Do’s and Don’ts of Offshore Company Directors

Offshore directorships can be rewarding, strategic roles—provided you run them like a serious business function instead of a filing cabinet with a bank account. I’ve advised boards across BVI, Cayman, Jersey, Guernsey, Hong Kong, Singapore, and the UAE. The same patterns show up everywhere: directors who run clean processes sleep well; directors who wing it end up firefighting bank freezes, tax audits, and compliance blowups. This guide lays out the do’s and don’ts that keep you on the right side of regulators, banks, counterparties, and—crucially—your own risk appetite.

What an Offshore Director Actually Does

The director’s job isn’t simply to “sign things offshore.” You’re responsible for oversight, judgment, and direction. That includes:

• Fiduciary duties: put the company’s interests first, act with care, skill, diligence, and avoid conflicts.

• Statutory duties: follow local company law, filing, and licensing rules; maintain registers and minutes; respond to regulators.

• Management and control: ensure decisions are actually made where the company is resident. Tax authorities still use management-and-control tests to determine residence.

• Compliance guardian: AML/CTF, sanctions, anti-bribery/corruption (ABC), data protection, and sector licenses.

A tough truth: minutes get read. Banks will request them. Tax authorities ask for them. Courts scrutinize them. If the documentation shows rubber‑stamping, you own that risk.

Choosing the Jurisdiction: A Director’s Lens

Selecting a jurisdiction isn’t just a tax or incorporation fee question. It sets your risk profile, your operational friction, and the quality of your stakeholder relationships.

Key criteria I use:

• Rule of law and regulator quality: predictable courts, responsive registries, established trust and company service providers (TCSPs).

• Substance expectations: can you achieve adequate premises, people, and expenditure if required?

• Banking ecosystem: local correspondent banking strength, KYC posture, and appetite for your sector.

• Reporting obligations: audited accounts, annual returns, UBO disclosure, licensing nuances.

• Tax interactions: local taxes, withholding taxes on distributions, treaty network if needed.

• Reputation: how counterparties perceive the jurisdiction (this affects onboarding and vendor confidence).

• Practicalities: time zone alignment, availability of competent resident directors, visa/travel ease.

Quick orientation for common hubs (highly simplified):

• BVI/Cayman: flexible corporate laws, robust economic substance frameworks, widely used for investment structures; rely on proper board process and substance where applicable.

• Jersey/Guernsey: strong governance culture, substance expectations, high‑quality professional services, good for funds and holding structures.

• Singapore/Hong Kong: onshore credibility, deeper banking networks, more structured reporting and tax compliance.

• UAE: substance regime, free zone options, increasingly bankable but still relationship‑driven; VAT and transfer pricing rules apply.

Choose where you can credibly make decisions and, where necessary, staff the company to meet substance requirements.

The Golden Rules: Do’s for Offshore Directors

Governance Do’s

• Build a board that works. Blend group executives with at least one experienced resident director who understands the local regime. Avoid token appointments. Define roles, decision rights, and delegation limits.

• Run real meetings. Circulate board packs at least five days before meetings. Ensure directors have read materials and can challenge management. Hold meetings physically in the company’s residence when feasible; use hybrid arrangements carefully.

• Keep high‑quality minutes. Record the reasoning, questions raised, conflicts declared, documents reviewed, and final resolutions. Capturing the “why” matters as much as the “what.”

• Maintain a board calendar. Map annual filings, audits, license renewals, AML training, insurance renewals, bank KYC refreshes, and major contract approvals.

• Declare and manage conflicts. Use standing declarations and a conflict register. Recusal should be reflected in minutes when necessary.

• Induct and train directors. Provide an onboarding pack: constitutional documents, past minutes, org chart, key contracts, AML policy, sanctions policy, risk register. Schedule annual refreshers.

Compliance Do’s

• Treat AML/CTF obligations as everyday hygiene. Ensure robust customer due diligence (CDD), ongoing monitoring, sanctions screening, and suspicious activity reporting protocols. The FATF standards shape national rules across 200+ jurisdictions—ignore them at your peril.

• Keep UBO and key person data current. Many jurisdictions maintain private or semi-private UBO registers. Expect banks and regulators to ask for updated ownership charts after any change.

• Maintain sanctions discipline. Monitor OFAC, EU, and UK lists. UK enforcement moved to a strict liability test for civil penalties in 2022, which lowers the threshold for action. Train staff and implement automated screening.

• Embrace automatic exchange of information. Over 100 jurisdictions exchange account data under the OECD CRS regime. Assume tax authorities can see offshore bank balances and certain income.

• Respect sector licenses. If you’re dealing in investments, payments, or advisory services, confirm licensing position early. Unlicensed activity can trigger immediate account freezes.

Tax Do’s

• Align substance with profits. Economic substance laws in places like BVI, Cayman, Bermuda, Jersey, Guernsey, and the UAE require “core income generating activities,” adequate people, premises, and expenditure. The more profit allocated offshore, the stronger the on‑the‑ground substance should be.

• Document transfer pricing. For cross‑border related‑party transactions, prepare intercompany agreements and transfer pricing files. Multinationals over €750m consolidated revenue generally need Country‑by‑Country Reporting. Even if you’re smaller, maintain a defensible file.

• Watch permanent establishment (PE) risks. Avoid creating a taxable presence in other countries through dependent agents or routine decision‑making there. Keep key management decisions in the company’s home jurisdiction.

• Coordinate with home‑country CFC rules. Many parent jurisdictions tax passive offshore earnings or low‑taxed profits. Get a tax memo that addresses CFC implications and profit attribution.

Banking and Cash Do’s

• Build relationships, not just accounts. Appoint a relationship manager, share business updates, and respond quickly to KYC requests. Provide predictable cash flows and clear narrative on sources and uses of funds.

• Diversify. Keep a main account and a backup (possibly a reputable payment institution) in case of de‑risking or country‑specific issues.

• Prepare a clean onboarding pack. Include UBO verification, group structure chart, source of funds/wealth narrative, board resolution to open accounts, audited financials (if any), key contracts, and client profiles.

• Expect timelines of 6–12 weeks. High‑risk sectors can take 3–6 months. Budget for this in your project critical path.

• Monitor FX and correspondent routes. Use SWIFT gpi tracking and confirm that correspondent banks will handle your currencies and counterparties.

Documentation Do’s

• Keep a master corporate file. Include incorporation docs, registers (directors, members, charges), share certificates, cap table, board minutes, resolutions, powers of attorney, contracts, policies, and licenses.

• Use clear signing authorities. Record who can sign bank instructions, contracts over specified thresholds, and KYC documents. Review at least annually.

• Time‑stamp decisions properly. Minutes should reflect when and where decisions were taken and by whom. Avoid informal email “approvals” without a formal board resolution to follow.

• Align commercial reality and paper. If the company claims to provide management services, show calendars, timesheets, and board materials demonstrating that work.

People and Culture Do’s

• Hire genuine local capability where needed. Even one or two experienced local team members can radically improve your credibility on substance and responsiveness to local regulators.

• Train for ethics. ABC and sanctions training should be annual and scenario‑based. Make the zero‑tolerance policy real: no facilitation payments, no gifts exceeding policy, strict third‑party due diligence.

• Protect whistleblowers. Establish a confidential reporting line and an investigation protocol.

Third‑Party Management Do’s

• Vet service providers. Conduct due diligence on TCSPs, registered agents, auditors, and law firms. Ask for service standards and escalation routes.

• Paper the relationship. Service agreements should set scopes, SLAs, fees, data protection terms, and termination provisions. Ensure you can get your books and digital files if you move.

Technology and Data Do’s

• Control your data footprint. Apply least‑privilege access to bank portals and document repositories. Use multi‑factor authentication, monitored logins, and a clean admin roster.

• Respect data protection laws. Map data flows, implement data processing agreements with vendors, and avoid moving personal data across borders without a lawful basis (e.g., GDPR mechanisms).

• Maintain business continuity. Backups, incident response plans, and a tested process for director changes or lost tokens/cards.

The Red Flags: Don’ts for Offshore Directors

Governance Don’ts

• Don’t be a rubber stamp. If decisions are merely relayed from a parent country without real debate or authority at the offshore board, you invite tax residence challenges and director liability.

• Don’t let shadow directors run the company. If founders or investors who aren’t on the board direct the company, you may have hidden governance problems and liability exposure.

• Don’t ignore conflicts. Undeclared related‑party transactions are catnip for regulators and plaintiffs.

Tax and Substance Don’ts

• Don’t centralize decision‑making onshore while claiming offshore control. If the CEO in London emails “approved” at 10pm and the offshore board simply notes it later, that’s not management and control offshore.

• Don’t allocate large profits without matching substance. High margins with no employees or premises triggers audits.

• Don’t backdate documents. Courts, auditors, and banks can spot it. Use ratification resolutions if you need to regularize past actions.

• Don’t rely solely on “nominee” secrecy. The era of Automatic Exchange of Information means opacity rarely holds.

Banking Don’ts

• Don’t overpromise to banks. If your business model, counterparties, or geographies change, tell the bank before the transactions appear. Surprises cause freezes.

• Don’t use personal accounts for corporate flows. Even “temporary” use can trip AML alarms and break your audit trail.

• Don’t ignore small sanctions hits. A near‑match requires analysis and documentation; do not process until cleared.

AML/ABC Don’ts

• Don’t accept cash or crypto inflows without a documented, approved policy and the right licenses. Many offshore banks will close your account.

• Don’t outsource KYC blindly. If third parties originate clients for you, you still own the risk. Verify their controls and audit them.

• Don’t permit facilitation payments. The UK Bribery Act prohibits them; the US FCPA can capture books‑and‑records violations even if the bribe occurs abroad.

Legal and Documentation Don’ts

• Don’t mix parent and subsidiary paper trails. Keep separate letterheads, email domains where feasible, and contract parties clear. Commingling feeds PE arguments.

• Don’t sign from the wrong place for critical decisions. If you claim management occurs in Jersey, don’t sign the major asset sale in Frankfurt without a clear protocol and travel record.

• Don’t forget document retention laws. Some jurisdictions require corporate records to be kept locally for 5–10 years.

Operational Don’ts

• Don’t hire “ghost” employees to meet substance metrics. Regulators can audit payroll, work product, and office use.

• Don’t ignore local employment rules. Terminations, benefits, and immigration compliance get messy fast and attract regulator attention.

• Don’t skip insurance. D&O coverage, professional indemnity, and cyber policies are your shock absorbers.

Step-by-Step Playbooks

The First 90 Days: A Setup Roadmap

Days 1–15: Foundation

• Confirm constitutional documents, issue shares, appoint officers.

• Select and contract with your TCSP/registered agent, accountant, and counsel.

• Approve a governance pack: board charter, delegation of authority, conflicts policy, AML/CTF policy, sanctions policy.

• Map business activities to licensing and substance requirements; commission a tax/substance memo.

Days 16–45: Banking and Operations

• Prepare the bank onboarding pack: UBO docs, source of wealth narrative, org chart, budget/forecast, key contracts, sanctions screening summary.

• Kick off application with at least two banks/payment institutions to de‑risk timing.

• Set up accounting system, chart of accounts, and invoice templates; establish document repository and access controls.

Days 46–75: Substance and Controls

• Secure premises (even serviced office) and set local IT and data security standards.

• Hire or contract local staff if required (admin, finance, or operations).

• Approve intercompany agreements and transfer pricing policies.

Days 76–90: Governance Rhythm

• Hold the first full board meeting in the jurisdiction; adopt banking resolutions and key policies.

• Finalize the annual compliance calendar: filings, audits, AML training, KYC refresh windows.

• Set KPIs and reporting cadence to the board.

Running Effective Board Meetings

Before the meeting:

• Circulate a board pack five business days in advance: agenda, minutes to approve, management report, financials, cash and bank letter, risk register updates, contracts for approval, related‑party disclosures.

• Obtain written conflicts declarations from directors.

During the meeting:

• Confirm quorum and the location and presence of each director.

• Discuss each key decision with supporting analysis; capture challenges and alternatives considered.

• Note abstentions and recusals; pass resolutions clearly.

After the meeting:

• Finalize minutes within 10 working days.

• Send action items with owners and deadlines.

• Update the minute book and resolutions register.

Economic Substance: Implementing Credibly

• Identify relevant activities: holding company, headquarters, distribution, financing, IP, fund management, etc.

• Map core income generating activities (CIGAs) to real people and processes.

• Set measurable substance: number of staff, qualifications, premises size, and local expenditure budget.

• Track evidence: employment contracts, timesheets, calendars, travel logs, vendor invoices, board minutes.

• File annual substance returns, supported by management accounts and activity narratives.

Banking: Opening and Keeping Accounts

Opening:

• Present a compelling business narrative. Banks care more about the story than the stamp duty. Who are your clients? Why this jurisdiction? What are typical transactions by value, currency, and counterparties?

• Provide clean UBO evidence, certified passports, and addresses; attach shareholder/resolution trail from incorporation to current.

• Explain source of wealth for individuals and source of funds for the company.

Keeping:

• Notify the bank ahead of material changes in activity. Absent narrative equals risk in the bank’s eyes.

• Respond to KYC updates within five business days. Keep a standing folder ready with updated documents.

• Maintain compliance hygiene: no third‑party payments without reason, consistent references in remittance information, and immediate sanction screening for new counterparties.

Intercompany Pricing: A Practical Pack

• Agreements: services, distribution, licensing, loans with arm’s‑length terms (interest rates, collateral, payment terms).

• Benchmarks: external comparables where possible; if not, cost‑plus or transactional net margin with explanations.

• Files: a short “local file” for the offshore company and a group “master file.” Even if thresholds don’t mandate it, having a concise pack often avoids extended audits.

• Operations: show that services were actually performed—calendars, deliverables, emails, meeting notes.

The Annual Compliance Calendar

• Month 1: Financial statement prep; audit planning.

• Month 2: Board strategy session; update risk register; AML/sanctions training.

• Month 3: File annual return; update registers; renew licenses and D&O insurance.

• Quarterly: Board meetings with management reports and cash forecasts.

• Rolling: Bank KYC refresh (expect annual); sanctions screening of key counterparties; data protection review; transfer pricing review if margins shift.

Realistic Scenarios and How to Handle Them

Scenario 1: The bank asks for updated UBO/KYC, “urgent.”

• Do: Acknowledge same day, provide a delivery date, and send partials quickly (ID, proof of address).

• Don’t: Argue about the need. Escalate politely if the request seems duplicative; offer a short call. Keep records—if the account is frozen later, your response trail helps.

Scenario 2: A foreign tax authority sends a questionnaire about management and control.

• Do: Coordinate with counsel and tax advisors; provide minutes, travel logs for directors, email headers showing decision timing and location, and relevant resolutions.

• Don’t: Provide informal emails that undermine your narrative. Compile a curated pack that demonstrates deliberation and location of control.

Scenario 3: A vendor insists on cash or crypto.

• Do: Push back and propose bank transfer with full references; if crypto is a strategic choice, update risk assessment, licensing, and AML controls before proceeding.

• Don’t: Run a one‑off exception without board approval and documented controls.

Scenario 4: Travel restrictions disrupt physical meetings.

• Do: Use video conferences but maintain offshore presence by having the chair and at least one director located in the jurisdiction. Document reasons for remote attendance and re‑establish physical meetings ASAP.

• Don’t: Let quarterly meetings drift into email approvals. Keep the cadence.

Scenario 5: A major acquisition on short notice.

• Do: Convene an extraordinary board meeting; obtain an independent legal memo, financial model, and risk assessment. If time is tight, approve in principle subject to defined closing conditions and a second meeting.

• Don’t: Sign from the wrong jurisdiction or let non‑directors dictate timelines without board scrutiny.

Metrics and Controls That Keep You Safe

• Governance KPIs:

• Board pack circulation lead time: target ≥5 business days.

• Minutes completion time: target ≤10 business days post‑meeting.

• Conflict register updates: within 24 hours of new conflicts.

• Banking KPIs:

• KYC refresh turnaround: target ≤5 business days.

• Transaction exception rate (payments queried/total): target <2%.

• Bank account redundancy: at least 2 institutions active.

• Compliance KPIs:

• AML training completion: 100% annually.

• Sanctions screening hits mitigated/documented: 100%.

• Filing timeliness: 0 late filings.

• Substance KPIs:

• Staff headcount and qualifications vs. plan: on plan or board‑approved variance.

• Local spend vs. budget: ±10% with rationale.

• Board meetings held in jurisdiction: ≥75% annually, subject to travel realities.

• Internal assurance:

• Annual internal compliance review (light‑touch if small).

• External legal/tax health check every 2–3 years or on major business change.

• D&O and cyber insurance coverage review: annually, with broker benchmarking.

Common Mistakes—and How to Fix Them

• Mistake: Using a “shelf company” and never updating its registers.

• Fix: Conduct a corporate housekeeping sprint—reissue share certificates, update registers, file changes, and prepare a clean cap table.

• Mistake: Treating the offshore entity as a pass‑through pocket.

• Fix: Introduce disciplined approvals, clear contract parties, and accounting segregation; update intercompany agreements.

• Mistake: No narrative for large inflows/outflows.

• Fix: Build a payment memo template—purpose, parties, contract reference, sanctions check, board or delegated approval.

• Mistake: Director signatures from the wrong country on critical documents.

• Fix: Implement a signing protocol—sign in the jurisdiction, keep travel logs, use local execution versions. If remote, record that signatory was located in the right place at the time.

• Mistake: Overreliance on email approvals.

• Fix: Replace with periodic meetings and written resolutions. Summarize email deliberations in the minutes for context.

• Mistake: Ignoring small regulatory notices.

• Fix: Assign a single owner for incoming mail and registry notices; log and escalate within 24 hours.

• Mistake: Transfer pricing afterthought.

• Fix: Commission a brief benchmark and lock in pricing before year‑end. Adjust invoices quarterly to hit targeted margins.

• Mistake: Underinsuring directors.

• Fix: Obtain D&O insurance that names the offshore entity; review exclusions for sanctions, AML, and securities claims.

Tools and Templates You Can Use

Minute Skeleton

• Header: Company name, registered number, date/time/location, attendees (with locations), apologies, quorum confirmed.

• Declarations: conflicts; confirmation of prior minutes.

• Agenda items: facts presented; questions asked; alternatives considered; decisions; conditions; votes/abstentions.

• Resolutions: text exactly as approved.

• Closing: next meeting date; action list with owners.

• Signature: chair’s signature and date; page numbers; annex list (board pack references).

Directors’ Resolution Checklist

• Is the decision within the board’s authority or requires shareholder approval?

• Are directors physically present where you want management and control to reside?

• Have conflicts been declared and managed?

• Is the supporting pack complete (legal memo, financials, risk assessment)?

• Are sanctions/AML checks completed for counterparties?

• Are follow‑on actions assigned (bank notifications, filings, press releases)?

Dawn Raid and Investigation Card

• Be polite and cooperative; request identification and legal basis.

• Contact counsel and the chair immediately.

• Preserve documents; do not delete or alter anything; halt auto‑deletions.

• Confine the scope: identify requested records; keep copies of everything provided.

• Record the names and times of officers; request a receipt of seized documents.

When to Bring in External Help

• Jurisdiction switch or redomiciliation: corporate and tax counsel to manage filings, tax exit/entry, and banking transitions.

• Economic substance uplift: local HR, office providers, and tax advisors to calibrate staff count and budget.

• Major transactions: legal due diligence, financial modeling, and regulatory notifications.

• Regulatory inquiry or bank freeze: counsel to coordinate responses, plus forensic accountants if transactions are complex.

• Transfer pricing and CFC planning: specialist advice to set robust documentation and defendable positions.

Practical Insights from the Field

• “Management and control” is a behavior, not a checkbox. The story your documents tell should match how you actually operate: who decides, where, and how.

• Banks value predictability over perfection. If your activity deviates from the profile they approved, advance notice and a clear explanation usually beats a freeze.

• Substance isn’t only about headcount. A small but credible footprint—competent director, regular in‑jurisdiction meetings, local vendors, visible decision‑making—goes a long way.

• Training moves needles. A one‑hour, case‑driven session on sanctions and ABC saves countless hours of cleanup later.

• Be honest about capacity. If a board packet lands and you need more time, ask for it. Rushing creates poor records and decisions that are hard to defend.

Regulatory and Market Context to Keep in View

• CRS and AEOI: Tax authorities receive cross‑border account information from more than 100 jurisdictions annually. Banking secrecy isn’t a shield.

• BEPS and the MLI: Many double tax treaties have been tightened; treaty shopping and artificial arrangements face scrutiny.

• Sanctions escalation: OFAC, EU, and UK sanctions programs have expanded in scope and enforcement. Civil penalties can be significant, and the UK’s strict liability approach increases exposure.

• De‑risking trend: Banks off‑board clients that can’t demonstrate clear compliance. Maintaining a strong relationship and proactive communication is a core director task now, not a courtesy.

Key Takeaways

• Run the offshore company as a real business unit: deliberate board decisions, clean minutes, credible substance, and proactive compliance.

• Focus on the story your records tell: why the company exists, who it serves, how money moves, and where decisions happen.

• Build redundancy and resilience: multiple banking relationships, clear approvals, robust service providers, and tested incident protocols.

• Keep the human element front and center: a capable resident director, trained staff, and ethical culture will carry you further than any checklist.

Directors who invest in these fundamentals reduce personal liability, protect shareholder value, and enjoy smoother relationships with banks and regulators. The goal isn’t to create paperwork for its own sake; it’s to create clarity—so when someone looks under the hood, what they see matches what you say.