The International Companies Act 1981-1982
A description of features
The International Companies Act, 1981-82 ("ICA") is the primary corporate legislation of the Cook Islands' offshore jurisdiction. It provides for both the incorporation of Cook Islands international companies and the registration of existing non-Cook Islands companies i.e. foreign companies. The legislation is a familiar Commonwealth model except to the extent that it permits a greater degree of flexibility and administrative ease.
In an offshore world where an ever-increasing number of jurisdictions are providing IBC type legislation, innovation is important to be able to distinguish one jurisdiction from another. Again, innovation and an understanding of clients' needs is where the Cook Islands has sought to attain its competitive advantage.
Since the ICA was passed in 1981 it has been amended numerous times. The original IBC concept has received constant review to ensure that the corporate law remains up to date and continues to anticipate and meet advisor needs. Specific illustrations are as follows:
Statutory negation of the rule in Re Charge Card Services Limited and Broad v The Commissioner of Stamp Duties. In the Charge Card case the Court ruled, inter alia, that a contractual right to "account" or contra off mutual debts did not amount to a charge.This can obviously have fairly wide-ranging implications for banks and finance companies. The ICA specifically negates this ruling and provides that where security is given in this fashion it does amount to a charge over an asset. This enables lenders to secure their position by the use of "contra" type arrangements;
Amendment of the rules relating to registration of charges to enable lenders to better verify their security;
Introduction of bearer warrants so as to give statutory recognition to what is effectively a bearer option;
Statutory authority for a variety of capital structures including no liability and unlimited liability companies as well as companies limited by guarantee, shares or a combination of both;
Rationalisation of liquidation procedures to provide for quick and simple liquidations in respect of dormant companies;
Specific asset protection provisions;
Introduction of the Registered Listed Companies to enable Cook Islands companies to be listed on approved foreign stock exchanges;
Introduction of flexible provisions relating to capital maintenance and the ability of solvent companies to re- acquire cancelled shares;
Introduction of provisions to enable the establishment of private trustee companies for a limited number of trusts.
Each of the above features has been specifically inserted into the corporate statute law of the Cook Islands over the last 20 or so years. Each one represents the identification of a need and the construction of a solution. Commencing in 1981 with the IBC concept of simplicity and ease of administration, Cook Islands companies have remained "state of the art" by a process of continual technical refinement.
The above is only intended as a general outline of some of the more significant features of the laws relating to Cook Islands international companies.