Formation of Limited Liability Companies (“LLC’s”)
The Limited Liability Companies Act, 2008 represents the definitive law governing the formation and management of SVG LLC”s. Under this Act, LLC’s may be structured to provide their members with both limited liability and rights and liabilities to income and for losses, and clearly creates an economic interest which may be transferred separately from membership interest. In return for their contributions, members get to own an assignable interest in the LLC.
The LLC Act also makes provision for the formation of Series LLC’s which could be used in much the same way as the Delaware LLC, and is particularly useful in the formation of hedge funds, mutual funds and captive insurance companies.
From an asset protection point of view, probably the most interesting feature of the SVG LLC is that under section 61, a judgment creditor’s sole remedy against the economic interest of a member of an LLC is by way of charging order. Such a creditor does not have any right to obtain possession of or otherwise exercise legal or equitable remedies with respect to the property or assets of the LLC.
In summary, the SVG LLC Act has many of the features similar to those available under the corresponding Delaware statute.
Features of the SVG LLC, include:
- One or more persons may form a LLC by requiring a registered agent to sign articles of formation in the prescribed form and filing them with the Registrar. The company may be managed by its member(s) or by one or more managers.
- An LLC is a separate legal entity, which shall continue in existence until dissolved. Where the company is established with finite duration, the latest date on which it must dissolve should be stated in its articles.
- A written agreement (“LLC Agreement”) concerning the affairs of a LLC and the conduct of its business may be entered into by the members of the LLC, either before, after, or at the time of signing of the articles. Such agreement takes effect whenever entered into, or upon such date as provided in the agreement. The LLC Agreement shall not be unenforceable by reason of there being only one person who is a party to it and may provide rights to any person, whether or not such person is a party to it.
- An LLC may undertake or carry on any lawful business not prohibited by the laws of SVG, except that it may not: (a) make its goods or services available to persons fiscally resident in SVG, (b) carry on any regulated activity for which a licence is required from the local regulator, without first obtaining such licence and (c) own an interest in SVG real property (other than a lease for use as an office) unless its members and managers first obtain any Alien Land Holding Licence required to be obtained.
- For 25 years from the date of registration, an LLC is exempt from all forms of direct taxation in SVG. However, the company may irrevocably elect to pay SVG income tax at 1% on its annual profits if it wishes to take advantage of the Caricom Tax Treaty which exists amongst the Member States of the Caribbean Community.
- A member has two forms of interest in an LLC; (a) his economic interest and (b) his membership interest. The former refers to his share of profits and losses plus his right to receive distributions of the company’s assets, the latter relates to all rights incidental to membership as set out in the LLC Agreement. Subject to the provisions of the LLC Agreement, a member’s economic interest may be transferred separately from his membership interest.
- On application to the court by any judgment creditor of a member, the court may charge the economic interest of the member with payment of the unsatisfied amount of the judgment. The entry of a charging order is the only remedy available to a judgment creditor. For the avoidance of doubt, the creditor of a member does not have any right to obtain possession of, or otherwise exercise legal or equitable remedies in or over the property of the LLC.
- The LLC Act makes provision for the formation of Series LLC. In such a case, each Series may have a separate purpose and the members thereof may have separate and different rights, powers, privileges and duties. Further, the assets and liabilities of each Series are separately insulated from those of each and every other Series.
- Except where the articles provide otherwise, a member may bring an action in the name of the LLC to recover a judgment in its favour if managers or members with authority to do so have failed to bring the action, or if an effort to cause those managers or members to bring the action is not likely to succeed.
- A foreign LLC may re-domicile to SVG, and, provided the LLC Agreement so provides, a SVG LLC may re-domicile abroad. Any company currently incorporated in SVG may also”re-domicile” as a SVG LLC.