Protecting Your Company’s Assets

Any company may face the need to protect its assets. Threats may come from dishonest competitors or counteragents as well as an unstable political and economic situation in the country. Fraudulent government officers or raiders may want to expropriate the assets of your company.

You can take various steps of an organizational and legal character to protect yourself from such a situation. You have to take complex measures in all cases to protect your company’s assets and bear all real and potential risks in mind.

For this reason, you should seek advice from professional lawyers if you want your assets efficiently protected.

What is asset protection?

Asset protection is a complex of legal and organizational measures that make your company’s assets inaccessible for you potential rivals. At the same time, you retain the following opportunities:   

• To control the assets;
• To use them to make profits;
• To dispose of them in any way you wish: sell them, give them away, hand them down to your heirs, etc.

We have to point out that we are talking about asset protection here, not about asset custody. You can learn about the difference between these two notions at the InternationalWealth web portal.

Corrupted government officers, your business partners, your competitors, or your relatives could be your potential rivals. A simple example: if you divorce, your spouse may want to get more than you are prepared to give up.

Besides, significant risks are associated with insiders who have confidential information. They might also want to use the information against your interests.

Please note that the asset owner him- or herself may pose threats to the company’s assets. Gamblers, alcoholics, and drug addicts do not control themselves and they cannot be trusted.  

Besides, nobody is protected from possible mental disorders. If the company owner grows very old, his/ her senile dementia may become threatening.

Legally, the assets can be material and non-material. Material assets are the physical assets of the company. Non-material assets include the company’s reputation, client base, qualification of the officers, and so on.

Assets can also be divided into liquid and non-liquid. Liquid assets are those that can be sold quickly at a decent price. Non-liquid assets are hard to sell: finding a buyer may take time and the selling price may be low.

Please note that it is important to fully realize what types of assets you would like to protect. Their types will have a direct bearing on the asset protection measures that you have to take.

When do you have to take asset protection measures?

You have to protect your company’s assets if you feel that they are threatened in one way or another. Below we provide a list of situations when your assets may need protection but the list is not exhaustive. The examples are supposed to give you a general understanding of the idea:

• You have made too many debts that you are unable to pay back;
• A regulatory agency has determined certain violations in your business activities that may lead to fines;
• It is possible that someone is going to sue your company;
• There is a threat of a forced takeover;
• There is raid probability;
• Tax authorities are laying claims against your company;
• There is a possibility that you company’s assets may be arrested;
• Other similar situations.

Methods of asset protection

There are several asset protection instruments that you can use and the choice will depend on why types of assets you would like to protect and how high the current risks are. In any case, you have to assess the risk probabilities with care. Risk management specialists recommend having two strategies: one for operations under normal circumstances and one more for operations in cases of emergency.

Below we discuss the asset protection mechanisms that are used most often.

Going offshore

Offshores are sometimes associated with illegal money laundering and tax evasion schemes. These associations are incorrect. Today, offshores offer wonderful asset protection opportunities. If you set up an offshore company, a trust, or a foundation and write your assets in its name, you will gain the following advantages:

• Your assets will remain yours;
• The information about the company ownership will remain confidential;
• Your company will fall under the jurisdiction of a foreign country.

Please note that some offshore jurisdictions do not have publicly available Business Registers. Thus, only the registration authorities will know that the company belongs to you.

An offshore trust or foundation is probably the most efficient asset protection mechanism. When you put assets in trust, you alienate them from yourself. What benefits does this bring? Because the assets do not belong to you (they are under the management of the trustee), they cannot be expropriated from you. Even on a court decision.

Well, the assets kept in trust can be expropriated on a court decision but if and only if a court of law finds your trust illegitimate. A sham trust can be created for illegal purposes and this fact gives the judges some opportunities to disqualify your trust. However, proving that a trust is illegitimate is a hard task.

In addition, creating an offshore trust is not overly expensive. This fact makes offshore trusts even more attractive.

Hiring nominee company directors and shareholders

Hiring nominees is a rather popular asset protection instrument. When they are appointed, they issue a power of attorney in the name of the real owner of the assets. This practice is widespread all around the world.

In some countries, professional nominee services are available while in some other countries people hire their relatives or close friends as nominee directors or shareholders of their companies. In this way, the company UBO remains secret: the documents contain the names of the nominees only.

Probably the wisest strategy would be to combine an offshore company/ trust/ foundation with hiring nominees. With some professional assistance, this goal is quite achievable.

A passport of a foreign country

Acquiring a passport of a foreign country in a fast manner is rather expensive. However, a second passport can bring many important advantages:

• You can use the tax benefits available to the citizens of your second home country;
• You can relocate to your second home country if it boasts a better climate, for example;
• Several citizenship-by-investment programs available in the Caribbean and elsewhere allow obtaining a second passport within a few months.

Therefore, acquiring second citizenship would help protect your assets and simultaneously solve other important tasks. If you obtain citizenship of the EU by investment (Malta, an EU member state, administers a citizenship-by-investment program), you can cross the European borders without any visas or other additional documents.

As you can see, several asset protection instruments are at your disposal. If you take a complex approach to the task and apply for some professional assistance, you can efficiently protect your assets from expected or unexpected threats.