Brunei Dedicated Cell Companies (DCC) are similar to a protected cell company (PCC) first created in 1997 in Guernsey and used by several offshore jurisdictions. Foreigners can form a DCC and create several companies with separate assets and liabilities like a PCC.
The International Business Company Order of 2000 (IBCO) (hereinafter the “Order”) governs all types of companies involving foreign ownership including the DCC.
Background
Brunei is a small oil rich sultanate located on Borneo’s northern coast. Oil rich refers to the fact that its main industries are natural gas and petroleum making it one of the wealthiest jurisdictions in Asia.
The official name is the “State of Brunei, Abode of Peace” was a British Protectorate since 1888 when it obtained independence in 1984. Thus, English is one of its official languages.
Benefits
Brunei Dedicated Cell Companies (DCC) offers these kinds of benefits:
• Total Foreign Shareholders: Foreigners can own all of the shares in the DCC and the cells.
• No Taxes: Brunei does not impose any taxes. However, U.S. taxpayers must report all global income just like everyone paying taxes on global income to their countries.
• Asset Protection: The ability to divide assets into separate cells isolated from the DCC and other cells’ liabilities provides ideal asset protection.
• One Director/One Shareholder: The DCC and its cells only need one shareholder who can be the only director for ultimate control.
• Privacy: None of the shareholders names are included in any public records.
• English: After nearly 100 years as a British Protectorate, English is one of its official languages.
Brunei Dedicated Cell Companies / DCC Legalities
Name
Every DCC must select a company name completely different from a legal entity’s name in Brunei.
The DCC shall include the words “Dedicated Cell” at the end of its company name or use its abbreviation “DCC”.
Explanation of a DCC
Since a Brunei DCC follows the PCC structure, an explanation of how a PCC works can explain the DCC as well.
Every PCC has a “core” company with segregated parts known as “cells”. Each cell operates independently from the core company and the other cells. Therefore, one cell has its unique name, different assets, incurs separate liabilities (debts, obligations, etc.), and engages in different business activities. Experts call this a “ring-fenced” structure separating each cell from the others like fenced homes are separate from the other fenced homes in the same neighborhood.
If one cell can’t pay its debts and becomes insolvent, its creditors cannot seek recourse from the core company or the other cells. Thus, the risks of different business ventures by the same core company and its separate cells are isolated to one of its cells. If the core company is sued or has unpaid creditors, neither the lawsuit judgment plaintiff nor the unpaid creditors can seek compensation form any of the cells. The same goes for a cell if it is sued or simply doesn’t have the assets to pay its creditors (insolvency), the plaintiff and the debt creditors can’t sue the core company or its other cells or seize their assets.
Another way of explaining the DCC is a cell company is a single legal entity whereby numerous separate cells are created in order to segregate and protect assets. Creditors of one cell only have the right to seek redress from that cell and not the others or the cell company.
The Order in Section 147 states that a DCC is an individual legal entity and the cell is not a separate legal entity from the DCC. A cell is created for “the purpose of segregation and protection of dedicated assets”. Therefore the Order establishes “general assets” of a DCC distinguished from “dedicated assets” to a particular cell.
A Brunei IBC can be incorporated as a DCC or an existing IBC can be re-constituted as a DCC.
Memorandum of a DCC
The Memorandum of a DCC must include:
• Declare that it is a DCC;
• The company name as a DCC;
• That each cell will have its own distinct name or designation as a cell.
Registration
Registered agents wishing to incorporate or re-constitute an IBC as a DCC shall file the Memorandum and the Articles of Association with the Registrar of Companies.
Liability of a DCC
Section 147M of the Order states that any liability resulting from a specific cell of the DCC will:
• The dedicated assets of that specific cell will be primarily liable;
• The DCC’s general assets will be secondarily liable if insufficient dedicated assets exist with the specific cell; and
• The dedicated assets of all other cells will not be held liable.
This means that if a specific cell’s creditors can’t obtain full satisfaction of the debts from the specific cell’s dedicated assets they can seek redress from the DCC’s general assets, but not from the other cells’ dedicated assets.
Shareholders
Only one shareholder is required for the DCC and for a cell to be formed. Shareholders may be residing anywhere and citizens from any country.
The Order in Section 147G specifies that the shareholders of the DCC are separate from the shareholders of a specific cell. Thus, the DCC may issue “dedicated shares” for each cell. In addition, each cell will have its own “dedicated share capital” separate from the share capital of the DCC.
DCC’s can pay dividends in respect to dedicated shares as a “cellular dividend” which can only be paid in reference to the cell’s dedicated assets and profits.
Directors
A minimum of one director is required to form the DCC and a cell. Directors can be natural persons or legal entities and reside anywhere and be citizens (or registered) in any country.
Company Secretary
The DCC must appoint a company secretary who is a local resident. The secretary may be a natural person or a legal entity.
Registered Agent and Office
The DCC must appoint a local registered agent whose office can be the registered office. Local, licensed trust companies are authorized to serve as registered agents.
Minimum Capital
The minimum authorized share capital is $1 million USD with all shares having par value.
Accounting
The DCC shall maintain separate books and accounting for each separate cell’s assets. One cell’s assets must never be comingled with the assets of the other cells or with the DCC’s assets.
Creditors
Section 147O of the Order required every DCC to inform all persons doing transactions that it is a DCC and identify specific cells involved with the transaction. Failure to provide the required notice will result in the DCC’s directors being held personally liable for any damages incurred by the injured party. However, directors may obtain indemnity from the DCC if the company’s Articles provide unless fraudulent, negligent, reckless, or acts in bad faith occurred by the directors.
Section 147E of the Order specifically declares that creditors do not have the right to seek any action against dedicated assets of a cell company unless the liability which the creditor seeks redress is attributed to that cell. If a creditor succeeds in seizing dedicated assets not entitled to, the creditor will be liable to reimburse the cell company for the value of the illegally seized assets.
Section 147F makes it clear that creditors of dedicated assets belonging to a cell can only seek redress from that specific cell and not any other cell. It also protects cells from the creditors of the DCC who are not creditors of the specific cell.
Taxes
Brunei does not impose any taxes. This includes income tax, corporate tax, capital gains tax, and stamp duty.
Note: U.S. residents and all others subject to global income taxation must report all income to their tax authorities.
Public Records
Neither the Memorandum nor the Articles contain the names of the shareholders so they are not part of any public records.
Time for Formation
It may take a DCC up to one week for incorporation.
Shelf Companies
Shelf companies can be purchased in Brunei.
Conclusion
Brunei Dedicated Cell Companies (DCC) provides these types of benefits: complete foreign shareholders, no taxes, privacy, asset protection, one shareholder and one director who can be the same person, and English is one of the official languages.
