Anguilla: Update

Anguilla’s position in the global offshore financial services industry has never looked more promising. The main factors which set Anguilla apart are: its stable constitutional position as a British Overseas Territory; its well regulated and competent financial services industry; its status as a true zero-tax jurisdiction; and its market leading, state-of-the-art, Anguilla Commercial Online Registration Network (ACORN), which revolutionises the company formation process.

The other factors on which Anguilla relies in order to maintain its competitive edge are the legislative framework for the types of offshore business likely to be in demand in the future and the availability of the necessary communications facilities.

Anguilla has been at the forefront of the Internet explosion. In November 1998, ACORN, Anguilla’s state-of-the-art on-line company registration system went live. Companies can be incorporated by authorised agents virtually instantaneously, 24 hours a day 365 days a year, from anywhere in the world, thus cutting across geographical boundaries and time zones.

While offshore activity throughout the world was threatened when the OECD and the major financial powers began their crusade for greater fiscal transparency, Anguilla’s favourable position as a well regulated British Overseas territory has stood it in good stead. Coupled with its advanced corporate and trust regime, and the development globally of a more selective approach from consumers of offshore financial services, Anguilla has begun to realise its potential as a jurisdiction of choice for the discerning and continues to gain market share.

Anguilla has one of the highest per capita penetrations of information technology in the world. In addition, this penetration is diffuse: it pervades the public and private sectors; schools and homes; and both domestic and offshore businesses. Commercially, the plethora of web businesses choosing Anguilla as their initial base of operations, the growth of a community of programmers and other technicians on the island, and the commitment of the Government of Anguilla to modernisation exemplified by ACORN are all factors which have encouraged the younger generation to embrace the new technology.

A major potential advantage of Anguilla as an ecommerce situs is that it is one of the few true "zero tax" jurisdictions. Unlike many of its competitor jurisdictions there are no income, corporate or inheritance taxes of any kind. This means that companies formed under the Companies Act (which includes the Anguilla Business Company) can conduct business locally without any liability to local taxes. In most of Anguilla’s competitor jurisdictions it is necessary to do business through an International Business Company (IBC) to secure freedom from taxation, but an IBC is, by definition, precluded from trading within its jurisdiction of incorporation – hence a domestic Business Company would need to be used which would be subject to local taxation.

Thus, an active internet business in Anguilla will normally result in elimination or indefinite deferral of tax in the investor’s jurisdiction, at least until a dividend is paid. Likewise, properly structured sales by an internet business located in Anguilla, with its server in Anguilla, should incur no tax liability in the buyer’s country. Furthermore, with proper structuring, tax free loans to shareholders may be possible without liability to tax.

The Government has published a forward looking telecommunications policy entitled: "A New Telecommunications Regulatory Framework for Anguilla" (http://www.gov.ai/telecommunications/). In the words of its opening paragraph: The objective of this Policy is to create an open market for the provision of facilities and services and conditions in Anguilla’s telecommunications sector in support of the continued development of tourism, financial services and information-based services on the Island, including the processing and secure storage of all types of data, encryption, software development, web hosting and back office services in the information technology sector, and international finance, trust and company management, insurance, and company registration in the financial services and insurance sectors. This reform project is consistent with the liberalisations taking place across the region and with the pro-competition policies contained in the WTO agreement on basic telecommunications services.

In furtherance of the Policy, the Anguilla Telecommunications Act was enacted in 2003. As a consequence of the Act there has been increased competition in the telecommunications industry and a consequent dramatic reduction in rates and an increase in affordable bandwidth. These developments signal good times ahead for those in Anguilla who see the future of the financial services industry as heavily dependent on information technology at the cutting edge.

The Anguilla Commercial Online Registration Network (ACORN) is a state-of-the-art Companies registry system. It allows via the internet, the electronic incorporation and registration of: ordinary companies, international business companies, limited liability companies (LLC’s), and limited partnerships. Since its introduction ACORN has been constantly maintained and improved. All legislative and regulatory changes are immediately programmed into ACORN.

Companies can be incorporated instantly 24 hours a day, 365 days a year from anywhere in the world. In addition to company registrations, ACORN also enables all other corporate registration activities, which are either required or permitted under the appropriate company legislation, to be undertaken online.

The system is available to all licensed practitioners within Anguilla and to their overseas agents. Overseas agents are required to be registered with the Financial Services Department of the Government of Anguilla in order to access the Registry’s services directly through ACORN. The system allows users to do electronically all that is currently done or can be done in paper from within the Anguilla Companies Registry. Registered users will be provided with software that enables them to have a secure digital encrypted access to the system, supplemented by individual user password controls.

The ACORN menu presents a list of administrative functions, name search and name reservation, and three types of corporate vehicle, plus the limited partnerships mentioned above. The administrative functions permit the user to establish password controls, view all Government fees, do full company searches, view announcements, view the legislation particular to a document being submitted, or to an activity being undertaken at any time, obtain help with respect to any function of the system at any time and retain incomplete documents in a separate pending file.

Name searches can be done alphabetically, phonetically or on a keyword basis. The system tells the user immediately whether the name is available, not available or reserved. The name may then be either reserved for a period of ten days, without cost, or for a longer period with the payment of the relevant fee. Alternatively, the name of the company may simply be incorporated directly. If the user wishes to reserve a name, the system produces a referenced name reservation document. The system allows multiple searches and reservations. The names of companies and their articles can also be incorporated in foreign languages.

For incorporations the user selects one of the types of company or partnership available, and the system takes the user through the incorporation process by a system of boxes on screen to be completed, or drop down boxes with options to be selected. Standard sets of articles of incorporation can be pre-established in the system for use with incorporations.

Once completed, the screen provides the user with a completed registration document for checking and final submission. On submission, the certificate of incorporation appears immediately on screen and can be printed out. A sub-menu of activities for each of the corporate vehicles and limited partnerships is also available. This lists all documents and registry activities which the relative corporate legislation either permits or requires the registered agent to file. The system takes the user through each process with a "Help" button and a "Legislation reference" button available at all times.

ACORN is unique in that it allows direct access for overseas agents. An overseas agent is a professional or professional firm experienced in the business of trusts and/or company management and formation. An overseas agent must become a client of a licensed Anguillian trust company or company manager (local agent) by means of an agency agreement, which has been approved by the regulatory unit. The licensed local agent must do proper due diligence on his client, who is effectively an intermediary, and he must satisfy himself that the intermediary in turn does proper due diligence on his own client, the end user. However, Anguilla goes one step further in the due diligence process in that the overseas agent must additionally be vetted and approved by the regulatory unit before direct access to ACORN is allowed.

Once approved, the overseas agent can incorporate companies directly through ACORN. However copies of all documents filed are automatically sent to the licensed local agent who will obtain for his files all the necessary information and documents in accordance with good practice within the industry.

A final regulatory point is that both the regulator and the local agent can stop access to ACORN at any time should any concerns arise. All other restrictions on use of words denoting financial services are also in-built into the ACORN system.

The KPMG Review of Financial Regulation in Anguilla stated: "Anguilla has many of the features necessary to be considered a well-regulated jurisdiction. Of particular note is the development of the ACORN company registration system and the operation of the company registry in general, which we consider to be an example of how on-line registration can be developed in a well-regulated manner."

In 1998 and 2000 much of the substantive offshore legislation enacted in Anguilla during 1994 was amended and brought up to date.

• an IBC may not hold real property situated in Anguilla, except an office for operating its business;

• an IBC may use the name of a company which has been struck off the register for over three years;

• an IBC may issue various types of shares and other securities, subject to its articles or by-laws;

• an IBC may have an authorised capital in any currency approved by the Registrar;

• provisions covering the definitions and consequences of an IBC making unlawful distributions;

• an IBC may create a priority on a mortgage or charge by registering same at the Companies Registry;

• provisions covering consequences and actions required of an IBC when a registered agent ceases to act on its behalf;

• an IBC may have only one director, together with provisions for meetings and resolutions of the company, where only one director exists;

• provisions regarding proper accounting records;

• a company incorporated elsewhere may continue as an IBC in Anguilla, even though the laws of the jurisdiction in which it is incorporated do not permit its continuation;

• provisions clarifying the liquidation and dissolution of an IBC by the Court;

• provisions clarifying the duties of an official liquidator of an IBC;

• provisions allowing a shareholder or debenture holder of an IBC to apply to the Court to carry out an investigation and the powers of the Court in this regard;

• an IBC may elect to register directors and shareholders, and to cancel such registration;

• regulations amending registration and filing fees for IBCs by creating a reduced scale of fees for documents filed electronically using the ACORN system.

• provisions clarifying the requirement for shareholder meetings, and the requirement for Companies to keep proper accounting records;

• provisions covering the consequences and actions required of a Company when a registered agent ceases to act on its behalf

• provisions clarifying the requirements for annual returns

• the inclusion of detailed new merger and consolidation provisions;

• provisions covering the revival of a company by both the Registrar and the Court;

• the inclusion of detailed enforcement measures and other protective actions by members of a company;

• regulations amending registration and filing fees by creating a reduced scale of fees for documents filed electronically using the ACORN system.

• provision for one member LLCs;

• provision for not-for-profit LLC’s;

• provisions covering the consequences and actions required of an LLC when a registered agent ceases to act on its behalf;

• provisions clarifying the liquidation and dissolution of an LLC;

• regulations amending registration and filing fees by creating a reduced scale of fees for documents filed electronically using the ACORN system.

• clarifying that a foreign company can be a general or limited partner;

• provisions clarifying the dissolution of limited partnerships;

• provisions for the assignment of the interest of a limited partner;

• provisions clarifying the confidentiality of the records of limited partners;

• regulations amending registration and filing fees by creating a reduced scale of fees for documents filed electronically using the ACORN System.

The Anguilla Insurance Act 2004 was enacted by the Legislative Assembly in September 2004. It provides up-to-date insurance legislation including flexible provision for captive insurance and wide scope for both domestic and foreign business.

The Anguilla Mutual Fund Act 2004 was enacted by the Legislative Assembly in August 2004. It provides for a reasonable regulatory framework for the management and administration of mutual funds.

The Protected Cell Companies Act 2004 was enacted by the Legislative Assembly in August 2004. It provides flexible provisions for new and existing companies in the insurance industry or for other purposes.

The Proceeds of Criminal Conduct Act and Regulations were enacted and came into force on October 16, 2000. Essentially this is all crimes money laundering legislation based upon the UK Criminal Justice Act 1993 that criminalises dealings in the proceeds of crime.

The Anti-Money Laundering Reporting Authority Act 2000 was enacted and came into force on October 16, 2000. The purpose of this legislation is to establish money laundering reporting authority for suspicious transactions noticed by persons involved in the provision of financial services.

Offshore banks and trust companies have been regulated since 1991 and company management companies since 1994. A new Trust Companies and Offshore Banking Act and Company Management Act were passed in 2000 providing for more rigorous licensing and regulating provisions for these financial services providers.

All of the above enactments ensured that Anguilla was never black listed as a "non-cooperative" jurisdiction by the Financial Action Task Force (FATF).

The KPMG Report commissioned by the UK, reviewing financial regulation in the Caribbean Overseas Territories and Bermuda, and published in October 2000, generally gave Anguilla’s financial services industry high marks in already meeting international standards and practices. It commented particularly on the sound regulatory aspects of Anguilla’s electronic Companies Registry, ACORN.

Anguilla, however, was listed as a tax haven in the 1998 OECD Report on Harmful Tax Competition. In February 2002, Anguilla signed a letter of commitment with the OECD to take effect commencing January 1, 2006 for the exchange of information in criminal tax investigations provided there is a level playing field in the sense that other OECD territories as well as the smaller jurisdictions outside of OECD comply. The letter of commitment underscores the fact that in respect of civil tax matters, Anguilla will not collect taxes on behalf of any foreign government nor will it institute legal proceedings for any such collection.

Anguilla has demonstrated its desire and commitment to be in the number of well regulated jurisdictions. It intends to adhere to the highest standards of regulation and quality and believes that its reputation in this respect will continue to enable it to attract quality business without unduly compromising the privacy of its clientele.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.