Having a sole director, shareholder, manager or member of a Nevis entity is legally permitted and may offer simplicity and efficiency. However, it also creates potential risks, particularly around succession and business continuity if the individual passes or becomes incapacitated.
POTENTIAL ADVANTAGES OF A SOLE-OWNER OR SOLE-MANAGER STRUCTURE
Streamlined decision-making: One individual has sole management responsibility, so decisions can generally be made without the additional approvals required in a multi-director or multi-manager structure.
Lower administrative costs: Decision-making can be documented by written resolution, reducing the administrative burden associated with convening meetings.
Clearer accountability: With one decision-maker, it may be easier to identify who made a decision and who is accountable for it.
Single-member LLC protection: Under Nevis legislation, single-member LLCs are granted the same asset protection as multi-member LLCs and creditors are limited to charging orders only.
CRITICAL RISKS & IMPLICATIONS
Sole director, shareholder, manager or member entities may face serious implications where succession, separation of power and third-party perception are concerned. Some of the main implications include:
Death or Incapacity of the Individual
When a sole director, shareholder, manager or member dies or loses capacity, the entity may face significant disruption if no succession arrangements are in place. This may affect its ability to make decisions, approve contracts, appoint replacements or otherwise continue its business.
Similarly, the transfer of ownership or control following death or incapacity may be subject to applicable succession or estate administration requirements. Appropriate advance planning can help minimise potential delays and ensure greater continuity in the management of the entity.
Concentration of Control
With a single person controlling both ownership and management, there are fewer internal checks. This may create particular continuity and governance considerations if the individual loses capacity.
Third-party Considerations
Banks, brokers and other service providers may have their own policies and requirements when dealing with entities that have a single owner or individual responsible for management.
MITIGATING THE SUCCESSION AND CONTINUITY RISK
A series of mitigating actions can be taken to prevent the risk of disruption to the entity’s operations:
Including appropriate succession provisions in the entity's bylaws or operating agreement dealing with the appointment or replacement of a sole director or manager following death or incapacity
Considering the use of a trust as shareholder or member of the Nevis entity, with appropriate trustee succession and governance arrangements
Appointing additional shareholders, members, managers or directors, where appropriate
For an LLC, providing for alternate or substitute managers in its Articles of Organisation or operating agreement
Our Nevis Corporate team has many years of experience in the formation, representation and administration of Nevis entities. For further information, please contact us at nevis@tridenttrust.com.