Offshore Company - Disadvantages

Disadvantages

• Offshore companies are usually prohibited from conducting business or retaining employees in their jurisdiction of incorporation though this very much depends on the jurisdiction in question and type of company.

• For regulatory reasons, there are often certain restrictions on the type of business which an offshore company can engage in without the need for a licence. In practice this is no different from trading 'onshore' since the majority of banks have offshore operations and the majority of the world's insurance companies are offshore captive insurance companies.

• Due diligence in reputable offshore centres tends to be more strict than most onshore areas. For example, to open a bank account in the name of an offshore company, to comply with relevant anti-money laundering regulations, the bank will normally require documents verifying the identity of the signers on the account to be notarised and may require one or more professional reference letters from an attorney, accountant and/or banker who has known you.

• Certain countries have "anti-tax haven" legislation which makes it difficult to conduct business in those countries using an offshore company. For example, capital markets regulations in France prohibit using offshore companies as bond issuing vehicles.

• Where a shareholder of an offshore company dies, it is usually necessary to have the will admitted to probate in the offshore jurisdiction as well (or, if intestate, to have the letters of administration re-sealed in that jurisdiction), which can add to cost, delay and inconvenience in administering the deceased's estate.