British Virgin Islands – The British Virgin Islands (BVI) are a colony of the British Crown, consisting of approximately forty islands. They are located in the Caribbean, about 100 km east of Puerto Rico.
Business plan– A document that describes a new concept for a business opportunity. Typically business plan includes the following paragraphs: executive summary, market need, solution, technology, competition, marketing, management, operations and financials.
BVI– See “British Virgin Islands”.
C corporation – an ownership structure that allows any number of individuals or companies to own shares. A C corporation is a stand-alone legal entity. It offers some protection to its owners, managers and investors from liability resulting from its actions.
Capital gains – A tax classification of investment earnings resulting from the purchase and sale of assets. Typically, an investor prefers that investment earnings be classified as long term capital gains (a year or longer), which are taxed at a lower rate than ordinary income.
Capital– Value of assets must be prominent from the income earned by those assets. Bearing to company law, the capital of a company belongs to the company not to shareholders, who own the shares. Capital is subject to the capital maintenance rule so that it may not generally be distributed to shareholders.
Central bank – A country’s central bank is a bank which is owned by the State and which decides of the country’s monetary policy.
Certificate of Good Standing – The Certificate of Good Standing is a certificate issued by the Companies Registry. This certificate shows that the company has complied with past and present statutory requirements.
Certificate of Incumbency – The certificate of Incumbency is an official document, issued by the Registered Agent of the company, that indicates the incumbent individuals (shareholder, directors, secretary) standing of the company and any material information.
Civil law – Civil law is all of the legal rules that manage relations between physical persons and corporate bodies.
Collateral – Hard assets of the debtor, such as real estate or equipment, for which a lender has a legal interest until a loan obligation is fully paid off.
Common law – common law is a law system based mainly on case law. Common law originates from the British law system.
Common stock – A type of security representing ownership rights in a company. Usually, company founders, management and employees own common shares while investors own preferred shares. In the event of a liquidation of the company, the claims of secured and unsecured creditors, bondholders and preferred shareholders take precedence over usual shareholders.
Company articles of association – The articles of association are usually drawn up as a notarial instrument. It describes every characteristic of the company, which will then be detailed in the company statutes.
Company domiciliation – Company domiciliation is a service that consists in using the company’s address.
Corporate body – A corporate body refers to a legal entity (company), while a physical person which refers to a human being.
Covenant – A legal promise to do or not do a defined thing. In a financing arrangement, company management may agree to a negative covenant, whereby it promises not to incur additional debt. The penalties for violation of a covenant may vary from repairing the mistake to losing control of the company.
Nominee director – A nominee director will mainly be nominated for confidentiality reasons. For example, a nominee director will be elected if you do not wish for your name to appear in a commercial contract or if you do not wish to sign all the forms to open a bank account. When a nominee director is nominated the customer and the nominated person will sign a service contract, which guarantees the customer that the nominated person will only be able to act or sign documents upon the customer’s request. It also assures nominated persons that they have no responsibility.
Designated director – A designated director will mainly be nominated for confidentiality reasons. For example, a designated director will be elected if you do not wish for your name to appear in a commercial contract or if you do not wish to sign all the forms to open a bank account. When a designated director is nominated, the customer and the nominated person will sign a service contract, which guarantees the customer that the nominated person will only be able to act or sign documents upon the customer’s request. It also assures nominated persons that they have no responsibility.
Designated shareholder – Designated shareholders are usually nominated in jurisdictions that do not allow bearer shares, in case to provide more confidentiality.
Dilution – The reduction in the ownership percentage of current investors, founders and employees caused by the issuance of new stocks to new investors.
Due diligence – Internal procedures and analysis (used to identify risk, liability and corrupt practices etc.).
Economic beneficiary – Economic beneficiaries are the final economic owners of assets.
Entrepreneur – An individual who starts his or her own business.
Equity – The ownership structure of a company represented by usual shares, preferred shares or unit interests. Equity = Assets – Liabilities.
Estate – an individual’s assets (less liabilities) at death.
Financial year – Also known as a fiscal year, it represents a company’s accounting period.
Founder – A person who participates in the incorporation of a company. Typically, founders manage the company until it has enough capital to hire professional managers.
Free zone – Free zones are geographic zones that offer advantages such as the absence of all tax loads.
General meeting – Meeting of shareholders of a company.
Hedge fund – An investment fund that has the ability to use leverage, take short positions in securities, or use a variety of derivative instruments in order to achieve a return that is relatively less correlated to the performance of typical indices than traditional long-only funds. Hedge fund managers are usually compensated based on assets under management as well as fund performance.
Hong Kong – Hong Kong is an island located in South East Asia.
IBC – An international business company or international business corporation (IBC) is an offshore company incorporated as a tax-exempt company by virtue of the jurisdiction’s laws, but which is not authorized to engage in business in the constituting jurisdiction.
Import/export company – An import/export company is a company whose activity is importing or exporting goods or services between different countries.
Income tax – Income tax is a tax levied on the total amount of the income of a physical person or corporate body.
Inheritance tax – Inheritance tax is a tax levied on the total amount of an inheritance.
Internet merchant account – An internet merchant account is an account that allows its holder to accept payments by credit cards on their website.
Judgment – order or decision of a court law.
Jurisdictions – Synonymous with “country”.
Legal owner – Person who owns the legal interest in an asset. He has rights in rem enforceable against the whole world. May hold the legal interest on behalf of another beneficial, equitable owner.
Limited liability company (LLC) – An ownership structure designed to limit the founders’ losses to the amount of their investment. An LLC does not pay taxes, rather its owners pay taxes on their proportion of the LLC profits at their individual tax rates.
Limited partnership – A legal entity composed of a general partner and various limited partners. The general partner manages the investments and is liable for the actions of the partnership while the limited partners are generally protected from legal actions and any losses beyond their original investment. The general partner receives a management fee and a percentage of profits, while the limited partners receive income, capital gains and tax benefits.
Liquidation – The selling of a company. This may occur in the context of an acquiring by a larger company or in the context of selling off all assets prior to cessation of operations. In liquidation, the claims of secured and unsecured creditors, bondholders and preferred shareholders take precedence over common shareholders.
Memorandum of association – A company’s memorandum of association, simply called the memorandum, is the document that governs relations between the company and the outside world. It is one of the documents required to create a company.
Nevis – The Island of Nevis, in the Eastern Caribbean, was a British colony from 1628 until 1983, when it joined the Federation of Saint-Kitts-and-Nevis and became independent.
Non-disclosure agreement (NDA) – An agreement issued by entrepreneurs to protect the privacy of their ideas when reveal those ideas to third parties.
Offshore bank – Offshore Banks are banks located outside of the depositor’s country of residence, usually in a low-tax jurisdiction. That offers financial and legal advantages. Such advantages usually include: greater confidentiality low or no taxation, easy access to deposits, protection against local political or financial instability.
Offshore business – Offshore business is synonymous with “offshore company”.
Offshore company setup – This is the complete constitution process for an offshore company.
Offshore company – Offshore or non-resident companies are companies that conduct an insubstantial or zero volume of business within their jurisdiction of incorporation. Offshore companies have three characteristics: Firstly, they should be registered as an entity within the jurisdiction of incorporation. Secondly, the ‘owners’ should be domiciled outside of the jurisdiction of incorporation. Finally, the company should transact the major majority of business outside of the jurisdiction of formation. However, most associate the term ‘offshore company’ as a means of increasing tax efficiency.
Onshore company – An onshore company is a company who is registered in a country not considered to be a tax haven.
Panama – The Republic of Panama is located between Costa Rica in Central America and Colombia in South America. Its shores overlook the Pacific and Atlantic Oceans.
Pari Passu – A legal term referring to the equal treatment of two or more parties in an agreement. For example, a venture capitalist may agree to have registration rights that are on a par with the other investors in a financing round.
Physical person – A physical person refers to a human being, unlike a corporate body which refers to a legal entity.
Power of attorney – “Power of attorney” is an English translation of the French “pouvoir de représentation”.
Primary shares – Shares sold by a corporation, but not by individual shareholders.
Proxy – An agent appointed by a shareholder to vote on his behalf at a meeting.
Public limited company – are companies that do not reveal the names of the shareholders who own them.
Quorum – A minimum number of persons who must attend a meeting to lawfully transact business.
Secretary – The Secretary General is a high position in a public or private limited business organization, typically an administrative post. Some jurisdictions require a Secretary to be designated.
Service provider – is a company who is able to provide services.
Seychelles – The Seychelles are a group of 115 islands located in the Indian Ocean, north of Madagascar.
Share capital – Share capital is the resources that a company can use for its operation. It is also a representation of the company’s commitments towards the shareholders.
Share certificate – is a certificate of ownership that is issued by a company to a physical person or corporate body. This certificate confers ownership of a part of the company’s capital.
Shareholder – he owns the company, and the share certificates are documentary proof of this. Companies can belong to one or more shareholders. Shareholders can be individuals or companies.
Self company – Off the shelf companies are corporate entities that have been incorporated by a provider, who holds the company until a customer is found. Post transaction, the ownership of the company transfers from the provider to the third party, who then commences trading activity under the company name. The benefits of purchasing an off the shelf company includes: • To the time it would take to establish a new corporation • To allow contract bidding (some jurisdictions require a fixed business age to allow this functionality) • To create the appearance of corporate longevity Note : shelf companies typically are more expensive than recently incorporated companies because of their age.
Statutes – Guide that governs how a company functions.
Tax haven – are places where some taxes are levied either at a low rate or not at all.
Tax law – Tax law can be defined as the branch of law that allows subjects of law to take part in the financial organization of the State and the expression of its economic and social policy.
Ultra vires – Beyond their powers. A largely defunct doctrine that limits the capacity of a company to transact business only for those purposes it was established to fulfill.
Unit trust – Collective investment scheme in the United Kingdom.
Venture capital – A segment of the private capital industry which focuses on investing in new companies with high growth rates.
Virtual office – A virtual office is a service that offers an address, telephone number and secretarial service to a company that may need to have it.
Voting rights – The rights of holders of preferred and common share in a company to vote on certain acts affecting the company. These matters may include payment of dividends, issuance of a new class of share, merger or liquidation.
Wealth tax – is a tax levied, as a percentage, on the total amount of the status of a physical person or corporate body.
Write-off – A decline in the reported value of an asset or a company to zero.
Zombie – A company that has received capital from investors but has only generated sufficient revenues and cash flow to maintain its operations without significant growth. Usually, a venture capitalist has to make a difficult decision as to kill off a zombie or continue to invest funds in the hopes that the zombie will become a winner.