Glossary

list of terms

ACCOUNTS

a systematic way to record transactions. An account (in bookkeeping) refers to assets, liabilities, income, expenses, and equity, as represented by individual ledger pages, to which changes in value are chronologically recorded with debit and credit entries.

AFFIDAVIT

a written and signed statement of facts, made voluntarily, and confirmed by the oath or affirmation of the party making it (the deponent), taken before a Notary Public or Commissioner for Oaths.

ANNUAL REPORT

a comprehensive report on a company’s activities throughout the preceding year. Annual reports are intended to give shareholders and other interested people information about the company’s activities and financial performance.

APOSTILLE

the Hague Convention Abolishing the Requirement for Legalisation for Foreign Public Documents, the Apostille convention, or the Apostille treaty is an international treaty drafted by the Hague Conference on Private International Law. It specifies the modalities through which a document issued in one of the signatory countries can be certified for legal purposes in all the other signatory states. Such a certification is called an apostille (French: certification). It is an international certification comparable to a notarisation in domestic law, and normally supplements a local notarisation of the document.

ASSETS

an economic resource. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset.

BALANCE SHEET

a summary of the financial balances of a sole proprietorship, a business partnership, a corporation or other business organization, such as an LLC or an LLP. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year.

BEARER SHARES

share owned by the person who holds the share certificate, and transferable by delivery. In comparison, a registered share can be transferred only through an instrument of transfer.

BENEFICIAL OWNER

is a legal term where specific property rights (“use and title”) in equity belong to a person even though legal title of the property belongs to another person. This often relates where the legal title owner has implied trustee duties to the beneficial owner.

СAPITAL GAINS TAX

a tax on capital gains, the profit realized on the sale of a non-inventory asset that was purchased at a cost amount that was lower than the amount realized on the sale. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property. Not all countries implement a capital gains tax and most have different rates of taxation for individuals and corporations.

CERTIFICATE OF GOOD-STANDING

business entities use a Certificate of Good Standing (also known as a “Certificate of Existence” or “Certificate of Authorization”) to prove they are incorporated and authorized to transact business in a certain state (or “jurisdiction”). The “good standing” status signifies an entity is current with the filing requirements of that jurisdiction’s secretary of state’s office, as well as being current with any corporate franchise taxes in that jurisdiction.

CERTIFICATE OF INCORPORATION

a legal document relating to the formation of a company or corporation. It is a license to form a corporation issued by state government. Its precise meaning depends upon the legal system in which it is used.

CONVERSION

transformation of the legal entity of one form to another (eg., a corporation into a limited liability company). Allowed in some jurisdictions. Official supporting document is Conversion Certificate (Certificate of Conversion), issued by the registering authority.

CORPORATION

type of business whereby the legal personality is different from that of taking part in it faces. In some jurisdictions, the term “Company”. Profits of such enterprises subject to corporate income tax.

DECLARATION OF TRUST, DEED OF TRUST

the document signed by a trustor (settlor) creating a trust into which assets are placed, a trustee is appointed to manage the trust (who may be the party who created the trust), the powers and duties of management of the principal and profits of the trust are stated, and distribution of profits and principal is spelled out.

DIVIDENDS

is a payment made by a corporation to its shareholders, usually as a distribution of profits.

DOUBLE TAX TREATY

reciprocal arrangement between two countries not to retax the repatriated income that a firm or person domiciled in one country earned in (and paid taxes on) the other.

DORMANT ACCOUNTS

a savings account showing no activity (other than posting interest) for some specified period.

DORMANT COMPANY

a company is considered dormant during a period in which no accounting transaction occurs.

DUE DILIGENCE

is a term used for a number of concepts, involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care.

FISCAL YEAR

a period used for calculating annual (“yearly”) financial statements in businesses and other organizations. In many jurisdictions, regulatory laws regarding accounting and taxation require such reports once per twelve months, but do not require that the period reported on constitutes a calendar year (that is, 1 January to 31 December). Fiscal years vary between businesses and countries. The “fiscal year” may also refer to the year used for income tax reporting.

GOVERNMENT FEE

a type of tax charged by specifically authorized institutions for actions in the interests of individuals and legal entities and for the issuance of documents of legal significance.

HOLDING COMPANY

a company or firm that owns other companies’ outstanding stock. The term usually refers to a company that does not produce goods or services itself; rather, its purpose is to own shares of other companies.

IBC, INTERNATIONAL BUSINESS COMPANY

is an offshore company formed under the laws of some jurisdictions as untaxed company which is not permitted to engage in business within the jurisdiction in which it is incorporated.

INCORPORATOR

authorized by founders person to perform actions for company registration.

JURISDICTION

statutory powers set of relevant state bodies to resolve legal disputes.

LEGAL ENTITY

an association, corporation, partnership, proprietorship, trust, or individual that has legal standing in the eyes of law.

NOMINEE DIRECTOR

person who acts as a non-executive director on the board of directors of a firm, on behalf of another person or firm such as an bank, investor, or lender.

NOMINEE SHAREHOLDER

nominee share holder refers to a company member holding the shares on behalf of the actual owner or beneficial owner. S/he is the registered owner of the share. A nominee share holder holds the share under a custodial agreement. The identity of the person with the true interest is subject to disclosure and investigation under the Companies Act.

NON-RESIDENT

individual or company that has no permanent location in the country. Used for tax and currency legislation

OFFSHORE COMPANIES

a legal entity established in a tax haven or offshore financial center, being protected by specific legislation which guarantees a status of partial or full tax exemption.

POWER OF ATTORNEY, PROXY

a written authorization to represent or act on another’s behalf in private affairs, business, or some other legal matter, sometimes against the wishes of the other’s.

PRINCIPAL PLACE OF BUSINESS

unlike registration / registered address is the address where the main office of the company where business is conducted

REGISTERED ADDRESS

address of the legal entity officially registered, entered in the register.

REGISTERED AGENT

physical person or legal entity licensed by registered agent. The functions include the provision of registered agent address of the company registration and receiving notifications. In many jurisdictions, the presence of the registered agent is a prerequisite for the existence of the company. Activity registration agents and their relationship with the company governed by the law of companies and statutory company.

REGISTERED SHARES

a form of shares issued in benefit of a particular person specified in the share certificate.

ROYALTY

payment rights for the commercial exploitation of intellectual property belonging to another (patent, trademark, books, etc.). Often used to accumulate income in an offshore jurisdiction. Royalty falls within the scope of international tax treaty benefits (as a passive income).

SHELF COMPANY

a company or corporation that has had no activity. It was created and left with no activity – metaphorically put on the “shelf” to “age”. The company can then be sold to a person or group of persons who wish to start a company without going through all the procedures of creating a new one.

SHARE CERTIFICATE

a share certificate is a written document signed on behalf of a corporation, and serves as legal proof of ownership of the number of shares indicated.

SHARE WITH NO PAR VALUE

share, representing a share in capital, which is not expressed in a sum of money, but represents only a combination of stocks and shares. The nominal value of such shares may be assigned later by the company management in accordance with the current financial situation in the company and the need to attract a particular amount of capital. Liability of shareholders for acquisition arise only after the appointment of the nominal value of shares.

TRUST

a corporation, especially a commercial bank, organized to perform the fiduciary of trusts and agencies. It is normally owned by one of three types of structures: an independent partnership, a bank, or a law firm, each of which specializes in being a trustee of various kinds of trusts and in managing estates.

VAT, VALUE ADDED TAX

a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs. The purpose of VAT is to generate tax revenues to the government similar to the corporate income tax or the personal income tax.

VIRTUAL OFFICE

a virtual office provides communication and address services that allow users to reduce traditional office costs while maintaining business professionalism.

WITHHOLDING TAX

is a government requirement for the payer of an item of income to withhold or deduct tax from the payment, and pay that tax to the government. In most jurisdictions, withholding tax applies to employment income.