The categories of business entity in Monaco
are defined by the Commercial Code, which
is essentially similar to its French equivalent.
For business-people used to common law
jurisdictions, the civil law company framework
can be confusing: companies are still
companies, but their management structure
is defined by statute to a far greater
extent, and must be entered into the official
commercial registry if it is to have legal
force. 'Directors' have extensive statutory
powers but are not normally executive:
executive management is delegated to a
named Managing Director (administrateur
delegue) or to a General Manager (Gerant)
whose name is entered into the Commercial
Register - and hence he derives his power.
Until recently, one of the key differences
between the Monagesque Commercial Code
and most others, including the French
one, was that the convenient and reasonably
simple SARL did not exist. A SARL (Societe
a Responsabilite Limitee) is the nearest
equivalent to the Anglo-Saxon limited
company, although the similarity should
not be pushed too far. The Societe Anonyme
(SA) is the grander type of civil code
limited company and is a much more constipated
form - there isn't an equivalent in common
law jurisdictions.
Article 26 of Monaco's Commercial Code deals
with the types of companies that can be
incorporated in Monaco. In offshore terms
limited liability companies incorporated
in Monaco are not attractive corporate
vehicles because of the extremely cumbersome
and bureaucratic formation procedures,
the fairly heavy taxation of foreign activity,
and the rather expensive professional
services in Monaco. See Direct Corporate Taxation
and Offshore Legal and Tax Regimes
for details of Monagesque corporate taxes
and low-tax alternatives.
As of April 30, 2002, there were 40 Corporate
Service Providers (CSPs) licensed to operate
in Monaco. The licensing requirements
are tiered with all applicants required
to meet specific minimum standards including
a detailed client identification protocol,
appropriate education and experience,
verification of source of funds, and a
police background check.
Additional requirements must be met when
the legal form selected to hold the license
is a Monegasque limited liability company
(Société Anonyme Monegasque, SAM). Conditions
for approval unique to the SAM include
minimum capitalization of €150,000, a
requirement to retain the services of
a notary, appointment of two statutory
auditors from an approved list who must
prepare an annual statement and a statutory
audit report. All individuals and partnerships
are licensed for two years renewable upon
reapplication.
For CSPs that are not SAMS, oversight is
currently not as robust as the licensing
process. The DEE has power under Law No.
1.144, 1991, to conduct on site reviews.
This authority has been sparingly employed.
Monegasque regulators estimated that approximately
3,950 offshore companies and 725 trusts
were under CSP management, as at April
30, 2002.
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Monaco Societe Anonyme
Monegasque
The Societe Anonyme Monegasque
(SAM) has the following characteristics:
- The
minimum share capital is 1 million
French Francs;
- Stamp
duty of 1% is payable on the amount
of issued share capital on incorporation;
- Although by law a company secretary is
not required a local office is nonetheless
required prior to Government authorization
being granted;
- Audited annual accounts must be filed annually;
- There
must be at least two shareholders
and 2 directors one of whom must be
resident in Monaco; directors have
to be shareholders in the company;
- Bearer
shares are permitted but they must
be deposited with a local institution;
- There
are no re-domiciliation and migration
provisions.
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Monaco Branch
A foreign company wishing to operate as a
branch in Monaco must obtain authorisation,
which involves submission of corporate
documents, three years' worth of audited
accounts, a statement of business intentions,
evidence of available premises, and evidence
of adequate funds.
Licences are normally issued for up to three
years, and are not necessarily renewed
automatically.
Branches of foreign companies are usually
taxed at 35% in Monaco: a better plan
may be to find a Monagesque manager, who
is not taxed, rather than to set up officially.
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Monaco Societe En Nom
Collectif
This form is similar to a common law partnership,
in that the participants have unlimited
liability. However the interests of the
partners (associes) are denominated in
book-entry shares (parts).
Unlike a partnership, the Societe en Nom
Collectif is, as its name implies, better
regarded as a company. It is formed on
signature of its articles (statuts), which
include a definition of the powers of
the manager (gerant), who is liable alongside
the partners (indeed he is one of them)
for the partnership's debts.
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Monaco Societe En Commandite
Simple
The Societe en Commandite Simple is similar
to the Anglo-Saxon Limited Partnership.
It consists of one or more general partners
with unlimited liability, and one or more
limited partners, who are liable only
to the extent of their capital contributions.
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Societe a Resposibilite Limitee
New legislation in 2007 modified the Civil
Code, the Commercial Code, and various
Sovereign Ordinances and Laws to introduce
the societe a resposibilite limitee, or
SARL.
The new SARL is intended to provide a limited
liability vehicle to enable smaller entrepreneurs
based in the Principality to operate more
flexibly and at a lower cost. Flexibility
will be provided by an easier method of
registration of corporate documents (cutting
out the requirement for expensive notarial
deeds), and by allowing only one director.
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Monaco Trusts
The concept of a trust in Monaco can be best
understood in terms of its historical
development. As a civil law jurisdiction
the Principality enforced its internal
laws governing strict heirship rules on
any dispositions made by Monegasque residents.
Consequently some British and United States
nationals residing in Monaco appealed
to the Government to be allowed to use
the vehicle of a trust so as to be able
to have the same flexibility to dispose
of their assets on death as existed under
the laws of common law jurisdictions of
which they were nationals.
Law 214 was passed with a view to allowing
foreigners resident in Monaco to set up
trusts governed by their own national
law. The law was not passed to create
a body of Monegasque trust law or introduce
the concept of a trust into Monaco. Unless
Monegasque law makes express provision
for a legal issue to be governed by its
internal law (e.g. appointment of trustees)
the courts of Monaco will apply the principles
of the foreign proper law governing the
trust as specified in the trust deed.
Monaco law also allows for a trust to be
administered from but not registered in
Monaco.
Monaco is not a good jurisdiction in which
to form a trust since the key characteristics
of a Law 214 Trust do not compare favorably
with other offshore jurisdictions:
-
Settlors must be residents of Monaco; thus
a Monaco trust has little relevance
to offshore financial planning;
-
The trust deed must be registered with
the result that information relating
to the beneficiaries, settlors and
property settled under the trust are
easily verifiable matters.
In most offshore common law jurisdictions
the converse applies. For further information
on the legal structure of Monagesque trusts
see Law of Offshore.
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Monaco Foundation
A Foundation has been described as the civil
law equivalent of the common law trust.
The administrators (like the trustees
of a trust) run a Foundation and once
founded the Foundation has a separate
legal personality to its founder and administrators.
The creation of a Foundation is often
preferable to the creation of a Law 214
trust.
A Foundation created in Monaco has the following
key characteristics:
- A
Foundation can be created in perpetuity
or for a fixed period;
- A
foundation can be created for any
purpose which does not offend public
policy and which it is seen to be
in the public interest;
- Foundations can be created by will, unlike
a Law 214 trust; a foundation created
inter vivos must be made by notarial
deed;
- Foundations are subject to a much stricter
regulatory regime than trusts;
- Unlike
a trust a Foundation must obtain the
approval of the sovereign under Monaco
law. Approval may take many months
and is only granted if the Foundation
has sufficient assets to achieve its
purposes. This cumbersome requirement
means that there are very few Foundations
in Monaco;
- Unlike
trusts Foundations cannot be used
by foreign nationals to avoid the
forced heirship rules of civil law
jurisdictions;
- The
administrators of a Foundation must
be Monaco citizens or have resided
there for at least one year;
- All
foundations are subject to supervision
by a local commission which has powers
to inspect and copy all documents
relating to administration or accounting
and which can dismiss the administrators
in certain circumstances.
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