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SCMP Reporter

FOR Chinese numerologists, 8/8/88 was meant to be the luckiest day this century and spelt untold riches. For Liverpudlian expat Ted Powell, it was the day that made his fortune.

  Mr Powell arrived in Hong Kong 20 years ago and worked with accountants Peat Marwick. In 1986 he set up his own company, and two years later had the brainwave of forming hundreds of offshore shelf companies on the Chinese calendar's most auspicious day which occurs every 100 years.

  He flew to the Caribbean and set up hundreds of what are technically known as 'international business companies' (IBC) in the British Virgin Islands (BVI) - all with the lucky 8/8/88 date.

  The shelf companies were all given Chinese names such as Triple Luck or Double Dragon and were marketed for US$8,888 to Hong Kong lawyers and accountancy firms to sell on to their clients.

  They went like hotcakes.

  Previously, most people in Hong Kong had not even heard of the BVI as an offshore haven for individuals. The British protectorate only put in place the legal framework for IBCs a few years earlier.

  Until then, Liberia and Panama dominated the off-shore scene but both have since fallen from prominence amid domestic problems and new-found strong competition from elsewhere.

  In the 1980s, only Hong Kong's rich and famous banked their assets in offshore companies. With strong new competition from the likes of BVI, the costs of establishing IBCs dramatically dropped, making them attractive and cost-effective for anyone looking to protect assets worth more than HK$1 million.

  Between 1984 and 1987, there were 3,418 IBCs in the BVI. With Mr Powell's help, the figure leapt to 7,013 in 1988 and the total has not stopped growing.

  BVI company registry figures show 32,627 IBCs were set up last year alone, of which one-third were from Hong Kong and 50 per cent from Asia.

  In the first quarter of this year another 14,680 IBCs were formed, up 21 per cent year-on-year, with the most demand from Hong Kong.

  Other up-and-coming domiciles offered in Hong Kong include the Turks and Caicos Islands, Cayman Islands and Western Samoa.

  Some IBC wholesalers in Hong Kong like to claim the high demand is because of the handover in 1997.

  'The nearer we get to 1997 the more we are seeing,' says Stuart Stobie of Sovereign Trust.

  While not really expecting the communists to take away everyone's assets, as happened in China in the early 1950s, Mr Stobie says some people still perceive a risk.

  'It is not a big risk, but is something to be aware of,' he says. 'Setting up an IBC is sensible. It is much easier to seize the assets of a Hong Kong company than a foreign company.'   Others prefer to espouse the ever-growing demand for IBCs on their practical attractiveness, irrespective of the handover, whether for confidentiality, tax or inheritance reasons.

  Most Hong Kong buyers are said to use their IBCs to open an offshore bank account. They are also frequently used for trading accounts for stocks and bonds.

  One favourite use among Hong Kong residents is to buy overseas properties, thereby saving on taxes, stamp duties and conveyancing fees.

  More recently, a growing number of companies have begun using BVIs as a cheap and safe way of forming third party joint venture firms to carry out particular projects, especially for doing business in China.

  With IBCs, confidentiality is guaranteed with no requirement to disclose beneficial ownership to the public. In fact, tracing ownership is virtually impossible.

  Registered shareholders and directors can be kept anonymous. There are no accounting or audit requirements, nor is there the need to file company registers as a public record. Bearer shares are permitted, a minimum of only one director is needed, and there is no need to hold any annual meeting.

  In fact, companies can be incorporated in an hour if necessary, and once bought there is little more to do than pay an annual fee, explains Yvonne Fong, assistant director at Hong Kong Trust Co.

  The cost depends on the jurisdiction, and has dropped dramatically since 1988.

  The basic cost of buying a BVI company is said to be US$700. However, various taxes and handling fees may be added. An annual fee of US$300 is also charged.

  A company registered in Turks & Caicos, for instance, is about US$200 cheaper, but is not as popular as the BVI. The Cayman Islands is more expensive at about US$1,250.

  A rising favourite among Hong Kong buyers is Western Samoa, where an IBC costs US$600, which allows buyers to register companies in both English and Chinese characters, unlike the BVI.

  It is also the first haven to boast a Chinese embassy, which enables IBCs incorporating joint ventures in China to get documents to be quickly notarised by Beijing.

  Another fact in Western Samoa's favour is that some 50 per cent of BVI applications today are said to get rejected because there is already a company registered in the same name. As a relative newcomer, Western Samoa should prove more successful for applicants registering a particular name.

  Having said that, BVI is still by far the most popular among Asian buyers.

  Mr Powell's Offshore Incorporations Ltd (OIL) now faces competition from 30 other competitors in the Asian wholesale and retail market but he claims it boasts a 50 per cent Hong Kong market share.

  Integro's Hong Kong Trust Co, which also specialises in the BVI, reckons business has doubled this year. Ms Fong says a sizeable part of its new custom is due to 1997.

  Mossack Fonseca & Co (HK) has also developed a sizeable market share.



Offshore and out of harm's way