The impact of choosing immature legal systems as locations for personal residence and for domiciling a private investment holding company, and the ripple effect of the Panama Papers.

ASSETS LOCKED BY FATHER’S DEMISE WHILE IN SOLE CONTROL, LEADING TO COMPLICATIONS IN THE UNLOCKING PROCESS CAUSED BY JURISDICTIONAL WEAKNESSES AND THE DEMISE OF THE LOCAL REGISTERED AGENT AS THE RESULT OF THE PANAMA PAPERS.

Father at the time of his decease was the 100% owner and sole director of an offshore company holding, in the custody of brokers, a significant investment portfolio over which the father as sole director had exclusive control. This recipe of total sole control which the father had favoured during his lifetime was to produce hurdles for his heirs after his demise.

My involvement

I was approached by one of the onshore resident siblings following the father’s decease whilst he was resident and domiciled offshore, and sole director and shareholder of the offshore company. The intent was for me to become a director and constitute a functioning offshore board, with me as one of the members, to resume management of the investment portfolio held in the custody of London brokers.

I identified candidate law firms in the company’s domicile (“Jurisdiction 1”) to quote for assisting with a grant of representation to the Estate by the local Court, and in the domicile of the deceased at the date of his death whilst resident there (“Jurisdiction 2”), whose brief was to provide an affidavit of local law in Jurisdiction 2  as to who was entitled to apply for the grant in Jurisdiction 1. Instructed the chosen firms on behalf of the heirs.

I was advised to file an application in Jurisdiction 1 for letters of administration to the Estate. Managed the frustrating lack of familiarity of both jurisdictions in dealing with the international nature of the process, which first led to the affidavit of law from Jurisdiction 2 being signed and sworn with an error in form, and then led to further requirements from jurisdiction 1 for supporting affidavits from the jurisdiction of residence of the heirs (a third jurisdiction) and an Administration Bond for the Court, and then to fee quotes from the offshore lawyers having to be renegotiated in order to move forwards, following all of which the first application in Jurisdiction 1 was rejected and the Court insisted on a new application being filed for a grant of probate, which was then done but at further cost of time and money.

Eventually probate was granted, by which time the registered agent in Jurisdiction 1 had been forced to cease trading by the ripple effect of the Panama Papers, having failed to organise payment of the requisite annual fee to the Registrar of Companies, which it transpired had led to the company’s name being struck off the register. Identifying and then instructing on behalf of the Executor a law firm to assist with restoration of the company to the register and to advise on who is entitled to appoint new directors and registered agent, and how that can be achieved to secure the restoration of good-standing and the proper functioning of the offshore company once more, so that its new directors can resume instructions to the London brokers to manage the investment portfolio.

Outcome

The project is ongoing. The letter of engagement has been negotiated and signed on behalf of the Executor with the new law firm in Jurisdiction 1, the application to the registrar of Companies in Jurisdiction 1 for restoration to the register is in process and will become the precursor to the appointment of the new board and new registered agent.

It will then be possible to resume full functioning of a properly organised offshore company, with much knowledge gained by all those involved of the responsiveness, user-friendliness and overall maturity of the jurisdictions involved. Lessons learned, invaluable for future planning for clients, with regard to the choice of jurisdictions and the depth of experience of advisers operating there.