Advantages of an NZOFC
Advantages of an NZOFC
Advantages of an NZOFC
An NZOFC, to those unfamiliar with the term, is a New Zealand Offshore Financial Company. Creating an NZOFC is an efficient and cost effective way for an individual or corporation to own and operate an offshore banking operation. An NZOFC is an offshore financial company which can offer a large variety of financial services to clients throughout the world but not to clients in New Zealand. Under New Zealand law an NZOFC may have any number of international clients, both individuals and corporations. There is no limit on the size of the operation or the amount of capital involved. Services are many including, but not limited to, taking deposits and paying interest, lending money, offering credit and debit card services, money transfer services, investment marketing, and payment processing services.
Why an Offshore Financial Company?
Many individuals and companies operate offshore and bank offshore. It is not uncommon for a company to be incorporated in one offshore jurisdiction, bank in another, and be owned by a private interest foundation in a third jurisdiction. The reasons for choosing to own and operate an offshore financial operation, essentially a bank, are many. However, it comes down to doing business and gaining profit. Rather than always paying for banking services a company or individual will choose to effectively go into the offshore banking business.
It should be noted, however, that the owner and operator of an NZOFC may not a depositor. This is usually stated in descriptions of NZOFC operations as the company needing to be independent of its depositors in order to operate internationally from New Zealand. This simply means that the owner of an NZOFC may need to hold cash reserves elsewhere or not pay interest to itself on those reserves. New Zealand law does not otherwise specifically prohibit the owner of the NZOFC from using other services of their own financial company. Thus the owner/operator of an NZOFC can not only provide offshore financial services to other for a profit but can also provide himself with free or discounted services instead of paying another offshore bank.
Advantages of an NZOFC
There are numerous advantages to setting up an offshore financial company. The amount of capital held "offshore" by wealthy individuals and families is estimated to be in excess of $10 trillion. As requirements of the US Patriot Act have made it more and more difficult for offshore banks to find correspondent banks there are fewer jurisdictions today where one can set up an offshore financial company that there were years ago. However, there are also three very specific advantages to setting up an NZOFC and they are listed below.
A New Zealand Offshore Financial Company Has No Capital Reserve Requirements
A comparison of capital reserve requirements for standard banks both "onshore" and "offshore" is striking.
Standard Capital Requirements
Capital requirement is a bank regulation and determines how banks and other institutions that take deposits must handle their capital. Capital requirements tend to be standardized and tend to be complex. Although capital requirements vary from jurisdiction to jurisdiction they tend to follow the same general rules. Another term is "risk based capital guidelines." This refers to standards to determine the adequacy of bank capital for covering deposits.
Tier 1 capital includes shareholder equity and is the price paid for bank stock by shareholders. It also includes retained profits (minus loses), and certain qualifying "capital" securities. Tier 2 capital is called supplementary capital and includes undisclosed reserves, revaluation reserves (appreciated value of assets such as buildings), hybrid instruments, and various items such as subordinated (long term) debt.
New Zealand Offshore Financial Company Capital Requirements
There are none. The absence of capital requirements allows for the owner/operator of an NZOFC to enter into the business with substantially less capital, to use his or her capital to run the business and not establish reserves, and to take profits as generated. This is a distinct advantage over many other offshore banking and financial operations.
Anyone from Anywhere Can Start an NZOFC
New Zealand law allows for individuals and corporations resident and with citizenship anywhere in the world to start and run a New Zealand Offshore Financial Corporation. The individual or company wishing to start an NZOFC must follow the designated procedures required to register and run the company but there is no restriction based upon nationality or residency. You do not need to be resident in New Zealand to own and run an NZOFC.
Very commonly an NZOFC will have one New Zealand citizen on its board of directors or in an administrative position with the authority to deal with legal issues, correspondent New Zealand banks, and any issue that might require timely attention. However, this is not necessary. If no urgent matters arise no one needs to visit the operation in New Zealand with any urgency. If issues do arise appropriate officers or board members can deal with them at a distance or in person. Aside from the matter of convenience a New Zealand Offshore Financial Corporation need not have anyone from New Zealand on its board or as an officer. All such personnel can be citizens and residents of any other country in the world.
An NZOFC is Not Subject to New Zealand Central Bank Regulation
There are whole web sites, big web sites, dedicated to banking regulations in the USA, Europe, and elsewhere. New Zealand is no exception with its local banking system. The system is well regulated with examiners, reports, and lots of paperwork. Although there are a number of New Zealand laws that apply to a New Zealand Offshore Financial Company and govern the actions of a New Zealand Offshore Financial Company there is no New Zealand Central Bank oversight or regulation of a New Zealand Offshore Financial Company. This fact derives from the fact that a different set of laws is responsible for the NZOFC than the set of laws setting up and governing the activities of banks in New Zealand. The fact that an NZOFC only takes deposits from and does business with customers outside of New Zealand may well be the basis for the difference in legal treatment of the NZOFC compared to an "onshore" bank in New Zealand.
The advantages of an NZOFC evolved for a variety of reasons but for the investor interested in doing business through an NZOFC, its advantages are strong and worth investigating.
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