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Tuesday, February 15, 2011
offshorecompany in Dubai & Mauritious: Legislative provisions in Dubai
offshorecompany in Dubai & Mauritious: Legislative provisions in Dubai: "INCORPORATION OF A COMPANY IN DUBAI OR ESTABLISHING WHOLLY OWNED SUBSIDARY OF AN INDIAN COMPANY Companies Formation Following are the brie..."
Documentation requirement in Dubai
ATTACHMENT 1
INFORMATION AND REGULATIONS
Some of the unique features of the companies are as follows:
1. No bearer shares will be allowed
2. The company shall file audited accounts each year
3. The company can open bank accounts with all banks operating in Dubai
Enclosed in the attachment a short note on the features of such companies.
It is important to note that Dubai
Jordan, Sudan, Syria, Kuwait, Morocco, Malta, Yemen, Egypt, Finland, France, India, Pakistan, Poland, China, Germany, Indonesia, Italy, Malaysia, Romania, Singapore, Algeria and Turkey.
ATTACHMENT 2
DOCUMENTATION AND INFORMATION REQUIRED FOR NON INDIVIDUAL APPLICANT
Proposed name of the company
Brief note on the proposed activity of the offshore company
Share capital of the company
Short profile of the corporate shareholder
Original Banker reference for the corporate shareholder (Attachment A)
Utility bill (e.g. electricity bill or telephone bill) of the directors of the proposed offshore company
Passport copy and address of the directors and secretary of the proposed offshore company
Certificate of Good Standing of the corporate shareholder
Certificate of Incorporation of the corporate shareholder
Memorandum & Articles of Association of the corporate shareholder
Board Resolution & Power of Attorney from the corporate shareholder for incorporating the offshore company (Attachment B)
Any other Incorporation documents of the corporate shareholder (optional)
Items 8 to 12 have to be:
1. Certified as true copy by the Notary Public in the country of origin.
2. Legalised by the Ministry of Foreign Affairs in the country of origin.
3. Legalised by the United Arab Emirates Embassy I n the country of origin.
ATTACHMENT A
BANKER REFERENCE
Jebel Ali Free Zone Authority
Dubai
(Date)
Dear Sir,
Re: A/C NO. (xxxxxxxxxxxx) in the name of (xxxxxxxxxxxx)
We confirm that (Name) is maintaining the above mentioned account with us since (Date).
The conduct of the account is satisfactory.
This certificate is given in confidence at the customer’s request, without any risk or responsibility whatsoever arising on the part of the Bank or any of its Officers.
Yours faithfully,
For (Bank Seal & Signature)
(Designation)
ATTACHMENT B
(Name of the Corporate Shareholder)
BOARD RESOLUTION IN WRITING PASSED PURSUANT TO THE ARTICLES OF ASSOCIATION OF THE COMPANY
INCORPORATION OF AN OFFSHORE COMPANY
It is hereby resolved that the company shall form an Offshore Company in the Jebel Ali Free Zone of the Emirate of Dubai, United Arab Emirates in the name of (Name of the Proposed Offshore Company) or as per the name approved by the Jebel Ali Free Zone Authority and guarantee full financial commitment to the Offshore Company, a Company to be registered in accordance with the laws of Jebel Ali Free Zone with its registered office situated at LOB 15 – 117, P.O. Box - 17870, Jebel Ali Free Zone, Dubai – U.A.E.
Further resolved that the shareholding of the company proposed to be incorporated in the Jebel Ali Free Zone would be as follows:
(Name of the Corporate Shareholder) 100%
Further resolved that the Company shall hereby appoint the following persons to act as Directors of the proposed company:
Name Nationality
(Name of the Director) (xxxx)
(Name of the Director) (xxxx)
It is further resolved that (Authorised signatory for the proposed offshore company), holder of (xxxx) passport number (xxxx), to be the true and lawful attorney for the company and to do and execute any or all of the acts.
Further resolved that (Authorised signatory for the proposed offshore company), holder of (xxxx) Passport No. (xxxx), to be the true and lawful attorney for the company to open any bank account(s) with any bank in the name of the Offshore Company and sign and amend any bank mandate and resolutions without further authorization or approval from the Shareholders or the Board of Directors of the company and to designate or nominate any signatories to sign singly or jointly for such bank account being opened in the name of the Offshore Company.
The Company hereby ratifies and confirms whatsoever the Attorney shall or purport to do by virtue of this Resolution including in such confirmation whatsoever shall be done until this revocation of the Resolution.
Dated this (xx) day of (xxxx).
DIRECTORS
________________________________________________
(Name of the Director of the Corporate Shareholder)
______________________________________________
(Name of the Director of the Corporate Shareholder)
Legislative provisions in Mauritius
There used to be one main source of 'offshore' regime in Mauritius, the Mauritius Offshore Business Activities Authority (MOBAA) constituted under the Mauritius Offshore Business Activities Act 1992 (MOBA Act 1992), which supervised almost all types of offshore entity other than banks, including the Free Port, and the Export Processing Zone. In May 2000 Mauritius Mauritius
Global Business Company Category 1 (GBC1)
Legal form: The Global Business Company Category 1 (GBC1) replaced the old Offshore Company under the Companies Act 2001. In terms of the Financial Services Development Act 2001, a GBC1 is defined as a company engaged in qualified global business and which is carried on from within Mauritius with persons all of whom are resident outside Mauritius Mauritius
Name of the company: Mauritius GBC names must end with one of the following words, or their relevant abbreviations - Limited, Corporation, Incorporated, Societe Anonyme, Sociedad Anonima. The following names to be used, require licensing: Bank, Insurance, Assurance, Re-Insurance, Trust, Trustee, Savings, Royal, Asset management, Fund Management, Investment Fund, Building Society, Municipal, Chartered. Names denoting any connection to local, state or national Governments are generally prohibited. Names can be in any language which uses the Latin alphabet.
Memorandum and Articles of Association: Once name approval has been obtained, three copies of the Memorandum and Articles of Association are submitted, together with a notice of the First Directors, Secretary and location of the Registered Office, and consent forms signed by the Officers. Companies holding Category 1 Global Business License can undertake banking or insurance business or solicit funds from the public, if the relevant authorities have licensed them. The legislation is in English and French whilst documentation may be expressed in any language but must be accompanied by a certified English translation.
Shareholders: Companies holding Category 1 Global Business License require a minimum of one shareholder and the same rule applies if the company is to be a wholly owned subsidiary.
The share capital: The usual authorized share capital is US$ 1 million with all of the shares having a par value. The minimum issued share capital is two shares of par value. Registered shares, preference shares, redeemable shares and shares with or without voting rights are permitted.
Directors of the company: Companies holding Category 1 Global Business License require a minimum of one Director who must be a natural person. Treaty access requires a minimum of two local directors.
Registered office and local agent/secretary: Mauritius GBC must have a Registered Agent and a Registered Office in Mauritius Mauritius
Taxation: Companies holding a Category 1 Global Business License - such companies are tax resident, subject to 15% income, but with an automatic tax credit making the effective rate 1.5% (3% as from 2003) and if they are correctly structured and managed may access Mauritius' tax treaty network. Neither capital gains nor withholding taxes are levied.
Audit and financial returns: Companies holding Category 1 Global Business License are required to prepare audited financial statements, which must be filed with the Financial Services Commission.
Meetings: The directors and the shareholders meetings need not be held in Mauritius Mauritius
Time needed for formation: Usually it is up to 3 weeks, but we need extra 7 working days for legalization of the documents and delivery by courier.
Global Business Company Category 2 (GBC2)
Legal form: The Global Business Company Category 2 (GBC2) replaced the old International Company under the Companies Act 2001. The International Company (IC) is the Mauritian equivalent of the International Business Company found in many offshore jurisdictions. It was established by the International Companies Act 1994, but is now constituted under the Companies Act 2001. The GBC2 is ideal for international trading, invoicing, licensing, international consultancy business and is often used to hold investments or other assets. An GBC2 can take any of the forms permitted under the Companies Act 1984 (now the Companies Act 2001). There are a number of restrictions on GBC2s, they may not: raise capital by public subscription; carry on banking or insurance business; own real estate in Mauritius
Name of the company: Mauritius GBC names must end with one of the following words, or their relevant abbreviations - Limited, Corporation, Incorporated, Societe Anonyme, Sociedad Anonima. The following names to be used, require licensing: Bank, Insurance, Assurance, Re-Insurance, Trust, Trustee, Savings, Royal, Asset management, Fund Management, Investment Fund, Building Society, Municipal, Chartered. Names denoting any connection to local, state or national Governments are generally prohibited. Names can be in any language which uses the Latin alphabet.
Memorandum and Articles of Association: In order to incorporate GBC in Mauritius Republic of Mauritius
Shareholders: A minimum of one shareholder is required, who may be an individual or a corporate body.
The share capital: There is no minimum capital requirement although at least one share must be issued and paid up. Registered shares and a variety of shares such as preferred, redeemable, and fractional are allowed. Shares may be issued with or without par value. Redeemable preference shares may be issued.
Directors of the company: The GBC 2 must have at least one director, which can either be an individual or another corporation. Directors can be of any nationality or residence, and need not also be shareholders.
Registered office and local agent/secretary: Every GBC must have a Registered Agent and a Registered Office in Mauritius
Taxation: A Company holding a Category 2 Global Business License does not pay any tax on its world-wide profits to the Republic of Mauritius
Audit and financial returns: Whilst there is no requirement to file audited accounts or annual returns with the authorities, a company is required to keep financial records, which should reflect the financial position of a company.
Meetings: The directors and the shareholders meetings need not be held in Mauritius Mauritius
Time needed for formation: Usually it is 3 working days, but we need up to 10 working days for legalization of the documents and delivery by courier.
Legislative provisions in Dubai
INCORPORATION OF A COMPANY IN DUBAI
Companies Formation
Following are the brief text of the new regulation and features:
1. Legislative Authority
The regulations are made by the chairman of the Dubai Port
2. Date of Enactment and Commencement
These regulations are made on and came into force on 15th January, 2003.
Features
a) Company status : Limited Liability
b) Number of shareholders : Minimum one and maximum not limited
c) Suffix to the name : “Limited”
d) Capital structure : Decided by the shareholders
Restriction on Activity
1. Not Allowed
Ø To carry on business with persons resident in the U.A.E.
Ø Own an interest in the real property situated in the U.A.E. other than approved by the Authority.
Ø To carry on banking, insurance, re insurance, insurance agent or insurance broker.
Ø To carry out any trade in the free zone or in the U.A.E.
2. Allowed
Ø Professional contact with legal consultants, lawyers, accountants and auditors.
Ø To hold shareholders and directors meetings in the U.A.E.
Ø To hold lease of property for use as registered office or own real property of the Palm Islands or Jumeirah Islands or any property owned by Nakheel Company LLC or any other real property approved by the authority.
Ø To hold an account in a bank in the U.A.E. for the purpose of conducting its routine operational transactions.
Ø To become shareholders in FZE, FZCO, LLC.
Formation Procedures
Ø Submit application to the Registrar.
Ø Provide Memorandum and Articles of Association prepared as per the regulation.
Registration
Ø The registrar is the final authority to accept or reject the registration. Upon registration an offshore company registration number will be allotted and registration certificate will be granted.
Corporate Capacity
Ø An offshore company has the capacity and privileges of a natural person.
Shares
Ø No bearer shares allowed.
Ø No different classes of shares allowed.
Ø All shares must be fully paid when allocated.
Administration
Ø A registered agent (legal firms, auditors, consultants) is required to be introduced to the Authority.
Ø A registered office to be maintained either in the Free Zone or in Dubai
Ø A registered agent’s office can also be used as the registered office.
Directors
Ø Minimum number of Directors shall be two.
Secretary
Ø Every offshore company shall have a secretary.
Meetings
Ø Shareholders’ meeting and Board meeting to be conducted periodically.
Ø Every company shall cause minutes of all proceedings at general meeting and its Directors.
Accounts and Audit
Ø Every offshore company shall keep accounting records. Accounts shall be preserved by it for 10 years from the date on which they are made.
Ø An offshore company’s accounts shall be approved by the directors and to be signed by one of them.
Ø An auditor shall be appointed for conducting the winding up proceedings.
Winding up
The winding up of an offshore company may either be:
Ø Summary under chapter 1 of the resolution;
Ø by its creditors under chapter 2 of the resolution;
Ø by the court under the U.A.E. Commercial Transactions Law No. 18 of 1993.
A liquidator shall be appointed for conducting the winding up proceedings.
Strike Company off Register
The Registrar may strike off the company from the register under the following circumstances by giving due notice:
Ø Offshore company is acting breach of Regulation 15 (permitted activities)
Ø To protect the good repute of the Zone.
Ø Non payment of fees.
FEMA Provisions for offshore subsidaries
FEMA PROVISIONS:
AUTOMATIC ROUTE
In terms of Regulation 6 of the Notification, an Indian party has been permitted to make investment in an overseas joint venture (JV) / wholly owned subsidiary (WOS) by submitting form ODA, duly completed, to a designated branch of an authorized dealer bank, unto 200 per cent of the net worth of the Indian party as on the date of the last audited balance sheet. This ceiling will not be applicable where the investment is made out of balances held in Exchange Earners' Foreign Currency
In terms of Regulation 6 of the Notification, an Indian party has been permitted to make investment in an overseas joint venture (JV) / wholly owned subsidiary (WOS) by submitting form ODA, duly completed, to a designated branch of an authorized dealer bank, unto 200 per cent of the net worth of the Indian party as on the date of the last audited balance sheet. This ceiling will not be applicable where the investment is made out of balances held in Exchange Earners' Foreign Currency
OBLIGATION OF INDIAN ENTITY
An Indian entity which has made direct investment abroad is under obligation to (a) receive share certificate or any other document as an evidence of investment, (b) repatriate to India the dues receivable from foreign entity and (c) submit the documents / Annual Performance Report to the Reserve Bank, in accordance with the provisions specified in Regulation 15 of the Notification.
An Indian entity which has made direct investment abroad is under obligation to (a) receive share certificate or any other document as an evidence of investment, (b) repatriate to India the dues receivable from foreign entity and (c) submit the documents / Annual Performance Report to the Reserve Bank, in accordance with the provisions specified in Regulation 15 of the Notification.
VALUATION
In case of partial / full acquisition of an existing foreign company, where the investment is more than USD 5.00 million, valuation of the shares of the company shall be made by a Category I Merchant Banker registered with SEBI or an Investment Banker / Merchant Banker outside India registered with the appropriate regulatory authority in the host country; and, in all other cases by a Chartered Accountant or a Certified Public Accountant. However, in cases of investment by way of swap of shares, in all cases irrespective of the amount, valuation of the shares will have to be by a Category I Merchant Banker registered with SEBI or an Investment Banker outside India
POST INVESTMENT CHANGES/ADDITIONAL INVESTMENT IN EXISTING JV /WOS
A JV / WOS set up by the Indian entity as per the Regulations may diversify its activities / set up step down subsidiary / alter the shareholding pattern in the overseas entity subject to the Indian entity reporting to the Reserve Bank, the details of such decisions taken by the JV / WOS within 30 days of the approval of those decisions by the competent authority concerned of such JV / WOS in terms of local laws of the host country, and, include the same in the Annual Performance Report (APR) required to be forwarded annually to the Reserve Bank.
A JV / WOS set up by the Indian entity as per the Regulations may diversify its activities / set up step down subsidiary / alter the shareholding pattern in the overseas entity subject to the Indian entity reporting to the Reserve Bank, the details of such decisions taken by the JV / WOS within 30 days of the approval of those decisions by the competent authority concerned of such JV / WOS in terms of local laws of the host country, and, include the same in the Annual Performance Report (APR) required to be forwarded annually to the Reserve Bank.
IMMEDIATELY AFTER REMITTANCE
Immediately after effecting the remittance, the AD banks are required to forward a report on remittance in the revised form ODR, in duplicate (format enclosed) to the Chief General Manager, Foreign Exchange Department, Overseas Investment Division, 3rd floor, Amar Building., Mumbai - 400 001. AD banks may ensure that the remittances on account of investments by a partnership firm / proprietorship firm are reported with the superscription “Remittance by partnership firm/ proprietorship firm". In cases where the investment is being made jointly by more than one Indian entity, form ODA is required to be signed jointly by all the investing entities and submitted to the designated branch of the AD bank. AD banks should forward to the Reserve Bank a consolidated form ODR indicating details of each party. The same procedure should be followed where the investment is made out of the proceeds of ADR / GDR issues of an Indian entity in terms of Regulation 6(5) of the Notification. The Reserve Bank would allot only one Unique Identification number to the overseas project.
ALLOTMENT OF UNIQUE IDENTIFICATION NUMBER
On receipt of the form ODR from the AD bank, the Reserve Bank will allot an unique identification number to each JV or WOS abroad, which is required to be quoted in all the future correspondence by the AD banks or the Indian entity with the Reserve Bank. AD banks may allow additional investment in an existing overseas concern set up by an Indian party, in terms of Regulation 6 only after the Reserve Bank has allotted necessary identification number to the overseas project
On receipt of the form ODR from the AD bank, the Reserve Bank will allot an unique identification number to each JV or WOS abroad, which is required to be quoted in all the future correspondence by the AD banks or the Indian entity with the Reserve Bank. AD banks may allow additional investment in an existing overseas concern set up by an Indian party, in terms of Regulation 6 only after the Reserve Bank has allotted necessary identification number to the overseas project
Summary of Master Circular on Investments by Residents in JV and WOS abroad
SECTION A
Objective of Circular:
Regulate acquisition and transfer of a foreign security by a person resident in India i.e. investment by Indian entities in overseas ‘joint ventures and wholly owned subsidiaries’ (said companies) as also investment by a person resident in India in shares and securities issued outside India.
Prohibition in investment
Indian parties are prohibited from making investment in a foreign entity engaged in real estate or banking business, without the prior approval of the RBI.
General Permission: A general permission is granted for purchase of securities as follows:
1. Out of funds in RFC a/c
2. As bonus shares issued on existing foreign holdings
3. When not permanently resident in India , out of their foreign currency resources outside India
SECTION B – DIRECT INVESTMENT OUTSIDE INDIA
Automatic Route (not applicable to investment in Pakistan
1. Ceiling: Investment to a max of 400% of net worth (as per last audited balance sheet) of company or person making investment. This ceiling is not applicable if investments are made out of EEFC a/c or out of funds raised from ADR’s and GDR’s. (Form ODI to be filed<30 days)
2. Ceiling applies to:
a. Investment as above in said companies
b. Loan to said companies
c. 100% guarantee given on behalf of said companies.
3. Conditions for Investments
a. It should be within the ceiling as above.
b. Amount and period of guarantee to be specified upfront.
c. Corporate guarantees to be reported to RBI (Form ODI-Part II)
d. Specific approval from RBI is required for charge on immovable property or pledge of parent company shares given in favour of foreign entity.
e. Indian party’s name is not in specified lists (Exporter’s caution list, defaulter’s list, etc)
f. Any transaction with said companies should be routed through a single branch of a bank.
g. If investment > $ 5 million, shares to be valued by merchant banker/investment banker, etc
h. If investment > $ 5 million, shares to be valued by CA or CPA.
i. If investment is by way of share swap, valuation to be only by Merchant banker and FIPB approval to be obtained.
j. If investment is made by Indian firm, the partners should hold such shares is regulations so require.
k. Investment, also through SPV, is permitted subject to above ceiling and conditions.
4. Acquisition of shares by issue of ADR’s and GDR’s to selling company:
a. It should be issued according the specified scheme
b. ADR and GDR should be listed on recognised stock exchange.
c. Indian company should back the issue of ADR and GDR with underlying fresh equity shares.
d. Number of ADR and GDR < Prescribed Sectoral cap as per FDI regulations.
e. Valuation of shares:
i. Listed Shares: based on the current market capitalisation of the foreign company arrived at on the basis of monthly average price on any stock exchange abroad for the three months preceding the month in which the acquisition is committed and over and above, the premium, if any, as recommended by the Investment Banker in its due diligence report in other cases.
ii. Unlisted Shares: As per authorised merchant banker.
5. Investment in unincorporated entities overseas in oil sector
a. Approval by competent authority is required.
b. No limit on investment by specified companies.
c. Other companies are subject to that 400% ceiling.
6. Method of funding:
Investment can be made out of the following sources:
a. Foreign exchange from Indian bank
b. Capitalisation of exports
c. Share swap
d. Proceeds of ECB / FCCB.
e. Exchange of ADR’s / GDR’s as specified above.
f. Out of balance in EEFC a/c (ceiling not applicable)
g. Proceeds of funds raised through ADR/GDR (ceiling not applicable)
7. Capitalisation of Export and other Dues:
a. Dues that can be capitalised: Dues towards exports, fees, royalties, etc for supply of technical knowhow, consultancy, managerial and other services.
b. Software Companies: Indian software exporters as permitted to receive 25% of export value to overseas start-up software company in the form of Shares without a JV agreement but with RBI permission.
8. Approval of RBI
a. Prior approval of RBI to be obtained.
b. RBI would approve after considering certain parameters.
9. Overseas Investment by Proprietorship or partnership firm
a. Prior approval of RBI required.
b. Following conditions to be fulfilled:
i. Firm should be a DGFT recognised star export house.
ii. Bank should be satisfied that the firm is KYC compliant.
iii. Overdue Exports < 10% of avg export realisation for past 3 FY.’s
iv. Exporter was not given any adverse notice by CBI, etc.
v. Amount of Investment =< lower of (10% of avg export realisation for past 3 FY.’s or 200% of net owned funds of the firm)
10. Overseas investment by registered trust / society
a. Trust deed / memorandum should permit such overseas investment
b. Proposed investment should be approved by trustees / governing body.
c. It should be KYC compliant
d. It is been in existence for >= 3 years
e. It has not received adverse notice from CBI, etc.
11. Post investment changes / additional investment in said companies
a. The JV/WOS can diversify its activities or set up a subsidiary in overseas.
b. The Indian entity should notify the same to RBI within 30 days.
12. Obligation of Indian entity
a. It should receive the share certificate/other document as evidence of investment.
b. It should repatriate to India
c. It should submit documents/APR as per the regulation 15 of notification.
13. Transfer by way of sale of shares of JV/WOS by Indian entity
a. Disinvestment can be made without prior approval of RBI if:
i. JV/WOS is listed overseas, or
ii. Indian entity is listed and net worth >= 100 crores, or
iii. Indian entity is not listed and investment =< USD 10 Million.
b. Conditions for disinvestment:
i. Sale
ii. Sale
iii. In case of unlisted shares, the share price >= price as per CA, CPA ascertained as per latest audited balance sheet.
iv. Dues to Indian entity by JV/WOS = 0
v. JV/WOS has been in operation >= 1 year and APR is filed
vi. Indian party is not under investigation by CBI, SEBI, etc.
14. Pledge of shares of JV/WOS by Indian entity
a. Pledged with bank or PFI in India
b. Pledged with overseas lender – Allowed if the lender is a regulated and well supervised bank and the total financial commitment of Indian entity is within the limit specified by RBI for overseas investment.
15. Hedging of overseas investment
a. Hedging of forex risk is permitted subject to verification of exposure by bank.
b. Cancellation is also permitted. However, 50% of such cancelled contracts may be allowed to be rebooked.
SECTION C – OTHER INVESTMENTS IN FOREIGN SECURITIES
1. General permission for purchase of foreign securities by individuals who is a person resident in India
The following transactions are allowed:
a. To foreign securities as gift person resident outside India
b. To acquire shares:
i. Under ESOP scheme issued by company outside India
ii. By way of inheritance from person resident outside India
c. To purchase equity shares offered by foreign company under ESOP based on certain criteria. Such shares can also be transferred provided the proceeds are remitted within 90 days from date of such sale.
d. Foreign companies can repurchase shares issued under ESOP provided:
i. Shares were issued as per FEMA regulations
ii. The repurchase is as per initial offer document.
iii. An Annual return is submitted through bank giving specified details.
e. In any other case apart from above, individual should obtain permission of RBI.
2. General permission for residents to acquire foreign securities:
Residents are permitted to acquire foreign securities if it represents:
a. Qualification shares for becoming director provided:
i. It is =< 1% of paid up share capital
ii. Consideration paid =< USD 20,000.
b. Right shares acquired by virtue of holding existing shares of the company.
c. Purchase of shares by JV/WOS of an Indian Company engaged in field of software subject to ceiling on the purchase price and other conditions.
d. Purchase of foreign securities under ADR/GDR linked stock options provided the consideration does not exceed USD 50,000.
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