Formation of British Virgin Islands and Panama Corporations

BVI COMPANIES

The British Virgin Islands (“BVI”) are a British Colony located in the Caribbean. The BVI are autonomous from the United Kingdom, except with respect to their external matters, defense and internal safety. Its legal system is based on the English Common Law. English is their official language and their official currency is the U.S. dollar. There are no exchange controls nor requirements to file corporate reports of any nature, therefore the islands offer multiple tax advantages to the non-resident that organizes companies therein.

A. BVI Off-shore Companies

The legislation of the BVI provides for several types of companies, of which the
Business Companies (BCs) are the off-shore companies with the greater number of advantages.

B. Advantages of the BC.

The main advantages of the BC are:
1) Exemption from payment of any income tax;
2) Can conduct most business transactions (except conducting banking and insurance activities and other businesses with residents of the BVI; or to possess real estate in BVI);
3) Requires a minimum of only one shareholder and one director;
4) The directors and shareholders can be entities or individuals resident in any country;
5) The shares can be issued to the bearer (when immobilized with a licensed entity) or
registered;
6) The Board of Directors can meet in any part of the world and even by telephone;
7) The payment of minimum capital is not required, and the shares can be issued at par or non par value;
8) The names of the Directors, Officers and shareholders do not need to be registered in a
public record ;
9) No need to file annual reports nor tax returns;
10) Can transfer its domicile and continue existing as a company incorporated under the laws of a jurisdiction outside of BVI; a foreign company can also become a BVI BC;
9) Neither the minutes book nor the shares book need to be certified by any authority of BVI;
10) It is not necessary to carry out Directors or shareholder meetings on a regular basis.

C. Incorporation of the BC.

The Memorandum and the Articles of Association are subscribed by BVI residents and then submitted for their registration by the Companies Registrar. The incorporation process takes approximately five days. We also have companies already organized available for immediate use by the client.

D. Administration of the BC.

1. Directors and Officers. The activities of the BC are handled by its Board of Directors, which first members are appointed by the subscribers of the Memorandum and the Articles of Association. Thereafter, the Directors will be elected by the shareholders. The remaining Directors will be able to choose persons to fill the vacancies that occur in the Board of directors.
   The Directors can choose Officers and appoint attorneys-in-fact to act on behalf of the company. It is not required to register the appointment of directors, officers or attorneys-in-fact in the Registrar of Companies of BVI.
   The name of the company must include the word ‘Limited’, ‘Corporation’ or ‘Incorporation’, or the abbreviation ‘Ltd.’, ‘Corp.’, ‘Inc.’ or ‘S.A.’.
2. Shareholders. It is not necessary to issue shares of the company, unless the Board of directors decides so. The shares should be paid in full at the time of issuance, and they can be issued for money, services or properties received. The name of the shareholder must be registered in the shares book, which is not open to the public. The meetings of the shareholders will be conducted whenever the Directors consider it necessary or desirable or through written request of the shareholders that represent more than 50% of the votes.
   The resolutions of the shareholders can be approved by telephone or in a duly convened meeting, and they can also be adopted through written consent.
3. Registered Office and Agent. The company must have a registered office and agent in BVI, services that are retained by LOMBARDI AGUILAR GROUP. An entity for immobilization of shares must also be retained for a yearly fee if the Articles of Incorporation allow for issuance of bearer shares. A copy of the shareholders book should be maintained at the registered office.
4. Seal of the Company. It is required that the company have a seal, and the Articles of
   Association appoint the person authorized to use the same.
5. Recordation requirements. The only documents that should be recorded at the Companies Registrar are the Memorandum or Articles of Association and their amendments, mergers, consolidations and dissolution of the company.
6. Mergers and Consolidations. It is permitted that a company be merged or consolidated with other BVI or foreign companies, provided that the consolidated or surviving companies comply with the requirements of the BC Act.
7. Dissolution and Liquidation. The BC can be dissolved by resolution of the Board of directors, if no shares have been issued. In case that the shares have been issued, the company must be dissolved through a shareholders resolution.

E. Taxation and Laws.

All the dividends, interest, rents, royalties, compensations and other amounts paid by company established under the BC Act to persons that are non-residents of BVI are exempt from payment of income tax. The capital gains earned from the sale of whatever shares or other securities of an BC are also exempt from payment of any tax. The incorporation duties of a company with an authorized par value capital of up to US $50,000.00 are of US $350.00. The incorporation duties are of US $1,100.00 for a company with an authorized par value capital above US $50,000.00. An additional yearly duty of at least US$1,100 is applicable to BCs with Articles of Incorporation that allow issuance bearer shares.

A company that is incorporated by December 31st of any year will have to pay the Registrar an annual license duty before July 31st of the following year. For example, a company organized in March of 1996 must pay the annual license duty by July 31, 1997. The license duty is of US $350.00 if the authorized capital of the company is below US $50,000.00 and US $1,000.00 if its authorized capital is above US $50,000.00.
BC laws are subject to occasional amendments and regulations, so we advise contacting us in advance in order to determine if any changes have ensued after the date of this document.

PANAMA CORPORATIONS

The Republic of Panama has always played an important role in international trade due to the favorable laws that have been enacted in order to make it a location attractive for investors of all parts of the world. The U.S. dollar is the official currency of the country and is used in all financial transactions, without applicable exchange restrictions nor requirements to file corporate reports of any kind. Furthermore, the income earned from sources outside of the country is exempt from taxes.

A. Off-shore Companies in the Republic of Panama.

The incorporation and operation of off-shore corporations is governed by Law 32 of 1927, which has been maintained without changes from its enactment. Currently there are more than 200,000 Panamanian corporations, which constitutes the best evidence of the advantages that these corporations offer.

B. Basic features of a Panamanian corporation.

1. Neither the subscribers of the Articles of Incorporation, nor the shareholders, nor the Directors must be Panamanians or resident in Panama. There must be at least three individuals or entities acting as Directors.
2. There are no legal requirements with respect to a minimum paid-in capital. According to the law, it is not necessary to report payment of the subscribed capital.
3. Corporate income is not subject to taxes in Panama as long as the corporation does not do businesses in Panama. The only tax that the corporation must pay (aside from an annual duty of US $300.00) is the recordation duty of at least US$60.00 payable at the time of the incorporation, which increases according to the amount of the authorized capital.
4. No additional formalities are required, except to record at the Mercantile Registry of Panama the subsequent amendments to the Articles of Incorporation and the elections of the Officers and Directors.
5. A Registered Agent must be maintained in Panama, service that the law firm, LOMBARDI AGUILAR GROUP provides.
6. The corporation is formed in approximately two (2) days as of the date in which payment for its formation is received. Corporations are also available in reserve for immediate use.
   Corporate names may be reserved previous to incorporation for up to 30 days.
7. The corporation can grant a General Power of Attorney to one or several persons of any nationality to act at their discretion on behalf of the corporation. It does not need recording to become valid.
8. The shareholders, directors and officers can be of any nationality, resident in any country, unless the corporation conducts retailing activities in Panama.
9. The corporation is governed by:
   i) Shareholders: The meetings of the shareholders can be conducted outside of Panama, if the Articles of Incorporation provide so. The shareholders can be represented through a proxy.
   ii) Board of directors: At least three (3) Directors should be appointed, unless the Articles of Incorporation provide otherwise. The meetings of the Directors can be conducted outside of Panama, and they can be held by representation through a proxy holder that needs not be a Director. The Board of Directors is elected by the shareholders, but the vacancies, either resulting from an increase in the authorized number of Directors or any other reason, can be filled by a majority vote of the remaining Directors.
   iii) Officers: The corporation must have at least a President, a Secretary and a Treasurer, who will be chosen by the Board of directors. Any person or entity can hold two or more posts if the Articles of Incorporation or the Bylaws provide so.
10. It is not an obligation to carry out shareholder or Directors meetings annually nor during any other interval.
11. Shareholder or director meetings may be held with parties being in communication by telephone, fax, or other electronic means. Resolutions adopted may be signed in different places and dates.
12. For information purposes, financial statements may be recorded in the Public Registry at the option of the corporation.
13. The corporation is not required to maintain a seal but it can be used, if it chooses to do so.
14. A Panamanian corporation can be merged with another Panamanian or foreign corporation. The surviving corporation can be, either the foreign corporation or the Panamanian corporation.
15. Foreign corporations may redomiciliate to Panama by recording their corporate documents in the Panama Public Registry.
16. Panama corporation can redomiciliate to another jurisdiction as long as it has no outstanding annual franchise duties.
17. A flat tax of US$300 and resident agent fees are due every year. Non-payment of the flat tax results in additional fines of up to US$350 per unpaid year.
18. Shares may be issued to the bearer when immobilized with its registered agent or custodian, or in registered form.
19. A Panamanian corporation can be dissolved by vote of the majority of outstanding shares with voting rights in a duly convened meeting, or through written consent of the holders of all the outstanding shares of the corporation with voting rights, without need of a meeting.