Structure and Registration Procedures of Offshore Companies
What is a Power of Attorney?
In reference to offshore company management, a Power of Attorney (POA) is a legal document, by which the operational right to represent the IBC and to act on its behalf is granted to an particular person. By virtue of the Power of Attorney such person becomes a representative of the company. A common practice in the offshore services industry is the issue of a Power of Attorney by the nominee director to the actual beneficial owner of that company, to act on behalf of the offshore company.
The Power of Attorney can either have a full scope of representational powers (General Power of Attorney), or it can be limited to some particular rights and activities only (Special or Limited Power of Attorney). A Power of Attorney can convey to its holder such rights as the opening and management of bank accounts, entering into business contracts, opening and managing branches and subsidiaries, assuming obligations and executing rights on behalf of the offshore company. A company may issue 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 representatives - for instance, by the beneficial owner of the company himself and his associates or family members.
While the concept and usage of Powers of Attorney is arguably the most convenient method of the practical management of an offshore company by its benefical owner, it allegedly has its risks. It may be a valid argument (by some tax authority, for example), that an individual who routinely uses general Powers of Attorney to enter into contracts and obligations on behalf of the offshore company, is in fact controlling that particular offshore company. Such implication may lead to the dealings between that offshore company and a domestic company owned by the same individual, being considered as concluded "at arms length" and may be therefore disregarded for tax purposes as bogus transactions. From this perspective it may be more appropriate to directly involve the third-party company manager into the conclusion of contracts and to limit the practical usage of the Powers of Attorney only to those transactions which are not subject to potential controversy.