Pehlivanoglu's Blog

Shell company is a fact of social life. However, shell company term is incorrectly only associated with unlawful actions and transactions. This is why shell company is mostly considered under anti- money laundering law and tax law. Shell company is a company that emerges when the identity of its beneficial owner is concealed, in most cases and places, lawfully. It is usually a limited liability company or a corporation. Company law, by nature, deals with shell companies. Corporate transparency principle is connected with this phenomenon. 

It is possible to enhance corporate transparency by using technology such as blockchain. Current beneficial ownership disclosure regime is, despite being digitalized in many countries, open to fraud. National central register's don't have the capacity to verify the accuracy of the information provided by beneficial owners and companies. Private institutions obligated to do KYC also have a limited capacity to assess truth. There is an opportunity for entrepreneurs to create new products for the market of beneficial owner and entity verification systems. 

 Organization for Economic Cooperation and Development (OECD) has implemented a rule known as economic substance criterion for no or only nominal tax jurisdictions. The criterion got enacted in national law by related jurisdictions as a dissolution ground for commercial companies. Economic substance regulations became rules with corporate nature, despite being based on international law and tax law. In my view, this criterion is a statutory involuntary dissolution ground subject to extraordinary liquidation regime. 

Involuntary dissolution of corporations, whether based on just cause or oppression grounds, is a subject with wide impact. End of corporate personality, liquidation of companies, wrongful trading, and liability of the board of directors are often relatedly evaluated. Still, its relationship with non- conventional cases such as non- pecuniary private benefit extractions of influencing shareholders is unknown. Non- pecuniary private benefit related dissensions represents a new form of shareholder dispute, connected with dissolution remedy. 

As a speaker on legal aspects of import and export, frequently hosted by Dubai Chamber of Commerce, I observe that technology is threatening the integrity of cross- border transactions. Fraudsters are generating fake invoices, hackers are manipulating communications, and criminals are establishing empty companies. Traders in international trade should implement satisfactory risk management systems to analyze the trustworthiness of their import and export partners in relatively risky foreign jurisdictions.