17 reasons why you should never sue a Nevis company (and how you can use it to your advantage)

One of the key points of Flag Theory is asset protection. We’ve already seen how you can use trusts and other structures in jurisdictions with tax benefits so that no creditor can take your money from you.

In that article we mentioned companies in Nevis, but today we’re going to take a closer look at the options this island offers, especially if you also live as a perpetual tourist (although this isn’t essential).

In some cases it isn’t so much that we’re worried about saving money in taxes, but that we want to have a company that gives us more security, with which we are assured that if something were to go wrong, we wouldn’t end up being prosecuted, or even bankrupt.

Obviously, we all want to minimise the probability of being sued or sanctioned, and this is where Nevis comes in.

Fortunately, global competition between countries has brought some benefits which can virtually allow you legal immunity if you have the right structure.

The good thing about a company in Nevis is that it gives you the option to have a tax-free offshore company as in any other offshore jurisdiction, but with a few added bonuses.

If you also use the company there as an investment vehicle, you can rest easy, with the certainty that no one in their right mind would consider suing you.

Unfortunately, lawsuits and requests for small faults are fashionable in the EU and can quickly lead to fines of tens of thousands of euros.

Whether it’s mistakes in legal notice, misquoted image sources, errors in the implementation of data protection (GDPR in the EU) or anything else that goes beyond what’s allowed in the sales process, we immediately fall prey to lawyers specialised in sanctions, vigilant to any little detail that’ll allow them to take a few thousand euros out of our pockets.

By arming yourself properly you can just forget about these lawyers  Luckily, this is something practically everyone can do and that, on top of security, also allows you to not pay any tax (as long as you don’t personally live in a high-tax country, of course).

If you want to know which structure would make you virtually untouchable by law then read on.

Knowing that there are structures that greatly reduce the risk of you being sued is undoubtedly reassuring, especially if your website or blog deals with issues as controversial as the ones discussed on Tax Free Today.

What being a perpetual tourist without a residence means in case of a lawsuit

Before delving deeper into the characteristics of companies in Nevis, allow me to tell you a bit about residency and being a perpetual tourist (PT) in terms of asset protection and legal certainty.

The most obvious reason suing a PT might be complicated is lack of residence.  Generally, it’s hard to know who is responsible for the matter, in which jurisdiction the PT should be taken to court.

Local courts have jurisdiction to try people for crimes committed by their residents or committed in the country.  So, contracts which mention something to do with a specific place (a rent al or business in the country) generally fall under local jurisdiction.

If you want to enjoy greater legal protection, obviously the best thing is not to reside in any of the those typical countries teeming with lawyers specialised in sanctions (USA, Germany, etc.) So if they ever want to cause you trouble they’ll have to go and look for you and sue you (either you or your business) in a country whose laws and procedures they aren’t familiar with.

Anyway, don’t think you can just do anything, either, especially in cases such as the EU.  There are procedures, such as public notice, which are very complicated, and we are not going to talk about them now.

Suffice to say that if you have accounts and investments in your company’s name, you’ll be able to be practically 100% protected against creditors.  Furthermore, facing a properly created structure, most people refrain from filing a lawsuit because of the low chance of success versus the large costs involved.

Moreover, even a favourable sentence would be useless because the creditor has no way of accessing the person’s assets. They’d first have to get the sentence in the country in which the company’s headquarters are located with its assets.

It’s important to bear in mind that the structure for asset protection that I talk about in this article only works if you have permanently left the country where your business interests are located.  In other words, you cannot be residing in the country where your company operates.

As long as you take this point into account, if your overseas company gets into legal trouble in that country but it’s not a crime, you can rest easy.  However, it’s important that this is not criminal activity, i.e., that your possible failings are not of interest to the State.

In these cases it doesn’t matter if it’s your old partner with whom you still have a dispute, creditors, lawyers or ex-partners; your chances of success are practically non-existent, no matter how many millions you have in your accounts.

Now that we’ve discussed residence, the next point to discuss is the company. In this case I’m going to talk to you about a Limited Liability Company (LLC) in the Caribbean country of Nevis, whose structure is similar to that of the LLCs in Wyoming or Delaware.

Nevis is well-known offshore financial centre in the Caribbean that, with the Marshall Islands, probably offers the greatest asset protection in the world.

17 reasons why you shouldn’t sue an LLC in Nevis.

Nevis is an island in the Caribbean and, together with its neighbour St Kitts, forms the country of St Kitts and Nevis.  It is known amongst other things for its economic citizenship programme, by which for some time now you can get a second passport for around €300,000.

Nevis used to be a British colony and gained independence in 1983. It is located about 225 km southwest of Puerto Rico, close to other British overseas territories such as Anguilla and Montserrat.

People have been able to set up LLCs in Nevis since 1995. The law basically corresponds to the US one, like Wyoming’s, but over time it has incorporated some additional clauses that offer highly effective asset protection.

The following 17 points show why suing someone with an LLC in Nevis is fairly senseless (the same goes for someone with a trust, which is an even more effective, though considerably more expensive, structure).

1. Out-of-country court sentences are not automatically enforced

Let’s say you’ve been found guilty in another country in your absence and creditors are now behind your assets. With a Nevis LLC this shouldn’t worry you in the least.

In order to access to your goods or for you to pay what is due, the creditor would need a guilty verdict from the country where you company’s headquarters are located, in this case Nevis. Take a look at the following 16 reasons why they probably won’t get it.

2. Charging order protection

Firstly, the creditor must ask himself whether the lawsuit will turn out to be profitable. Like some other jurisdictions, Nevis applies a charging order protection on its companies’ assets.

This charging order protection means that no creditor has the right to liquidate or repossess a company. The only right they get when winning a lawsuit is to collect future distributions that are due to be paid to the debtor.

So, if the debtor isn’t struggling financially (for example, thanks to other hidden sources of income), the creditor will not access the assets in Nevis even in the unlikely event that the lawsuit is successful. The debtor can waive any commercial activity that may arise, or relocate it.

The charging order only lasts for 2 years after the sentence. Thereafter, the debtor can request to terminate the charging order, unless the creditor has been deprived of profit that has already been distributed. The creditor will only be able to collect distributions during this 2-year period.

Other company members (partners) who are not affected by the sentence can continue receiving money through loans or other means.

Charging orders can not be renewed under Nevis’ laws. Therefore, there is only a 2-year interval in which a creditor could theoretically collect money if dividends were distributed.

In practice, the creditor may not be able to take away more than the capital gains attributable to the Nevis LLC. Although even this could be ’fixed’ by addition capital increases.

In conclusion, with a company in Nevis creditors generally do not get any benefit, not even by winning a lawsuit. On the other hand, the debtor can continue with his business without any problems, or even start new ventures.

3. Anonymity of company members (no registration)

Nevis LLCs are completely anonymous.  As is common in many offshore jurisdictions, there are no public records in which companies appear.

Beyond the owners, the country in which the business is located and the local agent with whom the company has been registered in Nevis (which, by the way, is subject to strict confidentiality laws), no one knows who the owners of the LLC are.

Finding a company in Nevis, or harder still, its members, is very different to doing so in the UK, for example.

The debtor could have 2 different LLCs in Nevis and, should a problem arise, only disclose one of the two, the one with fewer assets. If the creditor is unable to find the other company, it is kept secret under the strict conditions confidentiality in Nevis. Bear in mind that exchange of information is only useful to governments and only applies to tax matters.

4. You can only report the company, not its members

You can only sue the company, not its members In Nevis you can never be sued as an individual, just your LLC, but it first has to be identified (see the previous point).

You have to be able to provide the company’s full name. One simple wrong letter or number may lead to the lawsuit being rejected.  Similarly, if the members of the LLC are named, the lawsuit will immediately be dismissed.

All this makes it even harder to successfully file a lawsuit.

5. Local lawyers do not charge for results, but demand payment regardless of outcome.

To file a lawsuit in Nevis, the creditor needs a local lawyer. These do not charge based on the results of the trial, thus entailing expenses for the creditor from day one. Since Nevis is one of the wealthiest offshore centres, these costs are higher.

6. Whoever loses pays

Nevis is a jurisdiction in which the loser bears the costs. Whoever loses a case must pay the procedural costs of both parties.

The low chance of success makes this favourable to the potential defendant.

7. A $100,000 bond is required to file a lawsuit

In order to start legal proceedings, the creditor must make a deposit of around US$100,000 (EC$270,000) in cash to the court.

This money is used to cover the defendant’s lawyers and court costs if the lawsuit is dismissed or if the defendant decides to file a counterclaim and wins.

8. The LLC only has to have existed for 1 year to benefit from full protection.

To be able to enjoy all the mentioned benefits, the LLC has to have been set up in the other country before the guilty verdict. Since it only takes 2-3 days to set up an LLC, and in emergencies just 1 day, a structure could quickly be set up in Nevis if failure is seen to be imminent.

Assets held in Nevis by the LLC for more than one year prior to trial will be fully protected.

In many other jurisdictions, assets have to have already been in existence for 3-5 years. With Nevis’ one-year rule, delaying tactics of trials in other countries would provide full protection.  Assets transferred to the LLC at a later stage could be considered as fraudulent transfers.

9. With Nevis LLCs, transfers by members that would otherwise be considered fraudulent are unavoidable

Fraudulent transfers of assets are those made during a trial.

Even though these don’t provide full protection against a charging order, assets are protected as long as the lawsuit is not successful. Creditors cannot avoid transferring assets to a Nevis LLC. The condition is that the transferor of the assets is part of the LLC. Even if it is a one-person LLC, this action is still valid.

10. Guilty verdicts for fraudulent transfers need additional burden of proof.

In Nevis, proving a fraudulent transfer requires additional burden of proof.

The creditor must meet relatively complex requirements to prove that there has indeed been a fraudulent transfer of assets to the LLC.

There must be no doubt about this transfer.  Nevis’ requirements for the creditor are a lot higher in this case than in other jurisdictions.

11. Claims for damages cannot be made, even if a fraudulent transfer is found.

Even if the creditor is found to be right in finding a fraudulent transfer, he would only have access to the money or property transferred fraudulently. All other assets will continue to be protected. Equally, damages cannot be claimed if the creditor wins the claim against the debtor.

12. The coercion clause prevents the delivery of assets if the investigation happens under duress

There is a coercive clause in Nevis’ legislation, which prohibits trustees from accepting instructions if the person giving instructions is under duress.

Therefore, if the owner of an LLC demands that the company director pay assets, the director should object if he knows that the owner is being compelled to do so by court order or similar.

Without the free will of the owner, no assets can be taken out of an LLC.

13. No class-action lawsuits; each creditor must file a claim individually.

In Nevis class-action lawsuits are prohibited. Several creditors cannot group together as a single plaintiff to save costs.  Each creditor must meet every requirement, make an individual deposit and bear the costs of a full claim.

14. Possibility of cellular structure of the LLC, i.e. a different claim for each part of the assets.

It is possible to set up a series LLC. This means that several companies are set up under the same LLC. This creates a sort of cellular structure. In each cell you can keep a part of your assets. One cell has the financial assets, another the shares, the next the real estate, etc.

With a cellular structure, the creditor must win each individual claim he puts forward against each cell in order to gain access to the assets. So, suing a cellular structure can involve huge costs and effort.

15. This jurisdiction favours the defence

As you can see, Nevis applies the presumption of innocence principle, which makes things harder for the plaintiffs.  As a former British colony, Nevis is based on British common law, whose trust legislation has historically been in the defendant’s favour.  English law is difficult to penetrate and enjoys high prestige.

16. Low costs for the debtor

As long as the debtor does not lose to the creditor (and it’s highly unlikely he will), the lawsuit against his Nevis LLC will not have cost him a penny.

As for the costs of a company in Nevis, this type of LLC can generally be set up for $1,000 or so.  Of course, you won’t have to pay tax or submit accounts.

17. Minimal administrative burden

Thanks to the company in Nevis you can save complicated strategies to get effective protection of your assets. When setting up a company, you would need to draw up a watertight Operating Agreement, but then you could relax.

The administrative burden is minimal and limited to an annual declaration confirming the existence and shareholdings of the company.

Nevis LLCs do not have accounting obligations and do not pay tax in the country. In this sense, you can set it up however you want.

What you should bear in mind with a Nevis LLC

Thus, in addition to the 17 reasons that protect your assets in Nevis, there are low costs of only $1,000 a year, tax-exemption, and exemption from having to submit your accounts. Of course, we also can’t forget that there are good offshore banks both on the island and in the immediate vicinity.

So, do you just have to set up an LLC in Nevis to instantly enjoy all the benefits of asset protection?

In principle, yes, although you should be aware of a few details.

In order to guarantee full asset protection, members of an LLC must elect one external person as a director. It could even be another one of its own anonymous offshore companies, but the best option is a reliable external person.

This person will only be an administrator on paper, and does not have to get involved in the company. This director has the same role in an LLC as a trustee would in a trust.  So, if the director is asked to pay with the LLC’s assets following the creditors’ decision, the coercion clause apply.

Similarly, you must ensure that the LLC’s operating agreement is watertight. The LLC’s ownership structure can be quite flexibly configured.

Agencies that specialise in asset protection and setting up LLCs generally offer relevant model documents.  If you’re going to transfer large sums of money, it’s a good idea to draw up the operating agreement with a local lawyer to avoid any nasty surprises.

Finally, it is essential to have an account or deposit associated with the LLC. If you do not have a suitable offshore bank in a stable jurisdiction, file protection won’t do much good.

The Nevis LLC and taxes. Running a Nevis LLC as an active company

The good thing about a Nevis LLC is that you can also use it as a completely regular offshore company.

This LLC would be tax-exempt as long as it doesn’t generate profit in that country. In any case, the local market (around 20,000 inhabitants) is quite insignificant, so is shouldn’t be a problem avoiding it.

As with other fiscally transparent hybrid companies, how the LLC is taxed depends on the place of residence of its members. One Nevis LLC collects taxes at the level of the individual who must pay income tax in his or her country of residence.

If you live as a perpetual tourist and do not have to pay tax, you won’t have to pay them with the LLC either. Running an LLC is that easy, when income from abroad is tax-exempt in the country of residence.

So Nevis LLCs are perfect for people who don’t live in CFC member countries. This is because these laws would make it impossible for you to take advantage of the tax benefits of Nevis LLCs.

So, the LLC wouldn’t make much sense in terms tax if the owner lived in the UK, Ireland, or Australia, for example.

If you live as a digital nomad without a residence, you can run your Nevis LLC as an operating company, benefiting not only from tax-exemption and accounting freedom, but also from the advantages of asset protection.

One of the drawbacks of Nevis is its reputation as a tax haven.  Customers generally cannot deduct invoices issued by a Nevis LLC.  However, there are solutions to these issues of revenue recognition.

When it comes to asset protection there is no better option than the LLC in Nevis or the company in the Marshall Islands, Cook Islands or Belize.

Americans have been benefiting from the advantages of having companies in Nevis for decades now. We know of one occasion when a creditor’s lawsuit in Nevis was successful.  In this case the defendant was still living in the US and had made serious errors.

If you want to set up an LLC in Nevis or you want more information on your options regarding asset protection, write to us. We can put you in touch with our associates for setting up companies or help you with our consultation services.