Compare the Nevis LLC and the Cook Islands LLC
Time and again, an offshore Limited Liability Company (LLC) has proven to be an effective asset protection instrument. Here we will compare two of the strongest, the Cook Islands LLC to the Nevis LLC. Establishing an offshore LLC can be a very important component of your asset protection plan. This is because an offshore LLC can help create a nearly impenetrable layer of security for you and your assets. This is especially the case when placed inside of an offshore asset protection trust.
The Cook Island LLC and the Nevis LLC are two offshore asset protection instruments that offer some of the strongest defense against legal claims. Both countries strengthened their asset protection legislation. Cook Islands did so in 2009. They enacted the Cook Islands International Limited Liability Companies Act. Nevis did so as well when it updated the 1995 statutes . This includes its Nevis LLC Ordinance (Amendment), 2015, as well as 2017.
Both countries allow foreign citizens to be members. The operating agreements are similar. Neither country recognizes foreign judgments. Plus, the names of the members and managers are not in the public records. So, there is very little to differentiate one LLC from the other in these respects. This is because both countries regularly revise trust and LLC legislation. They want to closely capture and reflect the prevalent business and legal environment at the current time. There are differences between a Cook Islands LLC and a Nevis LLC with respect to the strength of its asset protection. The charging order limitation is one example we will discuss. Both, however, do have specific and strongly-worded asset protection legislation and they strictly enforce it.
LLC Asset Protection
An LLC can help you build a wall around assets that you declare to be part of the company. Thus, you help safeguard them from lawsuits. First, the LLC can give you asset protection for the assets you hold in the LLC. That is, LLC laws can protect those assets inside of your LLC. It protects them against those who may bring lawsuits against you, personally. Plus, it can protect you personally, when someone sues your LLC. That is, the LLC provides a barrier protects you from business lawsuits.
The above countries, in particular, have specifically formulated their laws to create a safe haven for assets. In addition, when someone brings a lawsuit to their shores, they have laws that are very friendly to debtors.
Nevis LLC vs. Cook Islands LLC – Membership
Both locations permit the establishment of a single-member LLC. At the same time, neither impose limits on the number of members. So any number of members may comprise an LLC established on their friendly shores. Cook Island and Nevis LLC owners can participate in the management of the LLC. They can do so without personally being liable for any debts or obligations that the LLC may incur in the normal course of business. They can also elect to have the LLC managed by a non-member. For example a non-member manager may have a particular expertise in the business arena where they operate.
To enhance an LLC’s asset protection feature, our attorneys may recommended a non-member foreign director should manage the LLC. In this instance, we are talking about a registered trust company or law firm. Such a entity must be a resident of either Cook Island or Nevis. A foreign LLC manager is not subject to the laws of a member’s home country. Therefore, it does not have a legal obligation to follow a court order coming from any other jurisdiction. This is an option available to LLC members in both countries. It’s an additional asset protection measure. But the law does not require this in order to have a legally established and recognized LLC.
Flexible Operating Agreement
The structure of a Cook Island LLC is highly flexible and this holds true for a Nevis LLC as well. The Operating Agreement can include any type of code of conduct, member responsibilities, or regulations. That is, it can include any provisions that members wish to include (as long as these are legal). It can also omit those they specifically prefer to leave out. That being said, an operating agreement should be drafted professionally. There are too many variables that a person not in the profession can modify that would hamper or eliminate the LLC’s protection.
Each location has certain statutory provisions in place for the protection of members. Within wide legal boundaries, members can structure the LLC to suit and serve the purpose for which they are forming it in the first place. This flexibility only adds to the benefits of operating an LLC in either location.
Nevis LLC vs. Cook Islands LLC Privacy
There is additional benefit an offshore LLC offers in addition to being an effective instrument of asset protection. It gives members a highly-prized ‘commodity’ in this increasingly wired (bordering on intrusive) world – privacy. Establishing a Nevis LLC does not require the public filing of member names nor any other information about them. You registered agent (through our organization) can handle future changes regarding membership or assets. The same is true for establishing a Cook Island LLC. Members are free to run their LLCs (whether directly themselves or through intermediaries) without unwarranted scrutiny.
This blanket of privacy also means it is highly unlikely that a creditor will find out about the member’s connection with an offshore LLC. That is, of course, outside of formal discovery. Members can keep their company records anywhere in the world where they judge the records will be most secure. Neither jurisdiction require an annual inspection of accounts or records.
We help handle renewals of the LLCs on the islands each year. This includes the renewal of the registered agent. It also includes payment of the annual government renewal fee. In this heavily interconnected world, it may seem that a person’s digital footprint is a mere click of a mouse away. Is it can be accessed by just about anyone who has access to the Internet – and a used in litigation. With an offshore LLC in either island paradise, you essentially do not leave readily apparent digital footprints. You don’t leave your assets out in the open for anyone to trace. So, you enjoy a level of privacy that’s tough to achieve anywhere else.
Charging Order Protection
Cook Island and Nevis generally only recognize only one lawful avenue of remediation against an LLC. The only remedy is what LLC law calls a charging order. However, both countries strictly define the limitations and scope of a charging order. That is, they specifically define what they permit a creditor to ‘collect’ from an LLC debtor-member. We talk more about this below. Naturally, one must properly establish the LLC within their jurisdiction.
Percent of Ownership
First, the charging order only covers that member’s percentage of ownership interest. It could only, theoretically, access those assets that would have normally been distributed to that debtor-member – if any. It does not affect the other assets of the LLC nor the distributions that are due to the other members.
Protection Of Member’s Position
Second, a creditor with a charging order against a debtor-member cannot assume that member’s position in the LLC. Now can the creditor interfere with the running of the LLC in any manner. In fact, charging order notwithstanding, a debtor-member can continue operating the business. The member can carry out his or her duties and responsibilities as prescribed by the LLC regulations. They can do so without interference from the creditor. A charging order does not give a creditor any power over or right to liquidate or seize the assets of an LLC. That is, it does not allow the creditor to seize LLC assets to satisfy a debt of a member. It does not restrict the business of the LLC in any practical manner. The LLC can continue to function with its assets intact and the distributions to other members unaffected.
Nevis LLC vs. Cook Islands LLC Charging Order Expiration
Third, both countries severely limit a charging order to the actual amount that is owed by the debtor-member. Punitive, retributory, or any exemplary damages are not permissible.
In this regard, a Nevis LLC has a slight advantage over a Cook Islands LLC. Tht is, the Nevis LLC legislation places a strict three-year expiration limit on charging orders. Current Cook Islands LLC laws have a limit of five years on the effectivity of charging orders.
Nevis LLC: Three-year expiration on charging orders
Cook Islands LLC: Five-year expiration on charging orders
Non-Recognition of Foreign Judgment
Nevis and Cook Islands are both sovereign countries. As such, they each have their own set of rules and regulations governing LLCs. They hold them above the laws of other countries – and rightfully so. Neither country will automatically enforce a judgment issued by a foreign court against a debtor-member. Nevis laws dictate that the creditor must mount a lawsuit against a debtor-member in a Nevis court. Nevis LLC regulations required creditors to pay the sum of $100,000 (EC) to a Nevis court before any action can be brought against a debtor-member of a Nevis LLC. In 2018 the $100,000 limit was done away with. Now, Nevis courts can impose a higher bond amount if they see fit, or less for that matter. The Cook Island does not mandate a similar deposit. Although a court may request for one to be made at the start of a trial.
Nevis LLC: Creditor must pay a court deposit to initiate a lawsuit (for example, $100,000 or more).
Cook Islands LLC: Deposit not mandated to initiate a lawsuit.
Cook Islands Vs. Nevis LLC Migration
Nevis and Cook Islands make it easy for members to transfer their existing LLC to or from almost any country in the world. In Cook Islands in particular, all it takes is a simple application process. So, it is quite easy to re-domicile a foreign LLC to the islands. The Cook Islands registered agent completes an application form. Then we include copies of the LLC’s certificate of formation and organizational documents. Then we submit them to the Registrar. Upon acceptance, the LLC is recognized to be a valid. It will be established on the islands retroactively from the date it was originally set up in the other jurisdiction. Nevis has an equally simple LLC migration regulation in place.
It is important to note that the wording of the Nevis and Cook Islands legislation regarding LLC migration is very specific when it talks about debts and obligations. An LLC takes with it all debts or obligations (including any judgment against it) wherever it goes. As stated, the islands will dutifully protect any LLC that has been properly set up according to Nevis and Cook Islands laws. However, they will not set aside an already existing against the LLC at the time of its migration to the islands. So, if your company already has a judgment, form a new Nevis or Cook Islands LLC. Then transfer the assets from that company into the new one. That strategy offers a better solution. So form a new LLC if the existing company already has legal issues.
Recommendation to legislators: If the statutes were changed in Nevis or the Cook Islands such that immigrant LLCs shed prior liability, the pendulum could swing widely in favor of that jurisdiction.
Nevis Vs. Cook Islands Final Analysis
In the final analysis, the decision to establish an LLC in the Cook Islands or in Nevis will have to take a few things into consideration. Not only should one consider each country’s existing LLC laws (which are clear and comprehensive), but also the other asset protection instruments that are available to you, such as an asset protection trust. In addition to their well-respected LLC statutes, each of these countries also possess asset protection trust statutes that are superior to other jurisdictions.
An LLC established in either country offers comparable levels of protection against claims against its members. Both have exceptional asset protection statutes and offers flexibility in the structure of the operating agreement. In addition, both regions are independent, sovereign countries. So, they offer further protection to LLC members because they are less susceptible to outside pressures.
As stated, they so not automatically enforce foreign judgments. The matter would first be subject to the veracity of their own laws. Both countries accept a charging order as the only remediation against a debtor-member of an LLC that has been properly established under their jurisdiction. Moreover, both also severely limit the scope of a charging order. Nevis has a slightly shorter period of time when it will consider a charging order to be effective. As we stated, it is three years in Nevis when compared to the Cook Islands at five years.
Suffice it to say, both offshore locations provide clear and comprehensive asset protection laws that are strictly enforced in their respective jurisdictions. This benefit offers a collective sigh of relief of LLC owners and members everywhere. Whereas LLC laws are constantly improving, as of this writing, the Nevis LLC has the slight advantage over the Cook Islands LLC.