What actually decides whether a company is treated as managed from somewhere else?

Most of the things people worry about do not decide it. Companies with no employees, no premises of their own, directors who sit on many other boards, and money arriving and leaving within days have all survived challenges. Those features get raised, but they appear in cases the company won as well as cases it lost. What decides it is whether the board took the decisions or recorded decisions taken elsewhere, whether there is a contemporaneous record showing that a decision was taken, and whether any of the documents were written after the event. Those three carry the weight because the record does not show any of them appearing in a case the company won.

Does a Cyprus holding company need employees and its own offices?

Not as a test, and the question is the wrong shape. Companies with neither have been upheld, and a holding company is not required to look like an operating company. Companies with real premises and a salaried director have also lost, where the deciding was happening somewhere else. None of that is an argument against having an office and people. They are worth having, a company that has them is easier to explain than a company that does not, and the Cyprus residence certificate questionnaire does ask where the minutes are kept, where agreements are signed and where the books and the seal are held. What the record shows is that the set-up and the deciding work together. A set-up with no deciding behind it has lost, and deciding with very little set-up has survived.

What should board minutes record?

Enough for a reader who was not there, years later, to see that a decision was taken. A minute recording that the board resolved to approve something shows nothing beyond the outcome. A minute recording what the board was given, what it considered, what the alternatives were and why it went one way rather than the other shows a board that was in the room. Two things are usually missing and are worth adding: where the board declines something or sends it back, minute that as well, and where the decision concerns money coming into the company, take it after the money has arrived. Anything not written at the time should be written now and dated now, never dated backwards.

Why does the Cyprus residence certificate form ask about powers of attorney?

It gives the subject a numbered section of its own, alongside its sections on the board, the shareholders and the books, which indicates it is treated as bearing on the answer in its own right. The question asks whether the company has issued any general power of attorney and, where the answer is yes, for the terms and conditions of it. It is the only question on the form that requires a written description rather than a tick or a place name. The useful question about an authority already granted is not whether it exists but what it lets the holder decide and where the holder is, and a company that cannot answer that without going to read an old document has learned something in the process of completing the form.

What Actually Decides a Residence Challenge

When a company's residence is challenged, people think first about the things you can see. The office, the headcount, the director who sits on other boards. Those are worth having and they all get raised, but companies have survived a challenge without them and companies have lost with every one of them in place. What has not survived is a board that approved something somebody else had already decided, a minute that records nothing, and a document written after the event. That is a shorter list than most people expect, and it is a much harder one to fix late.

What does not decide it on its own

A company with no employees has survived a challenge. So has a company with no premises of its own, renting a desk from its bookkeeper. So has a company whose directors sit on a great many other boards, supplied by a professional firm to a long list of clients. So has a company that received money and paid nearly all of it onward within days. So has a company holding one asset and earning nothing from it but passive income.

The reverse is on the record too. Companies with a real office, a salaried director on the ground, local bookkeeping and a proper set-up have lost, because the deciding was happening somewhere else.

None of that is an argument against any of it. An office, a director who is actually there, people on the payroll, are worth having, and a company that has them is easier to explain than a company that does not. What the record shows is that they work as part of an arrangement rather than instead of one. A set-up with no deciding behind it has lost, and deciding with very little set-up has survived, which tells you which of the two carries the weight without telling you the other is pointless. A holding company is not required to look like an operating company, and we have not found an authority anywhere that puts a number on how many boards a director may sit on.

Why the company exists at all is a separate question again, and not one the furniture answers.

The difference between approving and deciding

Across the decided cases we have read, one pattern has nothing on the other side of it. Where the owner, or an adviser, took the decision and the board recorded or carried it out afterwards, the company lost. It does not appear once in a case the company won.

A shareholder is allowed to have a view and to send it. A parent is allowed to recommend. An adviser is allowed to propose the whole plan, price it, draft the agreement and send it over for signature. Companies have done all of that and kept their residence, because the director read it, turned his mind to whether to do it, and decided.

What has not survived is the step below. A board that signs without knowing what it is signing. And a board that knows what it is signing but never considers whether to sign it, because it has not been given even the minimum it would need to hold an opinion. A board can sit for hours, take advice by telephone, obtain a written legal opinion and satisfy itself that the transaction is lawful, and still not have decided anything, because checking that something can lawfully be done is not the same as deciding that the company should do it.

A poorly informed decision is still a decision. No decision at all is the problem.

How this looks from outside is worked through in a Cyprus company managed from Greece.

The minute is the only witness

Five years later nobody remembers the meeting. The people who were in the room have moved on, or remember it the way that suits them now. What survives is the paper.

Minutes that are missing, or that are there and record only formal matters, have decided cases on their own at the evidential stage. Not as one factor weighed against others. The company could not show that a decision had been taken, so it had not been shown, and that was the end of it. Like the point above, this one has no counter-example either.

A minute saying the board resolved to approve the transfer tells a reader nothing. A minute saying what the board was given, what it weighed, what else it could have done and why it went the way it went tells a reader that a board was in the room. Which only works if it is true. A fuller minute is the record of a meeting where somebody actually asked whether to do this, and sometimes the answer to that is no, or not yet, or not on those terms.

Two things belong in the record and usually are not. Where the board declines something, or sends it back, minute that too, because a board that has never said no to anything is a board that has never been asked to decide. And where the decision concerns money that is coming in, resolve after it has arrived rather than before, so the board is deciding about something the company owns.

The one thing that is fatal on its own

Everything above is a matter of weight. One thing is not.

A document written after the event and dated earlier is the only class of failure in the whole of this research that decided a case by itself, with nothing anywhere on the other side of it. Once an authority finds one, it stops weighing. It assumes the work was never done, and the company is left trying to prove a negative about everything else in the file.

So if the minute was not written at the time, write it now and date it now. A late note that is honest about being late is worth having. One dressed up as contemporaneous is how a whole file stops being believed.

The wider version, that the file is written for a reader who has never met you, runs through a structure built to be seen.

Who actually pays, and when

The bill usually does not land on the holding company. It lands on whoever made the payment. In a family structure that is very often the family's own operating business, the one with the staff and the customers and the bank facility. The holding company sits there untouched while the trading company writes the cheque.

It lands late. These matters surface years after the payment, and interest runs from the date the tax was originally due rather than from the assessment.

And it does not reach backwards. Adding substance this year does nothing for a payment made five years ago. Every route we examined cures prospectively and only prospectively. Across the whole of the research there is not one recorded instance of the two revenue authorities agreeing a way out of it afterwards. What the record shows is the tax being paid.

That is the argument for doing this while nothing is happening.

The Cyprus form asks all of this already

None of it is imported. The Cyprus residence certificate questionnaire asks whether the board exercises control and takes the main management and commercial decisions the company needs. It asks whether the minutes are prepared and kept here. It asks whether agreements concerning the company's business or its assets are signed here. And it gives a numbered section of its own to a single question: has the company issued a general power of attorney, and if so, on what terms and conditions.

That is the only question on the form where yes is not a complete answer. Everything else is a tick or the name of a place. A yes has to be followed by a description, which means going to read a document that has probably not been looked at for years.

The form is signed by a director, who declares that the management and control of the company is exercised in Cyprus. The Department drew the line between deciding and carrying out on its own form, and put the general power of attorney on the deciding side of it. The question about an authority already given is not whether it exists, but what it lets the holder decide and where the holder is.

What this comes to

None of this needs a project.

It needs somebody to read the authorities the company has actually given out. They were granted at different times by different people and have probably never been read as a set. What usually comes out of that reading is a short list of things to take advice on rather than things to do, because an authority already in somebody else's hands is not always the board's alone to change.

It needs the next set of minutes to be written properly, and the ones after that.

And it needs whoever signs the declaration to be in a position to answer the questions. A director who has to be told what the board decided is in a weaker position than one who was there, and the duty to inform yourself does not soften with distance.

The things you can see are not what decides it. Three things do.