There are subtle nuances between the terms exempted companies, exempted limited partnerships and non-resident companies, but all of these types of businesses are generally referred to as offshore companies and they are established for a number of reasons. The most common is as tax-efficient vehicles for international trade. They are also used to simply hold property and investments or as part of a more complex financial structure. Offshore companies can be used for anything from shipping operations or stock dealing, to the ownership and licensing of patents or even aircraft financing. Companies can be formed with just one shareholder and generally, with a few exceptions, there are no minimum capitalisation requirements. Another major reason why corporations or wealthy individuals establish offshore firms is to achieve anonymity or to protect their privacy. The Registrar of Companies can only release the name and type of company, its date of registration, the address of the registered office and the company’s status. Disclosing any other information is prohibited unless requested by a law enforcement agency.

As a tax neutral jurisdiction exempted companies registered in Cayman are guaranteed a tax-free status for twenty years and there is no need for the directors to file accounts or for the firms to be audited and there are only minimal reporting requirements. Shares can be issued but these shares must be held by a custodian approved by the Cayman Islands Monetary Authority, (CIMA) and they can be in the name of an individual or a corporate organisation. Cayman’s Confidential Relationship (Preservation) Law makes it a criminal offence to disclose confidential information or to attempt to obtain confidential information in relation to all types of Cayman Companies.

Although the Cayman Islands is not the only jurisdiction to offer this type of financial offshore service it is considered a favourable location for registering companies. Cayman has a well-established legal regime, it is a politically stable British Overseas Territory, it has flexible corporate structures and, increasingly attractive in the fast paced world of international finance, speedy registration. Companies can be registered within 24 hours provided all the right information and documents are provided. The registry also has an on-line service known as CORIS which allows authorized users direct access their company information and associated transactions 24-7.

Although the offshore world is often considered to be shrouded in mystery, extremely complex and far too difficult for the man in the street to comprehend, setting up an offshore company is a fairly simple procedure and it is not all that different from the way one would set up a company in North America, Europe, or any other jurisdiction offering modern corporate legislation. Anyone wanting to incorporate an offshore company must in the first instance meet all the local anti money laundering legislation and the prevention of terrorism laws which are increasingly strict. Under the strict regime of Know Your Client, (KYC) all new clients have to prove who they are, where they live and the reason for the establishment of the company.

The cost of incorporating a company offshore is considerably more expensive in the first instance than to register a company in the United States or the United Kingdom for example, but the long term benefits often outweigh the initial cost. As offshore companies don’t pay sales or income tax or have to submit accounts this soon makes up for the establishment costs. Even if a company is dormant or generating millions in profit the owners do not have to pay tax or reveal anything but the most basic information about the company’s activities.

As straightforward as it can be to establish an offshore firm most corporations and individuals still employ a Caymanian firm to help them incorporate their offshore entities and then administer the company. This is why the island is home to a vast army of corporate lawyers and financial experts. All of the services which these organisations provide are governed by the Companies Management Law. The locally based firms can offer numerous professional services required for an offshore firm to comply with international financial regulations including registered offices, directors, nominee shareholders and other officers, and company management services.

Even though the Cayman Islands has been applauded in recent years for meeting the increasingly high standards of international financial regulations the offshore world still attracts considerable political controversy. While critics say that offshore jurisdictions and in particular the privacy laws, offer a safe have for the ill-gotten gains of criminals, the US government is becoming increasingly critical of the fact that many American firms are using jurisdictions such as the Cayman Islands to avoid their federal tax obligations.

A number of leading United States senators and congressmen have pointed the finger at various law firms in the Cayman Islands that administer thousands of American and other international subsidiaries. Some 150 leading US corporations have subsidiaries registered in Cayman including Intel and Coca Cola and senators such as Chuck Grassley, (Republican) believe these and other companies are costing the US treasury billions of dollars in lost tax revenue.