Foreign Offshore Company
Simply put, a foreign company can be defined as a company or corporation that is incorporated in a country, state or territory, but is registered to operate in another. Introducing or establishing a company as a foreign company as opposed to as a domestic or local company may be more beneficial for various reasons depending on the company’s goals and the legal regime established for foreign companies.
In establishing a foreign company, considerations of the company’s directors, officers and shareholders would include factors like fiscal regime, operational structure and damage liability of the company. If considering expanding outside the regular country or jurisdiction of operations, prior research and the aforementioned factors would lead the company’s officers to determine whether a foreign company should be established over domestic company, and if operating under multiple jurisdictions, be it within a single country or internationally, whether a holding structure can be created with individual domestic companies so as to isolate loss to individual companies without jeopardizing the organization on a whole, or the parent company. Company expansion must therefore be carefully planned since the setup of a foreign company would have to be designed within the context of the country or jurisdiction under which operations will be taking place.
Differing modes of entry can be used for entering new markets depending on the activities that a foreign company intends to undertake, generally namely, licensing, franchising, importing, exporting, management contracts and international investments through FD or portfolio investments.
Since business expansion across border to achieve maximized sales and earnings, involvement in international business by a domestic or foreign company would largely be influenced by the magnitude of business conducted with foreign companies, since some companies may experience sporadic business while others become overwhelmed by the business that comes in from overseas. Identifying a location outside the company’s legal domicile would enable a foreign company to establish a foothold within a specific region, either where a service and set of skills may be lacking or from where most international business originates. Additional motives that encourage the creation of a foreign company, its orientation and modus operandi include seeking to improve competition against rivals, gain access to resources, supplies and new markets, and tap into specific human resources so as to leverage core competencies.
Countries or jurisdictions that are elected for registering foreign companies would typically present a series of advantages over others and offer a competitive edge that would optimize the chances of expansion locally, transnationally or internationally and maximizing profits. A foreign company may apply a transnational, global or multidomestic strategy if seeking to gain differentiation and low-cost advantages, to market a product that are standardized globally in order to create economies of scale or customize marketing strategy and products within the context of the country or territory of operations, respectively.
An ideal environment for setting up a foreign company would be one that possesses a skilled, well educated, productive and motivated labor force, ancillary industries capable of supporting the foreign company’s operations and providing raw materials, meaningful tax incentives, a dependable supply of power, stable currency, political environment and economy, adequately developed transportation and communication infrastructure, economic factory lease arrangements, sufficient space for land use and is safe. Having said this, a foreign company is typically conscious of government policy towards foreign investment, since this considerably influences whether adequate resources are allocated to create a friendly environment for foreign companies and investors.
Foreign companies are integral to globalization as companies move across the world to maximize their profits and achieve economies of sale by increasing and standardizing and strengthening their product offering. A foreign company is evidence of the constant evolution of the world into a global village.