Offshore company liquidation is the process by which the assets of the company are collected in and realized, its liabilities discharged, and the net surplus, if there is one, distributed to the persons entitled to it. Only after theses administrative procedures are followed and completed, the company can be terminated or dissolved. In matters of insolvency, the winding up procedures are initiated by a position of financial distress of the offshore company. Financial distress happens when the offshore company can no longer meet its financial obligations when debts are due. It is a common misunderstanding that assets of the offshore company can be paid instantly to the beneficiaries. Even in voluntary arrangements specific predefined procedures to liquidate the company must be followed.

The offshore financial industry is characterized by cross-border and international transactions. Cooperation between different jurisdictions and application of distinct legal systems and frameworks is needed. To avoid that proceedings are started in individual jurisdictions, modified universalism seeks to establish the most appropriate and best jurisdiction to initiate the insolvency and liquidation procedures. Sovereign rights of individual states and the principle of jurisdiction over the issue at stake must be respected. It results that main insolvency proceedings with universal scope, territorial insolvency proceedings and secondary proceedings may follow.

Main proceedings follow the center of main interest of the offshore company. This is established as the place where the debtor conducts the administration of its interests on a regular basis, and which is ascertainable by third parties. The place of central administration may differ from the registered office of the company and therefore several factors must be considered. Since the offshore financial industry is often abused by sly actors and thus vulnerable for abuse, fraud against creditors and other stakeholders must be avoided. Insolvency proceedings follow accordingly.

Voluntary winding up is what most offshore companies do. It must be clarified that an offshore company that is struck off the corporate registry for failure to honor the annual payments is not considered to be liquidated. Voluntary winding up does not require any involvement of the courts. As such, it is cost efficient. However, to avoid personal liability, the controlling persons and beneficiaries must follow strict procedures.

Strict procedures to close down an offshore company include the following. The members of the corporate entity must adopt a special resolution to wind up the company. The structure of the resolution is defined by the articles of association. Creditors must be informed about the proposed closure of the company and holders of floating charges are allowed to appoint a special administrator to liquidate the company. A copy of the resolution must also be send to the company registrar and to the National Gazette for publication. The directors of the company must give a statutory declaration of solvency on the company. This statutory declaration requires a full enquiry into the financial affairs of the company. The declaration of solvency must conclude that the company is able to pay its debts. An erroneous or false declaration of solvency, or the lack of such a declaration may trigger personal liability for the controlling persons of the company. The above procedures reveal sufficient reasons to comply with the rules and liquidate an offshore company once due.