A brass plate company or brass plate trust is a legally constituted company whose only tangible existence in its jurisdiction of incorporation is the nameplate attached to the wall outside its registered office. The registered office is often the same office and address of the localprofessional service firm or corporate service provider, who act as local support to the company. It is not uncommon for CSPs to have hundreds of brass plate companies legally registered at their office. Brass plate structures are associated with tax havens, corporate tax havens and offshore financial centres.
Definitions
In the landmark Inspire Art ruling, the ECJ defined a brass plate company as being a ".. company which lacks any real connection with the State of formation...". The ECJ ruled that, with certain caveats, brass plate companies were legitimate in the EU. The ECJ previously used the term letterbox company, in the landmark Centros ruling, in relation to companies using various EU incorporation locations to avoid unfavorable local regulations in their home EU location, in conducting their business. While legally similar, the term letterbox company is usually used if the company legally trades with the general public from its location, while all other types are called brass plate companies. Neither brass plate companies nor letterbox companies should be confused with shell companies. Shell companies can be incorporated in the full "home base" of the main parent company ; their key feature is that they have no assets. A company can be a brass plate shell company, or just a brass plate company, or just a shell company. In practice, it is very common for a brass plate companies not to be shell companies; however, many shell companies are often brass plate companies. This is because a very common driver of creating a shell company is often to legally move a business activity to a different location from the "home base".
Controls
While accepted in the EU, the term brass plate company has become most commonly associated with offshore tax havens Thus the term brass plate company is often used in the pejorative sense and associated with undesirable nefarious activities. Because of this, more reputable "onshore" financial centres, who enjoy access to major global tax treaties, generally steer clear of any implication that they are open to brass plate companies for fear of being labelled corporate tax havens, and therefore losing access to the global tax treaty networks. Regulators in these onshore financial centres control the spread of brass plate companies by enforcing stronger tax residency rules that require greater "commercial substance" to occur in the regulator's jurisdiction. Typical criteria used include:
having a majority of local tax resident Directors on the Board
all the books and records of the company are held in the jurisdiction
the audit of the company is carried out by a professional firm in the jurisdiction
a minimum number of Board meetings are held each year in the jurisdiction
all major decisions regarding the company are made at Board meetings in the jurisdiction
There is a level of scepticism over whether such controls are really effective in controlling brass plate companies. CSPs in onshore financial centres are capable of providing local Directors, administration and other services designed to meet the minimum "central management and control test" for moderate fees. A recent academic study into Irish Section 110 SPVs found individual CSP officers acting as "local directors" for hundreds of SPVs, and found little evidence of any substance to the "central management and control" test.
Examples
Notable examples of entities accused of using brass plate structures for unsavoury activities include :
Panama Papers. This affair uncovered literally thousands of "brass plate" companies that were being used by individuals all over the world, for undesirable purposes. Many of the articles in the global media covering the affair used the term "brass plate".
Apple Sales International in Ireland. A "brass plate" company used by Apple; legally registered in Ireland, but not tax resident in Ireland as it was “managed and controlled” from Bermuda. The EU Commission allege this structure was in violation of EU State Aid Rules, and have fined Apple €13bn as a result.
Orphan SPVs. These are by definition "brass plate" companies used in legitimate global securitisation transactions. However, the anonymity of "orphaning", the accepted complexity of their structuring, and their availability in well respected onshore locations, has led to a rise in their use for less legitimate purposes.
