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BRUNEI: TYPES OF COMPANY

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Brunei International Financial Centre

Legislation passed in 2000 introduced a number of additional corporate forms which are available to business operations in the International Financial Centre, including International Business Companies, International Limited Partnerships, and International Trusts.

The Registrar of International Business Companies and Limited Partnerships is the lawyer in charge of a Registry, which, for confidentiality and administrative reasons is a part of BIFC. The Registry is within MOF and quite separate from the domestic registry.

The Registered Agents and Licensed Trustees Order, 2000 ('RATLO') restricts the provision of 'international business services' to companies licensed under that Order. There are 11 (2009) Registered Agents and Licensed Trust Companies registered under RATLO. All establishment and compliance documents (including Certificates of Due Diligence) of International Business Companies (and Limited Partnerships) are filed by these licensed trustees.

Brunei International Business Companies

The incorporation of an IBC is governed by the International Business Company Order, 2000 (IBCO), which makes provision for tax-free corporate facilities at highly competitive cost levels. Brunei is more concerned with attracting a critical mass of good business than to achieve a fee-based income stream at a high cost to end-users.

IBCs may be limited by shares, limited by guarantee, limited by shares and guarantee, of limited duration, Dedicated Cell Companies, created by conversion, re-domiciled or discontinued in Brunei. Foreign or overseas companies may register as Foreign International Companies, and also operate tax free. The BIFC has been steadily progressing and has registered more than 3,000 IBCs.

The total Government Fee for company incorporation and year one maintenance of an IBC is US$500, while renewal fees from year 2 onwards are set at US$400.

IBCs are incorporated by trust companies subscribing to Memorandum and Articles. A Certificate of Due Diligence must be filed with the constituent documents. This Certificate contains an undertaking by the trust company concerned that the IBC complies with applicable provisions of IBCO and that due diligence in respect of beneficial owners and the source of finding has been conducted, or will be conducted prior to commencement of business. A similar certificate is required at every annual renewal.

Standard Memorandum and Articles for the three classes of limited company are Scheduled and may be adopted in full or as modified. Other than bearer shares, which are prohibited, an IBC may issue the usual wide range of shares and classes of shares, including Dedicated Cell shares, options, warrants or rights to acquire securities of an IBC, including convertible securities.

Directors may be individual or corporate, as may secretaries. A Resident Secretary provided by a Trust Company is mandatory. Audits are optional (except as required under banking, trust company, insurance and dealing licensing provisions).

Conversion/continuance occurs where permitted by the former domicile, subject to certain requirements including solvency and registration of (IBCO-compatible) Memorandum and Articles. There is provision for the Court to strike from the Brunei register a company which continues to exist in another jurisdiction following conversion.

The records of an IBC may only be searched subject to the prior grant of certain consents, except where circumstances, such as criminal activity, are adjudged by the Registrar to have arisen. This applies both to the Registrar's records and those of the IBC held at its registered office.

Brunei International Limited Partnership

Under the International Limited Partnerships Order, 2000 (ILPO), an ILP consists of one or more general partners (of which one must be a trust company or subsidiary thereof, an IBC or another ILP) and any number of limited partners. An ILP may be formed for any lawful purpose, undertaken in or from within Brunei Darussalam or elsewhere. It does not carry on business with any persons resident in Brunei Darussalam, and prospectus provisions may apply to offers of securities.

In an ILP, a general partner is personally liable for all the debts and obligations of the ILP but, except in so far as the partnership agreement or ILPO otherwise provides, a limited partner is not so liable. At the time of becoming a limited partner, a limited partner contributes, or undertakes to contribute, a stated amount (or property valued at a stated amount) to the capital of the partnership. Provision for confirmation of value exists.

Every ILP must:

have a name which includes the words "International Limited Partnership" or the letters "ILP";
maintain a registered office in Brunei at the registered office of a trust corporation; and
keep at its registered office such accounts and records as are sufficient to show and explain the ILP's transactions and to disclose with reasonable accuracy, at any time, the financial position of the ILP at that time.

Except as permitted or required under ILPO, a limited partner shall not take part in the conduct of the business of an ILP, and all letters, contracts, deeds, instruments or documents whatsoever must be entered into by the general partner on behalf of the ILP. If a limited partner, other than a trust corporation acting in such capacity for the purposes of ILPO, takes part in the conduct of the business of the ILP in its dealings with persons who are not partners, then, in the event of the insolvency of the ILP, the limited partner may be liable as though he or she were a general partner.

ILPs are registered through a trust corporation by the payment of a year one fee of US$500. The annual renewal fee thereafter is US$400.

Brunei International Trusts

Brunei has very comprehensive international trust legislation, which will appeal both to private clients as well as major corporations. For the private clients, provision is made for asset protection trust as well as special trust regimes. Under this regime, it is not the beneficiary who enforces a trust but an independent Enforcer. This addresses certain tax and security issues.

For the major corporations, commercial purpose trusts may be created whereby it is not necessary to have an individual beneficiary. Such trusts are widely used for special purpose vehicles (SPV) and planning, varying from project finance to securitization and segregation. The legislation also provides a more modern definition of inquired charities. This enables charitable trusts to be established to protect the environment and historic buildings, for example.

Under the International Trust Order, 2000 ('ITO'), an IT must be in writing, settled by a non-resident of Brunei, declared in its terms to be an international trusts (on creation or migration to Brunei), and at least one trustee must be a licensed under RATLO or an authorised wholly-owned subsidiary of a licensee. Generally, only non-residents may be beneficiaries when an IT is first established. Purpose and Special trusts are provided for, whether charitable or non-charitable.

At least one trustee must be licensed under The Registered Agents and Trustees Licensing Order, 2000 (RATLO) or an authorised wholly-owned subsidiary of a licensee. Generally, only non-residents may be beneficiaries when an IT is first established. The retention of certain powers (specified in the ITO) by the settlor will not invalidate an IT. Such powers are not, however, deemed to exist in the absence of specific provision in the Trust instrument.

There are wide powers of investment, with an ability for trustees to seek "proper advice" as defined. Having done so, a trustee will not be liable for acts taken pursuant to such advice.

There are powers to appoint agents and to delegate. Trustees may charge, and similar provisions appear for enforcers and protectors. Powers of maintenance and advancement are wide, spendthrift and protective trusts are recognized.

Arrangements for appointment or change of trustees follow generally accepted lines. The Court is given wide powers to interpret, assist and amend. Hearings may be held in camera. Trustees may pay funds into Court for determination of matters arising in the course of administering the fund, and there is power to apply to the Court for an opinion, advice or a direction relating to trust assets.

Purpose Trusts are provided for, whether charitable or non-charitable. Without prejudice to the generality, a trust for the purpose of holding securities or other assets is by statute deemed a purpose trust. The purposes must be reasonable, practicable, not immoral nor contrary to public policy. The trust instrument must state that the trust is to be an authorized purpose trust at creation or on migration to Brunei. Provision must be made for the disposal of surplus assets (although no perpetuity period applies), and an enforcer is required. On completion or impossibility of achieving purposes, further trusts may be activated.s

Brunei Corporate Forms In The Domestic Sector

Business enterprises in Brunei may be organised in the form of:

Sole proprietorship;
Partnership;
Private Company (Sendirian Berhad);
Public Company (Berhad);
Branch of Foreign Company

All business must be registered with the Registrar of Companies and Business Names. The proposed name of business or company must first of all be approved by the Registrar of Companies and Business Names. For each name proposed, a small fee is imposed.

Brunei Sole Proprietorship

Sole proprietors are not subject to tax in Brunei Darussalam, but are personally liable for the obligations of their businesses. Generally, registration approval is not granted to foreigners.

Sole proprietorships must be registered with the Registrar of Business Names unless the full name of all individuals concerned is used for the business.

Brunei Partnership

A partnership may consist of individuals, local companies and branches of foreign companies. The maximum permitted number of partners is twenty. In general, at least one partner in the partnership must be a Bruneian or a Brunei Permanent Resident. However, under special circumstances, the Registrar may grant approval for foreign individuals to register a partnership.

In Brunei Darussalam, partnerships are not subject to income tax.

Brunei Private Company (Sendirian Berhad or Sdn. Bhd.)

Companies that are incorporated in Brunei Darussalam are governed by the Companies Act (Cap 39). Under the Act, four types of companies may be incorporated:

Companies limited by shares;
Companies limited by guarantee;
Companies limited both by shares and guarantee; and
Unlimited companies.

A private company must, by its constitution (Articles of Association), restrict the right of members to transfer shares, limit its membership to fifty and prohibit any invitation to the public to subscribe for shares or debentures.

At least half the directors in a company must be Brunei citizens or Brunei Permanent Residents.

Private companies must have at least two shareholders. Shareholders need not be Brunei Darussalam's citizens or residents, and a subsidiary company may hold shares in its parent company.

All companies must appoint auditors to audit their accounts and report to the shareholders. The companies must also file annual returns with the Registrar of Companies and submit annual tax returns to the Collector of Income Tax ( CIT ) at the Ministry of Finance.

Brunei Public Company (Berhad or Bhd.)

Public companies are formed under the same legislation as private companies.

A public company is one which may issue freely transferable shares to the public and is not bound by any of the above restrictions relating to a private company. Public companies:

May be limited or unlimited;
May issue freely transferable shares to the public;
Must have at least seven shareholders;
Shareholders need to be Brunei citizens or residents;
Subsidiary company may hold shares in its parent companies;

Half the directors in a company must be either Brunei Citizens or ordinary residents in Brunei Darussalam

Memorandum and Articles of Association must be registered with other incorporation documents in prescribed forms. Upon approval, a Registration of Companies Certificate will be issued and a fee of $25.00 is imposed.

The registration fees are based on a graduated scale on the authorized share capital of the company. No minimum share capital is required.

Public Companies are required to do the following:

Appoint auditors who are registered in Brunei Darussalam;
Prepare each year profit and loss account and balance sheet, accompanied by a Director's Report;
Submit accounting data annually to the Economic Planning Unit, Ministry of Finance;
File annual returns, containing information on directors and shareholders with the Registrar of Companies and Business Names;
Keep the following records: Minute Book of Members' Meeting; Minute Book of Directors' Meeting; Minute Book of Managers Meeting; Register of Members; Register of Directors and Managers; Register of Charges.

Brunei Branch

Any foreign company that wishes to establish a business in Brunei Darussalam and does not incorporate as a local company must register as a branch of the foreign company.

The Companies Act also stipulates the requirements for the registration of a branch of a foreign company in Brunei Darussalam. The procedure is similar to that of incorporating a local company but the documents required to be filed with the Registrar of Companies differ slightly. The filing documents required for registering a branch are as follows:

A certificated true copy of the Charter, Statutes or Memorandum and Articles of Association or other instruments defining the constitution of the foreign company duly authenticated in English;
An original copy of the Board Resolution approving the registration of a Branch in Brunei; and
A list of directors together with their particulars and the names and addresses of one or more persons residing in Brunei Darussalam authorized to accept notices on the company's behalf.

The branch must have a registered office in Brunei Darussalam and must appoint a local agent. On registration, a foreign company is entitled to the same powers and authority as a local company.

Branches of foreign companies are required to file a copy of their head office annual financial accounts with the Registrar of Companies every year. Branches are also required to prepare branch accounts for tax computation.

Registration fees payable in respect of the registration of a branch depend on the authorised share capital of the holding company but are 50% of the fees payable for locally incorporated companies.