Glossary of business terms and definitions

 

Administrative Office - An administrative office of a company or Trust is frequently located in a country other than that of the headquarters, the parent company or a country of operation. An administrative office is often used to co-ordinate international or regional activities, to provide particular services (such as management or back office services) or to perform a given function such as marketing.

Annual Fees - All offshore structures (Trusts, International Business Companies etc.) have to pay renewal annually to the authorities of the jurisdiction of incorporation, via the Registered Agent.

Annuitant - The beneficiary or beneficiaries (in a last-to-die arrangement) of any form of annuity who receives a stream of payments under the terms of the annuity contract, usually until their death.

Annuity - An annuity refers to an insurance contract and is defined as series of payments of set size and frequency, often to a retired person. The term annuity is also used to refer to any terminating stream of fixed payments over a specified period of time for repayment of the received credit, the loan and percent on it.

Apostille - A written authentication of a public document (e.g. Certificate of Good Standing) issued in accordance with the standards of the Hague Convention of 1961. Documents issued in a convention country, which have been certified by an Apostille, are recognised in all other convention countries without any further authentication. Having a document apostilled requires payment of additional fees but it can be useful if the same document is going to be used in different jurisdictions or countries.

Articles of Association - These are the regulations governing the rights and duties of the members of a company amongst themselves and deal with internal matters such as general meetings, appointment of directors, issue and transfer of shares, dividends, accounts and audits.

Bank Draft - A signed, written order by which one party (the drawer) instructs another party (the drawee) to pay a specified sum to a third party (the payee), at sight or at a specific date. A cheque is technically a sight bank draft.

Bearer Share Certificate (Bearer Shares) - A share certificate owned in the name of "bearer" and not to a particular person or organization. Bearer shares grant ownership rights to any individual who is in actual physical possession of the certificates however they are required to be lodged in a registered depository. Such shares may be transferred in complete privacy but such transfers must be recognized and registered by the companies registry otherwise they have no legal standing.

Bye-Laws or By-Laws - The By-laws of a company (in certain jurisdictions) set out the internal laws by which the company is governed.

Certificate of Incorporation - The evidence of incorporation and registration of the legal entity with the companies registrar of the jurisdiction. It includes basic information about the company including the name, date and place of registration, entry number in the register, etc.

Certificate of Good Standing - The official attestation by the companies registrar of a jurisdiction of incorporation which states that the company legally still exists, is in compliance with the requirements of the local laws (timely payment of all annual fees and local taxes, filing the company's annual statements and returns where applicable, etc.) and otherwise remains validly on the companies register.

Certificate of Incumbency - The official attestation, issued by its registered agent or the authorities of the jurisdiction of incorporation, which states that the persons listed in it are the validly appointed directors of the company.

Certificate of exemption from Direct Taxes - The official attestation, issued by its registered agent or the authorities, which states that a St. Vincent and the Grenadines IBC is not liable to any form of local taxation.

Certificate of exemption from Import Duties - The official attestation, issued by its registered agent or the authorities, which states that a St. Vincent and the Grenadines IBC is not liable to any form of import duties.

Companies Act or Ordinance - Legislation that provides for the incorporation, registration and operation of international business companies (IBCs).

Corporate Redomicile - The process by which a company moves its legal domicile from one jurisdiction to another , in the process changing the country under whose laws it is registered or incorporated, while maintaining the same name and legal identity.

Custodian - A specialist bank or financial services company, or other entity that has the responsibility and ability to manage or administer the custody or other safekeeping of assets for other persons or institutions in return for on-going fees. LATC does not offer this service.

Dividend - The part of a company's post-tax profits distributed to shareholders, usually expressed as a cash amount per share.

Domicile - The place where a company or Trust has its legal permanent home, or to which an individual intends to return, or in some cases his country of origin. In some jurisdictions this is the place where an individual has a long established residence or, in relation to a company, where it is incorporated.

Domiciliary - A person who is domiciled in a particular jurisdiction (as a country).

Dormant Company - A company that is not actively currently trading in any way. It has a registered name, directors, articles of association, and so on but it has no sales turnover.

Double Taxation Agreement (or Double Tax Treaty) - Agreement between two countries intended to relieve persons who would otherwise be subject to tax in both countries from being taxed twice in respect of the same earnings, transactions or events.

Due Diligence - Research and analysis of a person or a company or organization done in preparation for a business transaction (including an analysis of the business's structure, an examination of the business's financial health, proving the identity and physical address and credibility of the business's owners, directors, the future potential, an assessment of the risk involved in a company's business, a company's business plan etc.).

Exempt Company - A company exempted from certain taxes or from compliance with specified regulations of the country in which it is established.

Holding Company - A company whose activity is limited to holding and managing investments or property but not having ordinary commercial or trading activities. The requirements to achieve holding company status vary in different countries (in particular Liechtenstein, Luxembourg, Nauru and the Netherlands).

International Business Corporation or International Business Company (IBC) - A company providing limited reporting requirements normally combined with comprehensive freedom from local taxation. A typical IBC can carry on business outside its jurisdiction, have meetings of its Directors and/or Members anywhere in the world, keep bank accounts in various currencies, and does not have to file disclosures to the same extent as a resident company (however an IBC does have some reporting requirements and cannot be anonymously owned).

International Mutual Fund - A mutual fund only offering its shares to persons resident outside the country in which it is incorporated.

Joint Venture - A type of business partnership involving joint management and ownership with the sharing of risks and profits as between two or more enterprises based in different countries.

Limited Liability Company (LLC) - This type of company consists of member owners, not shareholders, and a manager. It combines the more favourable characteristics of a corporation and a partnership. The LLC structure permits the operational flexibility found in a partnership, operating in a corporate-style structure, but operating with limited liability as provided by the state's laws.

Limited liability partnership (LLP) - A form of the LLC favoured and usually used for professional associations, such as accountants and attorneys.

Memorandum of Association (or Company Charter) - The first constitutional document of a company, which must be submitted to the registrar of companies together with the Articles of Association, and which contains company name, address of its registered office, objects and powers, authorised share capital, and statement of limited liability. Can often be combined with the Articles to form the "Memorandum and Articles of Association", or "M&A".

Minutes - A summary of proceedings of a meeting/assembly/committee.

Mutual Fund - Investment company issuing shares to the public and which invests in wide range of companies or assets. The investors share in the profits and any capital appreciation of the fund but are not liable for any debts of the fund or underlying companies.

Corporate Company - A company formed for the express purpose of holding securities and other assets in its name or to provide corporate directors and/or officers, or shareholders on behalf of clients.

Corporate Director - A person or corporate entity acting as a formal director of a company. The corporate director may sign contracts, negotiate loans, etc. for the company but has no personal liability for any action and the real decisions concerning administering and managing the company rest with the Beneficial Owner or its agent.

Non-Resident Company - A company treated by the jurisdiction in which it is incorporated as non-resident for tax purposes or exchange control purposes or both.

Ordinary Shares - The most common form of shares. Each ordinary share gives its holder an identical volume of the rights. Holders have the right to vote at the meetings and receive dividends which vary in accordance with the profitability of the company. The holders of the ordinary shares are the owners of the company.

Partnerships - A partnership often offers useful features for the purposes of an overall tax plan. In certain jurisdictions, a partnership may have corporate attributes and resemble a company. However, even where a partnership does not have corporate attributes, requirements relating to formations and registration the nationality and/or residence of partners, limited liability, restrictions on activities, should be examined in the context of the general law governing partnerships.

Permanent Establishment - Legal concept applied by a country in order to tax commercial activities realised in its territory by a company or person incorporated or resident outside the jurisdiction. The expression is commonly used in double taxation agreements although in practice there is no consistent definition adopted either in double taxation agreements or in jurisdictions which recognise the concept under their general tax laws.

Power of Attorney (POA) - A document which authorises a person to act on behalf of another or on behalf of a company.

Registered Agent - A person or company designated in the articles of incorporation to represent a company in the jurisdiction of incorporation. A Registered Agent normally provides a Registered Office address, but not mail forwarding etc., unless this is a specific service and is billed for separately ; provides liaison with local authorities and receives all legal and tax papers and/or notices addressed to the company, handles the renewal of the business license, provision of duplicate documents, apostilles, etc. In many jurisdictions the Registered Agent is the only interface between the International Business Company and the Registry. The Ultimate Beneficial Owner or Settlor cannot directly pay fees etc. to the Registrar.

Registered Office - The official address of a company to which authorities, courts, and suitors send their notices, letters and reminders. It must always be an effective address for delivering documents to the company, and is usually provided by a Registered Agent.

Registered Share - Share which is transferred by an instrument of transfer. The name of the holder is registered in the books of the company and the shareholder's name is displayed on the actual share certificate.

Registrar - The Registrar of Companies, a governmental body controlling the formation and renewal of companies created under the local company acts.

Resident - Is defined as the country in which a private person, a company or any other legal entity is normally or habitually resident for tax purposes.

Resident Company - A company treated by the jurisdiction in which it is incorporated or in which it conducts commercial activities as resident for tax purposes or exchange control purposes or both.

Royalty - All amounts received for the privilege of using intangibles such as patents, copyrights, secret processes and formulae, as well as amounts received for the privilege of exploiting mineral, oil and gas deposits.

Settlor (Creator or Grantor) - A person who actually creates a Trust by irrevocably donating property or assets to be managed and administered by a Trustee but from which all benefits and profits will go to a beneficiary.

Shelf Company (Ready-Made Company) - A company that has already been organized and registered with designated capital and registration cost paid, and is placed on an inactive basis, with annual registration, capital and stamp duty fees currently paid .The directors and officers are substituted at the time the company is sold, at which point it is taken off the shelf and becomes active. Sale usually involves a change of name and certainly a change of owner and directors. LATC has such companies for sale.

Subsidiary Company - A subsidiary company is a company under the control of another company through stock ownership.

Tax Information Exchange Agreement (TIEA) - An agreement between two governments to exchange information on the citizens of one country who may have assets, bank accounts or dealings in the other country.  The inquirer must give evidence of suspected tax malfeasance and proof of the identity of the person(s) under inquiry must be made clear as ”fishing”  is not permitted ( i.e. inquiring based only on citizenship and with no names, addresses , proof of suspected tax malfeasance or other details given ). SVG has signed such TIEAs with the required number of other states, as stipulated by the OECD.

Trust - An entity created for the purpose of protecting and conserving assets for the benefit of a third party, the beneficiary. A Trust is governed by a Trust Deed which is a contract affecting three parties, the settlor, the Trustee and the beneficiary. A Trust protector is optional but recommended, as well. In the Trust, the settlor transfers asset ownership to the Trustee on behalf of the beneficiaries.

Trust Deed (Declaration of Trust) - The document that creates a Trust and lays down the ways of how the Trustees should conduct administration and management of the Trust, and how they are to distribute Trust assets among the beneficiaries.

Trust Protector - A person appointed by the settlor to oversee the Trust on behalf of the beneficiaries. In many jurisdictions, local Trust laws define the concept of the Trust protector. Has veto power over the Trustee with respect to discretionary matters but no say with respect to issues unequivocally covered in the Trust Deed. Trust decisions are the Trustee's alone. Protector has the power to remove the Trustee and appoint Trustees. Consults with the settlor, but the final decisions must be the protector(s). The extent of protector's powers in each separate case is defined by the settlor.

Trustee - A person who administers and manages the property transferred in a Trust. Trustee becomes a legal owner of the property, and has a fiduciary responsibility to act in accordance with a Trust Deed and for the benefit of the beneficiary.

Ultimate Beneficial Owner (UBO) or “Beneficiary” - A natural person or a legal entity enjoying the right to own an IBC or to receive benefits of a Trust upon conditions established by the Trust settlor in a Trust Deed.

 

 

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