General features – company formation services in the Cook Islands

A progressive offshore jurisdiction

The Cook Islands is a progressive offshore jurisdiction with sophisticated and innovative legislation designed for:

Next, we outline the Cook Islands offshore legislation and the services provided by TBA & Associates.

Trust Companies

A company is not permitted to carry on business in the Cook Islands as a trustee company unless it is registered pursuant to the provisions of the Cook Islands Trustee Companies Act 1981-1982.

Carrying on business as a trustee is widely defined and includes acting as trustee, executor or administrator.

The control of the registration of trustee companies lies with the Cook Islands Financial Supervisory Commission, which looks at the suitability of the applicant and the experience of this associated with the applicant. Minimum capitalisation requirements also apply.

International Companies

The Act 1981-1982

A company can be incorporated under the International Companies Act 1981-1982 as an international company if its shareholders are non-resident of the Cook Islands, however, a trustee company registered under the Trustee Companies Act 1981-1982 may hold shares in an international company and may be the sole shareholder. TBA & Associates can incorporate an international company within 24 hours of receipt of instructions.

Features

Taxation

The legislation expressly provides that international companies and foreign companies registered under the International Companies Act 1981-1982 will NOT be tax resident in the Cook Islands, if the Directors are not resident in the Cook Islands, and control of the Company is exercised from outside the Cook Islands. Therefore the Company will not be subject to Company income tax in the Cook Islands, under such terms, the same way their shareholders will not be subject to any form of taxation including stamp duty.

This changes the previous position, where the International Companies in Cook Islands would be subject to tax in the Cook Islands from 01 January 2022. That rule will now only apply if the Company is controlled and managed from within the Cook Islands.

However, from 01 January 2022, any dividend payments (including previous retained earnings and any current year profit) will be subject to 15% withholding tax. This rule will be reviewed in 2022 and, most probably it may be changed or removed. IN such case, should you wish to consider distributing those retained earnings before 31 December 2021, please contact us to assist you.

The C.I. International Company is still required to keep proper accounting records with a copy in the Cook Islands. This has not changed. The company will still be required to file a tax return in the Cook Islands from 2023 (relating to 2022) onwards.

Forms of entities

The Act permits the incorporation of various types of companies other than companies limited by shares. These include no liability companies, companies limited by guarantee, unlimited companies and mutual companies.

Special features of the Cook Islands International Companies Act 1981-1982 include:

Transfer of corporate domicile

One of the essential criteria for international tax planning is flexibility. There should be an ability to modify promptly an offshore structure as a consequence of a change in circumstances and the Cook Islands legislation permits such flexibility through provisions which enable a company to transfer its domicile.

The International Companies Act enables:

• (a) companies incorporated in other jurisdictions to transfer their registration to the Cook Islands as international companies, and;
• (b) international companies to transfer their registration to other jurisdictions.

Stock exchange listing

Amendments to the International Companies Act in 1991 provide for International Companies to become listed on a number of major Stock Exchanges. In addition foreign companies already listed on designated stock exchanges can now make application to transfer their domicile to the Cook Islands.

Share capital

The Act provides considerable flexibility in regard to reduction of share capital. Specifically, the Act allows:

• a company to purchase and cancel its own shares;
• redemption of shares without maintenance of capital and without the need for a Court order;
• a company to finance the purchase of its own shares.

Insurance Companies

Offshore insurance business is defined as any insurance business where each of the insured, the policy beneficiary and the owner of the policy are not domiciled nor ordinarily resident in the Cook Islands and are not domestic companies or a trustee company.

Only an international company or a foreign company registered under the International Companies Act 1981-1982 may be licensed to carry on offshore insurance business. A licensee is not permitted to transact any insurance business other than offshore insurance business and must use the services of a registered trustee company to conduct such business.

In addition to the general secrecy provisions of the International Companies Act 1981-1982, the Offshore Insurance Act contains strict secrecy provisions which impose penal sanctions on any Government official, officer or employee of a licensee or of its auditor who discloses any information concerning the offshore insurance business of the licensee.

TBA & Associates is fully experienced in the formation and management of captive insurance and re-insurance companies and further details are available through any office of the TBA & Associates Group.

Banks and merchant banks

The Banking Act requires that all licensed banks have a physical presence in the Cook Islands. The Financial Supervisory Commission considers that “physical presence” means that the mind and management of the bank must be based in the Cook Islands, that the bank have an office in the Cook Islands which is open to the public during normal business hours, that all records of the bank must be kept within the Cook Islands and that all transactions of the bank must be approved by the management of the bank in the Cook Islands.

International Trusts

Application for registration is made by a licensed Trustee Company. The application must certify that no resident of the Cook Islands is a beneficiary, advise the date of the trust deed, the name of the trustee and the name of the trust.

There is no requirement to file the trust deed with the Registrar. Any information pertaining to an international trust, including the deed of trust and the identity of parties connected with the trust is confidential and subject to the secrecy provisions of the Act.

The Act creates a flexible tax effective environment in which the familiar English trust concept can be used for both tax planning and asset protections purposes.

The legislation overcomes specific common law problems to provide protection for settlors and beneficiaries from unwarranted claims against trust assets.

More recent amendments in 1996 and 1999 have expanded the definition and role of the protector, expanded the scope of the Purpose Trust and adopted with slight modification Section 50 of the New Zealand Trustee Act 1956 in respect of Custodian Trustees. Asset protection trusts are explained further.

Partnerships

The Act also permits the registration of limited partnerships comprising of at least one general partner and one limited partner. One of the general partners must be either a trustee company, an international company or a registered foreign company.

Registration of an international or limited partnership is a simple procedure and the partnership agreement does not need to be filed. The International Partnerships Act contains extensive secrecy and confidentiality provisions, including penal sanctions for their breach.