Is The Independent State of Samoa, one of the best destinations to protect your assets? Absolutely!
Ever heard of A “Chameleon Corporate Structure”?
By Lionel Iruke, Esq.
Can you imagine an entire day has to disappear from your calendar? Unthinkable is it? At an age where every second is precious, this seems impossible. But the impossible is what happened in the tiny Pacific Island of Samoa on Friday, 30 December 2011 when the country skipped that date.
But Samoa is unique for a number of other important reasons as well. It is one of the last remaining countries in the world which provides strong bank secrecy and also has a specialized international company structure for businesses. But before we go into the business-related details, let us know more about Samoa.
Samoa is one of the southernmost inhabited places on the planet and consists of two major islands – Upolu and Savai’i which are situated between New Zealand and Hawaii in the Southern Pacific Ocean. The islands are home to close to 200,000 persons. A large percentage of the population, however, resides overseas primarily in Australia and New Zealand. The main languages spoken in the country are Samoan and English. The islands have a long and checkered history which also involved colonization efforts by Germany and the USA and occupation by New Zealand. It is however now an independent nation and a favored tourist destination for tourists seeking offbeat places.
Let us get down to Business in Samoa
Samoa is more than just beaches and forests. It is also a favored business destination due to its business-friendly laws and a specialized offshore business structure which has been built keeping in mind the needs of international corporations.
The First step to know about Business in Samoa would be to know the Samoa International Financial Authority (SIFA) which has been designed as the single point contact authority to regulate all offshore business on the island.
The next step would be to know about the legal structures which can be formed in the country. We first start off by looking at the types of companies and the unique features of the company structures.
The most renowned among the company structures is a Samoa International Company (IC) enviously dubbed “a Chameleon Corporation” formed under the International Companies Act, 1987. Distinctive and highly specialized asset protection minded corporate structure fairly unique in the legal world.
A Samoa IC provides a number of inherent benefits including:
- The requirement of only one director and shareholder whose names are not available in Public Records
- No requirement of filing accounts or submitting annual returns
- An international company may acquire, hold, dispose or deal with the whole of any part of the undertaking of any other company association or business
- No taxation of International Companies in Samoa
- Meetings across the globe
Contingent Protection & Vesting– “The Chameleon Clause”
The most important factor which differentiates a Samoa International Company is the unique asset protection mechanism provides under the Act. The Act through Section 228(B) correctly titled “Asset protection” allows for the vesting of the assets of the company with another natural or legal person on the happening of any specific activity like an expropriation or court order. This feature ensures the safeguarding of the company assets under unforeseen circumstances and is unique among major jurisdictions.
Let us try to understand this situation from a practical perspective. The first step here is the incorporation of a Samoan International Company (Let us call it Company ABC) with a clause in the articles stating that the assets held by a particular person in the form of shares or any other interest in the company can be transferred on the happening of any particular event to any other person or persons (Legal or natural). The next step is the designation of the event and the person(s) to whom it has to be transferred on the occurrence of that event. The person(s) can be changed as and when required and need not be fixed.
Now, let us see how it will work in practice. Let us consider Mr. A is a shareholder and member of Company ABC that we just incorporated. Keeping in mind the Asset Protection clause, he has informed the company that his interests should be transferred to two natural persons- Mr. B and Mr. C on the happening of an event which he specifies as any – “order by any court across the world for the seizure of his assets.”
Unfortunately, two years later such an order is passed. Now, automatically on the passing of the order, the assets of Mr. A stand transferred to Mr. B and Mr. C as per the clause and the court can no longer seize the assets as belonging to Mr. A. The Act also clearly provides that Mr. A or anyone else shall no longer hold any further rights on the assets which were automatically transferred due to the court order thereby negating any possibility for controversies. A stroke of genius indeed!
An LLC to limits your tax liabilities
Samoa through an amendment in the International Companies Act in 1996 created a Samoa Limited Life Company (LLC) structure based on the Wyoming Legislation (USA) primarily for compliance with IRS requirements and to make it a Tax Transparent structure. An LLC is for a period of 50 years unless specified otherwise.
Segregated Fund International Company
The third major form of Company in Samoa is the Segregated Fund International Company (SFIC) formed under the Segregated Fund International Companies (SFIC) Act. This company form allows for the creation of separate structures in a single company for undertaking different businesses without sharing the risks of the businesses. Inherent benefits of an International company like no taxation remain both with an SFIC and an LLC.
Let us understand the practical benefit of such a company. Let us consider that you have to manage the assets of a family with multiple family members. The wealth of each member comes from a single pool but the members wish to invest their assets differently.
In such a scenario a Segregated Fund International Company is an ideal structure because although there is one company for managing the assets, they can be divided into a number of completely separate individual funds and each family member can be given his share of the asset through a segregated. In the future, if any liabilities arising out of the investment of transactions of any of the funds, they can be limited to that particular fund only.
So, supposedly if a family member Mr. A with a segregated Fund of 1 million incurs a liability with any creditor, the creditor will have access to the funds of Mr. A only and not the entire family or the company.