Seychelles’ offshore financial sector - 769 companies struck off register |11 May 2016
Seven hundred and sixty-nine offshore companies that have been found to be non-compliant with parts of the International Business Companies Act have been struck off the register by the Financial Services Authority.
Seychelles NATION has learned that in 2014, 128 international business companies (IBCs) were taken off the register by the Financial Services Authority (FSA) and the number increased to 489 in 2015.
From January 1 to May 5 this year, a total of 152 offshore firms have been deregistered.
Also, three international corporate service providers (ICSPs) have had their licenses revoked and another has been suspended.
Finance, Trade and the Blue Economy Minister Jean-Paul Adam said the FSA is very tough with all the offshore companies and those that are found to be non-compliant are dealt with accordingly.
“It is the country’s reputation that is at stake when registered agents do not follow the rules and only do the bare minimum when registering offshore companies. This is not what we want. We want them to gather as much information as possible to make sure all offshore companies are transacting according to the law,” said Minister Adam in a recent interview.
The FSA is the regulator for non-bank financial services in Seychelles and it was established under the Financial Services Authority Act, 2013. The authority is responsible for the licensing, supervision and development of the non-bank financial services industry of Seychelles. It is also responsible for the registration of international business companies, foundations, limited partnerships and international trusts in Seychelles.
As Seychelles’ name has been linked to information contained in offshore financial services documents leaked from Panama-based law firm Mossack Fonseca, Minister Adam stressed that we are a country that is largely compliant according to the OECD (Organisation for Economic Cooperation and Development) in terms of exchange of information for tax purposes.
He noted that Seychelles is party to the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Information (AEOI), reminding doubters that “through those agreements we are able to exchange tax information with all other parties to that same convention which includes over 70 countries worldwide and mostly members of the G20.”
Although Seychelles has an anti-money laundering framework which is also in conformity with the best practices of the financial task force and also in conformity with the OECD best practices, the minister pointed that this does not mean that “there is no action to be taken”.
He added that the FSA and the FIU (Financial Intelligence Unit) are doing a joint investigation in relation to the Mossack Fonseca leaks and also in relation to any other firms or corporate service providers that may have facilitated, if there were registration of companies that were not done in conformity with international best practice.
Results of the investigation will be announced at a later date.
It is very important for people to understand that IBCs are companies that are registered / incorporated in Seychelles by clients but do not carry out any activities in Seychelles, while ICSPs are companies that are licensed by the FSA to among other things provide services such as registered agent services to the IBCs.
IBCs that are seen as non-compliant can be struck off because they do not comply with any part of the International Business Companies Act, 1994 (as amended) (‘IBC Act’). Section 97 (1) of the ‘IBC Act’ provides where the FSA has cause to believe that a company:
· no longer satisfies the requirements of the IBC Act as an IBC;
· fails to comply with a request for information from the Seychelles Revenue Commission;
· fails to pay any penalty imposed by the Registrar under the Act; or
· conducts business or other activities which are, or are likely to be, contrary to the written laws of Seychelles or detrimental to the reputation of Seychelles.
In these cases, the FSA will initiate procedures for striking-off.
As for Section 29 (1) of the FSA Act, it states that the FSA may, at any time, revoke or suspend the licence of a licensee (such as an ICSP licence) if it is entitled to take enforcement action against the licensee under Section 27.
Section 27 sets out the instances where the FSA may take enforcement action if it appears to the FSA that:
· the licensee has contravened or is in contravention of this Act, or any other financial services legislation or any code or guideline issued by the Authority;
· the licensee has contravened or is in contravention of the Anti-Money Laundering Act or any other laws of Seychelles;
· the licensee is carrying on or is likely to carry on business in a manner detrimental to the public interest or to the interest of clients, creditors or investors;
· the licensee is or is likely to become insolvent;
· the licensee has failed to commence or ceased to carry on the financial services business for which it was licensed;
· the licensee has failed to comply with a direction given to it by the Authority;
· the licensee has breached or is in breach of any term or condition of its licence;
· a person having a share or interest in the licensee, whether beneficial or legal, or any director or senior officer of the licensee, is not a fit and proper person to have an interest in or be concerned with the management of a licence as the case may be;
· a licensee or another relevant person has refused or failed to cooperate with the Authority on an inspection conducted by the Authority under section24;
· the licensee has provided the Authority with false, inaccurate or misleading information, whether on making an application for a licence or subsequent to the issue of the licence;
· the licensee or a director or senior officer of the licensee has been convicted of an offence involving fraud, theft or dishonesty; or
· such action is necessary or desirable to protect the good repute of Seychelles as an international financial centre.
Or if
· the licensee is compulsory wound up or passes a resolution for voluntary winding up or is dissolved;
· a receiver has been appointed in respect of the financial services business carried on by the licensee or possession has been taken of any of its property by or on behalf of the holder of a debenture secured by a registered charge;
· the licensee fails to pay any penalties imposed under this Act, made on or before the date on which the penalty is due to be paid; or
· the licensee fails to comply with a directive issued by the Authority under section 26.
Meanwhile, a company which has been struck off the registrar shall remain liable to any due and unpaid fees. According to the Seychelles laws, the company also remains liable to all its obligations and debts and cannot continue to trade or enter into any new transactions. Its directors, shareholders and managers are by law not allowed to do any operations or transactions with the assets of the company.
When a company has been struck off, it means all its assets and funds are legally frozen until the company is restored in good standing – or legally dissolved. The owners of the company may become personally liable with all their private assets for debts or obligations of the defaulted company.