In the current economic climate, there has been increased interest from clients and their advisers in using offshore companies in cross-border restructurings. The use of offshore companies in restructurings is often driven by tax and structuring advice, where there is a desire to continue the group operating as a going concern and to achieve a favourable outcome for creditors (usually outside of formal insolvency proceedings).
Such companies can offer a number of advantages when used as part of a restructuring plan, including:
- corporate flexibility, eg with various options for thereturn of income and capital to shareholders and share issues/transfers not being subject to stamp duty;
- tax neutrality, as the vast majority of such companies are not subject to local income tax, capital gains tax or corporation tax;
- bankruptcy remoteness, eg through the company shares being owned by a charitable trust (ie an orphan SPV) and including non-petition provisions in the transaction documents; and
- the flexible creation and enforcement of share and asset security.