COMPANY STRUCTURE AND REGISTRATION PROCEDURES IN THE BVI
What is a Power of Attorney?
In the context of offshore company management, a Power of Attorney (POA) is a legal document, by which the operational rights to represent and bind the offshore company and to act on its behalf are granted to an otherwise unrelated individual. By virtue of having a Power of Attorney such individual becomes a representative of the company. The most common practice in the offshore services industry is the issue of a Power of Attorney by the nominee director (on behalf of an offshore company) to the actual beneficial owner of that company.
In general the Power of Attorney can either have the widest possible scope of representational powers (General POA), or be limited to some particular rights and activities only (Special or Limited POA). A Power of Attorney can convey to its holder such rights as the opening and operation of bank accounts, entering into business contracts, opening and operating branches and subsidiaries, assuming all sorts of liabilites and executing rights on behalf of the particular offshore company. A company may raise one or several Powers of Attorney, with identical or varying scope of operational rights. Thus the operational activities of the same company can be split or shared between several individuals – for instance, by the beneficial owner of the company and his partners or members of family.
When directorship services are provided by BVI local, licensed and regulated service provider (us), only Limited Power of Attorneys are issued. Reason being that Powers to be granted must be limited to the purpose for which they must serve. General Powers of Attorney are not permitted as they grant the attorney in fact powers which are only to be reserved by a director. General Powers of Attorney also allow the issuance of third party powers without our prior consent and approval and under BVI law we are required to all know our clients that is having the adequate due diligence on them. However, our Limited Power of Attorney is wide enough in its scope and allows for the incorporation of most of client needs.
There are alternative options available for the appointment of licensed and regulated directorship services form other jurisdictions.
While the concept and usage of Powers of Attorney is probably the most convenient method of the practical operation of an offshore company by its owner, it has its theoretical risks. It may be argued (by some tax authority, for example), that an individual who routinely uses a General Power of Attorney to conclude contracts and enter into obligations on behalf of an offshore company, IS actually controlling this particular offshore company. As a result of such implication the dealings between such offshore company and, say, a domestic company owned by the same individual, may be disregarded for tax purposes as bogus transactions concluded "at arms length". From this perspective it may be wiser to directly involve the third-party company manager into the conclusion of such sensitive transactions and to actually limit the practical usage of the Power of Attorney only to those transactions which are not subject to potential controversy.