The Cook Islands International Limited Liability Companies Act 2008 follows the model adopted in a number of U.S. States. The Act goes a step further however, to give statutory certainty on several key issues of concern to US attorneys using domestic US LLC statutes. The Act also introduces several unique asset protection features, including but not limited to:
- S 45 (6) is specific that the sole remedy for a creditor against a membership interest in a LLC is the right to apply for a charging order.
- S 45 (5) provides that exemplary, pecuniary and aggravated damages are not recognised in the Cook Islands, and accordingly are not able to be recovered under a charging order.
- Like most LLC jurisdictions, a creditor of a member is permitted to apply for a charging order against a membership interest. However, unlike other jurisdictions, the Act furthermore sets out the availability of other remedies, the nature and extent of that charging order, and the rights of the creditor against that membership interest.
- Similar provisions in other jurisdictions have been interpreted by courts (in the absence of sufficient definition of the exact nature of a charging order), to include rights similar to those of a mortgagee in possession, of an assignee, and of a lien holder. These have created uncertainty as to the extent of protection offered by an LLC. Any uncertainty in the Cook Islands has been removed by the clear provisions of Section 45.
- A single member LLC is permitted in the Cook Islands. An LLC shall maintain in the Cook Islands a registered agent which shall be a trustee company.
- The Act provides a broad foundation to structure an LLC according to its own rules, rather than have them dictated by statute. The operating agreement may contain any provisions for the conduct of its business as long as they are lawful. Certain provisions (designed to protect the interests of its members) are mandatory.
- LLCs may transfer their domicile from the Cook Islands to another jurisdiction and LLCs from other jurisdictions may seek registration in the Cook Islands under the legislation.
- The new legislation provides a comprehensive but not cumbersome framework for the operation of LLCs. It is believed LLCs will provide a useful addition to attorneys and financial advisers in conjunction with the establishment of trusts in the Cook Islands.
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