Outline of Limited Liability Company Legislation

The Cook Islands Limited Liability Companies Act was passed in late June 2008. The Act provides for a modern and innovative Limited Liability Company vehicle with substantial asset protection advantages. The legislation is modelled on the most recent LLC style-legislation in the United States and offshore jurisdictions.

Overview

A Cook Islands LLC may be formed to conduct any lawful business in any part of the world. A Cook Islands LLC may be incorporated by a single member or by multiple members and is a legal entity separate from its members and managers. Corporations may be Members or Managers of the LLC. The LLC is exempt from any form of taxation in the Cook Islands.

A Cook Islands LLC is incorporated by a trustee company lodging very simple Articles of Organization with the Registrar of LLCs. The Operating Agreement of the LLC governs the rights, duties, limitations, qualifications and relations among the members and managers of the LLC. An Operating Agreement may be specifically tailored to the particular business requirements of the LLC.

Filings, records and accounts

There is a requirement to file a very simple annual return with the Registrar setting out the name of the LLC and the address of the registered agent. The registered agent must also keep:

• A current list of the full name and address of each Member and Manager

• A copy of the Articles of Organization and Operating Agreement

Other records may be kept anywhere else in the world.
There is no requirement to prepare accounts or to appoint an auditor

Asset Protection Features

The sole remedy available to a creditor of a Member in respect of the Member’s interest in the LLC is a charging order against the Member’s interest. A charging order only entitles the creditor to receive any distributions from the LLC if and when made to the Member by the LLC. The Act also specifically states that no membership rights may pass to a creditor of a Member. The effect of this is that any creditor of a Member is effectively prevented from attacking the assets in the LLC. Even where a charging order is granted, the Act states that the creditor shall have no right to:

• Interfere with the management of the LLC (including any sale of assets)

• Liquidate or seize the assets of the LLC

• Restrict the business of the LLC in any way

• Dissolve the LLC

Any judgment obtained outside the Cook Islands which affects the rights of Member in the LLC cannot be enforced in the Cook Islands.

Members and Managers of an LLC cannot be personally liable for any debt, obligation or liability of the LLC.

For further information, kindly contact Adrian Taylor at