Offshore Based US Companies Won't Have To Swear To Accuracy Of Financial Results

by Leroy Baker, Tax-News.com, New York

09 July 2002

A recent Wall Street Journal Report expressed concerns that US companies which have relocated in offshore jurisdictions to minimize taxes are unlikely to be asked to swear to the accuracy of their financial results as part of the SEC's drive to restore investor confidence.

The Securities and Exchange Commission explained recently that the motivation behind its June 27 order that all CEOs and Finance Chiefs of US companies bringing in more than $1.2 billion should be required to swaer under oath that their books have not been cooked, was to 'provide greater assurance to the commission and to investors' that the securities laws which govern accounting and financial reporting are not being flouted.

However, an SEC spokesman explained to the Wall Street Journal that it was in the interests of greater efficiency and speed of implementation that offshore based US companies were not included on the list.

'We have no plans at this point to change or revise the list,' he added.

However, this is likely to add fuel to the already furious debate over offshore reincorporation. The newspaper reported that despite their exclusion from the list of companies required to file sworn statements when they next file their financial results with the SEC, Bermuda-based US companies, Tyco International and Global Crossing are both under investigation for accounting and bookkeeping irregularities.

Speaking on behalf of the Council of Institutional Investors, Spokeswoman Ann Yerger slammed the SEC's decision to leave reincorporated companies off the list in the interest of achieving a quick fix:

'Most people think of Bermuda-reincorporated companies as US companies, and would expect the same rules to apply,' she explained. 'There is great concern among our members about the dilution of shareholder rights that reincorporation entails, and this is just another reason why shareholders need to be concerned.'

Recommended