Belize LLC formation
LLCs originated in the United States some time ago of course and are now available in a variety of offshore jurisdictions. Belize came to this corporate structure rather late, introducing its LLC legislation towards the end of 2011. In an attempt to differentiate itself from other jurisdictions, Belize incorporated into the legislation what we feel are the most powerful asset protection features available in offshore LLCs. We have tried to We summarize the main asset protection features below.
According to Belize legislation – the Belize International Limited Liability Companies Act, 2011. Part IV of the Act is the portion of particular interest with regards to asset protection. Below at least some of the sections of the Act which contribute to its asset protection strengths:
- Section 36(1) provides that only the judgments delivered by a court in Belize shall be enforceable against an LLC or any manager or member thereof. This would, of course, include judgments rendered in appellate courts not located in Belize but which relate to actions commenced in a court in Belize, e.g. Caribbean Court of Justice.
- Section 36(2) As in most LLC jurisdictions, a creditor of a member is permitted to apply for a charging order against a member’s interest. To the extent so charged, Section 36(2) provides that the judgment creditor shall only have the rights of an assignee of the member’s interest.
- Section 57 provides that the assignee of a member’s interest shall have no right to partake in the management of the company.
- Section 36(3) provides that the charging order remedy of 36(2) shall be the sole and exclusive remedy available to a judgment creditor or other creditor of a member.
- Section 37(7) provides that every creditor, before bringing an action against any LLC property, shall first deposit with the Supreme Court Registry of Belize an amount equal to half the amount claimed or fifty thousand dollars, whichever is greater. To that one would have to add the cost of retaining Belize legal counsel. This imposes a significant financial burden on anyone attempting to bring an action against the property of an Belize LLC and should not only eliminate ‘nuisance’ lawsuits, but also give anyone pause as to whether to proceed with a lawsuit against a Belize LLC.
It is the combination of these asset protection features that distinguish Belize LLCs from those of its competitor jurisdictions. The underlying intent is of course to discourage litigation and instead bring a potential litigant to the table to work out a fair settlement without the necessity to resort to litigation.
To provide some additional background, and according to the Belize International Financial Services Commission this document provides some useful information on the effective use of Belize LLCs as well useful additional background. It also deals with the asset protection features of course, but that is covered in detail in the legislation above. We should note that Section 17 has been superseded to a limited extent by the new requirement, now seen a wide variety of jurisdictions, that all Belize entities shall keep some sort of accounts, sufficient to show their financial condition, although the submission or audit of the accounts is certainly not necessary.
We trust this provides a good starting point for discussing the possible use of Belize LLCs, especially those with asset protection concerns who prefer a non-Trust, non-Foundation solution. If you have any additional questions please contact us.