Companies registered offshore will be familiar with the common request - often made by the other party in a transaction - for a legal opinion on the offshore company’s ability to enter into the transaction.
A legal opinion can be invaluable when seeking to ensure that an offshore company can - under its constitution - enter into a given transaction whether it does so as landlord, tenant, buyer, seller, borrower or lender.
However, when regularly acting for an offshore company with a large portfolio of diverse assets, the process of obtaining a legal opinion for every transaction can become overly cumbersome and prevent transactions from completing quickly. This is particularly so where the offshore company frequently undertakes small and regular transactions which are similar in nature. A good example of such a scenario is where an offshore company owns and lets property in England and Wales.
In such circumstances, it is not unusual for a tenant to request a legal opinion before entering into a lease with a landlord that is registered offshore. The process of obtaining a legal opinion for each letting of a unit within a large development can be time-consuming and costly. Fortunately, there may be an alternative to obtaining a legal opinion.
Where the landlord is well known in the market and the development is well established there is an argument that an offshore opinion is not necessary given that the tenant can take comfort from the regular course of dealings that the landlord has with the other tenants of the development. However, this argument often falls down because it does not deal with the tenant’s concern that the landlord is solvent.
The concern over a landlord’s solvency could be easily dealt with if the landlord were registered in England and Wales as a company search and/or winding up search may be undertaken prior to completion in order to establish the landlord’s “good standing”. Fortunately, there are often similar searches available for offshore companies and specialist search providers who will undertake these searches for a fixed fee.
Take, for example, a company registered in Jersey. The company has owned and let a commercial development in England for many years and regularly enters into new leases of units within the development. A tenant will hopefully accept that a legal opinion is not necessary in these circumstances and, if so, the landlord can satisfy the tenant that it has good standing by undertaking searches similar to those that would be undertaken if the company were registered in England and Wales. For example:
The cost of these searches varies depending on which search provider is used, but at the time of writing the total cost of all three searches is £82.50; significantly less than a typical legal opinion.
Whilst the example above relates specifically to a company registered in Jersey, there are similar searches available for a wide variety of jurisdictions across the globe. As stated at the outset, many transactions require a legal opinion and this approach is not applicable to every scenario, but in the right situation, it could save both time and money.
Please contact Tom Skinner ([javascript protected email address]) for more information on this subject, or to ask a question. Or visit our Commercial Property page.
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