So, you are incorporating a new company; where in the world do you go? If you are investing into China or intending to list in Hong Kong, then odds are you will end up with a British Virgin Islands (BVI) or Cayman company. Even with Hong Kong’s recent modernisation of its company law, these core jurisdictions offer Asian investors a level of corporate flexibility – the boutique experience – that simply isn’t available elsewhere.
BVI and Cayman offer significantly lower taxes, less onerous regulation and greater privacy than most Asian jurisdictions; the identity of shareholders and directors is not public. They impose no auditing or reporting requirements or foreign exchange restrictions. Companies may give financial assistance without a costly and time-consuming whitewash procedure, merge with other local or foreign companies (far simpler than the scheme of arrangement route), migrate between jurisdictions, transfer shares free of stamp duty, hold shares in treasury, buy back their shares without shareholder or court involvement, declare dividends from almost any source of funds (rather than just profits) and convene board and shareholder meetings anywhere in the world. These are also creditor-friendly jurisdictions where security may be enforced without court involvement – great for debt financing – and there is no Chapter 11 or administration equivalent currently in force imposing moratoriums on creditors’ rights.
BVI and Cayman also share a common law foundation, right of final appeal to the Privy Council and a strong rule of law. They are prosperous and stable microstates with small, affluent populations isolated to some extent from global economic and political turmoil by not being part of any major political or economic grouping – and in particular they are economically and politically remote from Asia. Their dependence on offshore business makes material adverse change in tax and law almost unthinkable. They are stable destinations and never necessitate any last minute change of plan.
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Jonathan Culshaw is the managing partner of the Hong Kong office at Harney Westwood & Riegels. He can be contacted on +852 3195 7238 or by email at jonathan.culshaw@harneys.com
Ellie Crespi is a senior associate at Harney Westwood & Riegels in Hong Kong. She can be contacted on +852 3195 7214 or by email at ellie.crespi@harneys.com
