June 16, 2016 Articles

The Talk about Shell Companies

The Panama Papers leak has brought attention to the role of lawyers in moving money offshore.

By Emily Lehmberg

Events in recent months have attracted attention to the use of corporate vehicles—among them, different forms of companies, trusts, and foundations—that are expressly organized to hold money, usually tremendous sums of money and often in foreign jurisdictions. Upon encountering such an entity, a business litigator can be either emboldened or discouraged, depending on his or her case and objectives. The prevailing perception is that the primary and intended purpose of these entity structures is to facilitate tax evasion or to serve as an instrument of money laundering.

The fact that this negative view is so generally held should be of concern to those who understand the practical applications of employing complex business structures, and foreign corporate entities, for facilitating international business transactions. The use of these structures, and the organization of foreign entities, is a mainstay of global business; entire banking and investment markets have developed in areas of lower regulation and lower taxes, to provide banking, investment, and legal services for these foreign capital holding companies. This isn’t a dirty, little secret. Yet, since the media first published the story of the Panama Papers data leak, this has become quite a big deal.

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