What happens when I don’t liquidate my offshore company?
International Business Corporations and offshore companies start and end every day. Registered legal persons separates the legal entity from the shareholders. The offshore has legal corporate personality. As such, only the company is responsible for its conduct and staff members and directors have a duty towards the company. There is discretionary jurisdiction to hold natural persons responsible for acts of the company by piercing the corporate veil. Case law and jurisprudence applicable to offshore financial centers and the companies incorporated offshore also allow the court to pierce the corporate veil.
The doctrine to pierce the corporate veil furthers the personal responsibility and liability of corporate staff members. Such acts are possible when the company is used as a façade or to conceal liability for impropriety. Even though a winding down procedure or liquidation ends the existence of the company, improper closure can lead to personal responsibility of the director or beneficial owner of the company.
Offshore companies often have foreign ownership. Their business activities may take place in several jurisdictions. When activities end, all the connections with service providers must be terminated too. This does not always happen when offshore companies are unofficially put asleep. Consequently, civil agreements continue for a company that officially does not exist anymore. In some legal systems this is an offense that triggers personal liability.
International projects and short-term assignments delivered by consultants are often suitable for the use of offshore companies. At the end of the project, the assignment stops, and the special purpose vehicle may become obsolete. In such events, the closure or liquidation of the company does not necessarily have to be difficult and can often take place without the intervention of the courts. However, such a closure must follow the rules in order to be effective.