BY CORNELIA LAWRIE
The Cook Islands is world-renowned for its offshore asset protection laws and the limited liability company (LLC) is no exception to the rule. It allows the diversity of a limited partnership with elements of a corporate structure. The fact that liability is limited means that the members are separate from the identity of the LLC. This means that an offshore LLC is afforded its own identity, much like individuals have their own legal identity. Something to note is that while many jurisdictions around the world offer offshore asset protection LLCs, they are not all created equal – make sure you do your homework and please contact us if you have any questions.
If you are looking for a politically and economically stable jurisdiction then the Cook Islands provides a great option for an LLC. Privacy laws mean the Cook Islands does not hold a publicly accessible register of managers and members. Even more importantly, the two year statute of limitations that applies to assets that are held by a Cook Islands offshore asset protection trust covers assets that are placed into the control of a Cook Islands LLC held by such a trust. Thanks to this statute of limitations, US courts are often unable to touch offshore assets held in Cook Islands LLCs owned by such a trust (unlike US LLCs).
Even where a Cook Islands LLC is not owned by a Cook Islands offshore trust, there are still significant asset protection benefits. The only remedy available to a creditor under the relevant Cook Islands legislation is a charging order against a member’s membership interest. This can only be granted once in favour of any given creditor, lasts a maximum of five years, is non-renewable and does not give the creditor any of the member’s powers except for the right to receive distributions. So if no distributions are made during the currency of a charging order, the creditor will be left empty-handed.
So, you ask, what sets the LLC apart from an International Business Company (IBC)? As mentioned earlier, the LLC is a blend of a typical company structure like an IBC may have, combined with the functions of a limited partnership. This flexibility allows a more diverse range of uses and is widely accepted in any part of the world. LLCs are also look-through entities for taxation purposes. LLCs can be used for any lawful activity or legitimate business venture. Examples of activities include: holding cryptocurrency accounts, investments, financing arrangements, real estate holdings, manufacturing and as an operational vehicle for international trusts. Another point to note is that LLCs can have a perpetual lifespan: imagine the potential for offshore asset protection and returns for future generations that could come from that!
LLCs can be established in the Cook Islands under the Limited Liability Companies Act 2008, and can be formed quickly. Under the legislation an LLC requires a minimum of one manager and one member. The legislation provides the basics for how an LLC can function and the duties of each officer. While not compulsory, it is preferable that an LLC adopt an operating agreement which will set out the specifics of each officer’s duties and obligations as well as the fundamentals for how the LLC will operate and its activities.
So what does it take to be a manager? A Cook Islands LLC can function with a single or multiple managers. Managers can be individuals or companies and can be from any jurisdiction meaning that the structure can be flexible to meet the LLC’s purpose.
The member holding the LLC membership interests can, like the manager, be any person, company, or trustee from anywhere in the world and there can be multiple members. The member elects to establish the LLC and appoints its manager.
Each Cook Islands LLC is required to have a registered agent which is a Cook Islands offshore trustee company. Southpac is licensed to act as a registered agent and will conduct due diligence checks on each member and manager. Provided they meet Southpac’s due diligence requirements, they can be appointed and the LLC formed.
A Cook Islands LLC can act as a shield against any potential litigation and, for the ultimate offshore asset protection structure, can be held under the umbrella of a Cook Islands international trust. This can enable the direct management of assets combined with the protection of the offshore trust. Twice the protection under one umbrella!
If you have any questions or would like to set up a Cook Islands LLC please contact us at [email protected].
We will be happy to help you tailor the best umbrella to fit your needs.