Holding Company location

All,

I'm looking for the best strategic location to hold physical assets (e.g., property/houses), digital assets (intellectual property) and cash (<$1M, expect to grow $5-7M by end of 2024). Outside of those 3 things, it would be ideal to have said holding company be a shareholder in the operating company (US LLC, based in WY). Director location will be Canada, intending to use a nominee for privacy.

This said, what is your recommendations? I was looking into Belize, BVI or Caymans as they seem to be the "most common", but again, would love some input from the community.

My "I would like"'s are:

1. A trustable banking location
2. A company which provides the best asset protection comparative to price
3. The yearly maintenance costs should be reasonable, I'm not looking to spend $10k-15k/year to maintain it, but between $500-$2K is not an issue per annum to maintain

Sols said:

Form the holding company in Canada, unless there is some compelling reason to form an overseas company? It's probably going to end up tax resident in Canada anyway.

Canada has zero privacy in director ownership, so I'm trying to avoid that.

Sols said:

Can the physical assets (property/houses) be held by a foreign company? Is that permitted under local law?

Local law permits foreign ownership, except in certain areas and in those areas, the law particularly targets Americans buying property in Canada. I'm not in the areas barred from foreign ownership and it's as well why I'd prefer to avoid a US ownership of the physical assets.

Sols said:

Depends on what you mean by trustable but I'm not sure for example Belizean banks would fit this criteria.

Ideally a bank in which has good reviews, preferably a regulated bank and not an EMI.

Sols said:

Protection from what?

Overzealous litigants, primarily. I've been involved in previous lawsuits where the litigant knowingly submitted fraudulent information into a Canadian court in order to obtain a court order, which had a devastating effect until my lawyers succeeded in proving the litigant knowingly submitted fraudulent information and it was dismissed.

Sols said:

Given your range, I would say that leaves you with Belize, Seychelles, and US. Maybe with a nominee, but probably not a regulated one from a reputable service provider.

Seychelles is generally considered bad these days, no?

Sols said:

IIRC, that depends on type of entity and where in Canada you form it. But public disclosure of directorship this is your only concern, you could also solve it by just appointing a nominee director. For a holding company, where you won't need frequent transactions or agreements signed, a nominee arrangement needn't be particularly disruptive.

In my case, I'm in ON so I can't take advantage of a ON LLP, I could attempt at a BC LLP but I've heard from a few who've tried that being residents within Canada and it backfired for them so I'm trying to avoid that.

Sols said:

Depends on who's doing the consideration. It's "bad" because it's opaque and opaque might be what you want. You'll struggle to find banking, but that's a problem shared with most offshore jurisdictions like it.

Of course, I mean from a banking perspective it would be very difficult. How would that compare to a bank for a corporation in BVI, Caymans, Hong Kong even?

Sols said:

Unlike most people who come here asking about asset protection, you actually have a well scoped out threat vector.

If you want to be outside of the Canadian court system as well and asset protection of this kind is a key factor, you might want to take a look at Saint Kitts, Nevis, Samoa, and Cook Islands. Speak with for example Asiaciti Trust, Southpac Trust, and Sovereign Group. Proper asset protection requires extra planning and diligence, which is going to cost way more than the range you've quoted so far. However, if you're protecting assets worth millions, a few thousand is a worthwhile investment for working with skilled people.

Thank you. I'm not familiar with those regions, what is the banking situation like and the asset protection generally?

Sols said:

You mentioned multi-million dollar amounts. For that kind of money, jurisdiction itself no longer matters much. You should still avoid the likes of Comoros, Liberia, and Marshall Islands, but the difference between Seychelles, BVI, Caymans, Hong Kong, and most other jurisdictions is practically insignificant in this context.

Understood.

Sols said:

Banking within the countries is quite unimpressive, except for Capital Security Bank in Cook Islands. However, banking can often be arranged elsewhere.

I'm not too much concerned about local banking, but the ability to open with a trustable bank in another region would be sufficient.

Sols said:

So if you set up a company in for example Saint Kitts and Nevis (where it's very difficult to sue), that company can likely have a bank account in Switzerland or Luxembourg if the amount of money mentioned in the thread is accurate.

Interesting!

Sols said:

Start reaching out to the service providers I mentioned. There are of course many more out there. It's just a starting point.

However, combine it with seeking legal advice in Canada (relevant provinces/territories). Most service providers that operate in offshore jurisdictions are not equipped to also provide legal advice where their clients are resident. Some will even refuse to work with you until you show you have sought legal advice.

It's important that what you do outside of Canada isn't illegal or dismissible in Canada, should someone try to sue you. Asset protection isn't a guarantee you won't get sued. It's a legally rigorous arrangement meant to ensure that if you do get sued, nothing happens to the assets being protected. Sometimes that means going to court and winning.

I've seen examples where local judges have disregarded (or have tried to disregard) all the offshore mumbo jumbo and viewed the natural person as effectively controlling/owning the assets. Even when they do, it doesn't always work, though.

Be mindful of for example fraudulent conveyance, which is a requirement that a structure is set up in good faith. You are allowed to set up asset protection structures, but if you do it while knowing or reasonably suspecting you have creditors, claimants, lawsuits, and so on coming your way, the structure may be considered null and void under Canadian law.

There is a lot of nuance to it. The details are going to be very minute and detailed. It's well worth investing in legal advice, and even getting legal opinions written in support of your setup.

Thanks, I am definitely looking into it and I'll seek local advice from lawyers and accountants where I live. In this situation, I have no creditors or anticipated creditors in that aspect etc. this is just future-proofing in the event someone else gets overzealous. A costly blanket for security, but a blanket that's necessary.

An update for anyone following:

I've spoken with a few people and evaluated Cypress but I don't think Cypress is the best option so I'm looking at the Caymans primarily currently. Is anyone here familiar with the Caymans and opening in Caymans? I'd appreciate some guidance and recommendations.

Sols said:

Trees rarely make for good holding companies. ;)

Have incorporated in Cayman Islands on a number of occasions and worked on more sophisticated setups (CIMA registered entities). It's a fine jurisdictions. While it's on the FATF gray list and has been for a long time, it hasn't really affected the jurisdiction much besides enhanced due diligence by banks.

Tons of quality service providers, too, being that it's one of the biggest jurisdictions around for investment funds. You have all nine of the "offshore magic circle" in Caymans: Appleby, Bedell Cristin, Carey Olsen, Conyers, Harneys, Maples, Mourant Ozannes, Ogier, and Walkers. They'll be pricy but they have well earned reputations for quality. The interactions I've had with them have all been positive. Aside from them, there are many more such as Vistra, Trident, TMF, Amicorp, and others.

There are a lot of different entity types in Cayman Islands and picking the right one can be difficult. Ask around for advice and see what different people say, based on your circumstances.

Local banking is OK, but you should be able to open bank accounts in places like the US, Switzerland, Luxembourg, Singapore, Isle of Man, and others with the balances mentioned in the thread.

Have you worked with HSM before?