Collecting Offshore in the Caribbean and Central America

150614 Offshore 1It is not uncommon companies decide to run (part of) their business from an offshore location. The reasons can be tax-related, for asset protection, or can have a commercial or servicing background.

The businesses on offshore locations are often run by a trust company, a fiduciary services provider that acts as the local managing director and keeps the company in good standing.

So it can be that you closed your commercial deal in Europe, North America or South America, but you paper the deal with a company in Panama, Belize, or from a nation on a Caribbean island like the British Virgin Islands, Curacao, Cayman Islands, Antigua & Barbuda or the Bahamas. You will subsequently also invoice the company at the offshore location.

When the invoices become overdue, legally you will need to do your collection efforts at the location your contract partner is formally established, which is consequently also Panama, Belize, or the Caribbean nation.

Collecting from offshore locations in the Caribbean or Central America often cause serious difficulties:

  1. The location may be remote from the creditor’s perspective;
  2. The ultimate decision takers on the debtor’s side or not based at the location;
  3. Legal systems at the offshore location are unknown to the creditor;
  4. Information available on financial status, assets, and people involved is often limited or unavailable;
  5. All communication goes through a third party, the trust company, who only has limited responsibilities and obligations.

How can you optimize your collections and minimize overdue collections and eventual write offs in offshore locations in the Caribbean or Central America?

  1. Your paperwork should be in excellent shape. You know where your contract party is based, so make sure beforehand that the contracts, order forms, and invoicing complies with local standards so that, in case necessary, you have solid file for enforcement of claims;
  2. If legally possible in accordance with the laws and regulations of the jurisdictions involved, make sure that at least one of the beneficial owners or related companies who are not at the offshore location signs as guarantor in case of default on the side of your offshore-based client. It will give you the possibility to claim from several parties who may be in much more favorable jurisdictions to enforce overdue payments;
  3. The trust company, as the trusted third party who manages the offshore company, is the gatekeeper and a good and continuous relationship with the trust company is essential. If you do not manage to collect yourself then turn to a third party account receivables provider who does have the relationships in the trust business, as this often makes it easier to get through and get outstanding invoices paid.
  4. As a general rule, do not wait too long if you see payment behavior or communication is deteriorating. The longer you wait, the more difficult it becomes to collect. Sometimes trust company have even stepped down as managing director or companies are dissolved. International and local law give little to no legal options when that happens to claim the unpaid invoices from anyone else and then usually it becomes impossible to still collect.

For several reasons it can be a challenge to collect on your (overdue) invoices from companies that are based on offshore locations in the Caribbean or Central America. To optimize your collections and minimize overdue collections and eventual write offs you should make sure your paperwork is in excellent shape, that a guarantor signs off on payment obligations in case of default on the side of the offshore-based company, you have and maintain a good and continuous relationship with the trust company that manages the offshore company, and you do not wait too long with taking action if payment behavior and communication deteriorates.

If you are interested in learning more on the subject of debt collection in offshore locations in the Caribbean and Central-America (like Panama and Belize) let’s connect on Linked-In or follow me on Twitter.

To participate in conversations about debt collection in Latin America & the Caribbean please join the Linked-In Group Debt Collection Latin America.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s