continued to TCI would in the ordinary course be deemed to have
had a taxation year ended immediately prior to being continued
and each asset would be deemed to have been disposed of by it
for proceeds of disposition equal to that property's fair market
value - any gains or losses in this respect would be taken into
account when determining the taxable income for the fiscal
period ending immediately prior to continuation and would be
subject to tax in the ordinary way.]
Companies anticipating that the market value of certain of their
assets will appreciate in value dramatically should consult
their resident tax advisers in advance to establish whether they
could benefit by continuing the company into TCI before such
appreciation in value occurs.
From a share holder's perspective a continuation of a company
into TCI should not constitute a taxable event where properly
structured meaning that shareholders will continue to hold their
shares at the same cost adjusted base as before the continuance.
However, dividends paid to members/shareholders in high tax
jurisdictions after continuance to TCI may no longer attract
dividend tax credits (or deductions in the case of corporate
members). The situation would also have to be considered from
the perspective of shareholders tax-advantaged retirement
Corporation Services in conjunction with its
associated law offices have advised and assisted in relation to
the continuation of both public and private companies into (and
out of) TCI, are conversant with many of the considerations that
arise and are well placed to work with clients' on-shore legal
and tax advisers to ensure that objectives are met.
Companies to do Business in TCI
Foreign Companies wishing to do business in TCI and not
wishing to set up a subsidiary for the purpose, are required
by the Companies Ordinance to apply to the Registrar of
Companies in TCI to be registered as a foreign company and
maintain a registered office within the jurisdiction for the
purpose. Such companies are not in the ordinary course
permitted to hold land, but can lease properties and hold
registerable charges/mortgages over properties in the islands.
We will be happy to assist and advise in this respect.
Such companies will also have to obtain a Business License in
the appropriate category, will need to consider immigration
requirements for non-Belonger employees/management and their
status and obligations as employers under the National
Insurance Ordinance and subsidiary regulations.