Back to Basics: What is a Corporate Service Provider?

13 Aug 2024

In our Back-to-Basics series, our new apprentice, Joseph McDaid will be explaining the fundamental principles of corporate and tax services from the perspective of someone completely new to the industry.

It is our hope that this short series which will delve into a fresh key topic each week, will provide others like Joe, who are starting out in the industry, with bite size, easy to digest information to save, study and explore as they continue to expand their knowledge of corporate and tax services.

This week Joe explores Corporate Service Providers.

What is a Corporate Service Provider and what services do they provide?

A Corporate Service Provider (CSP) is a business that provides company formation and administration services and support to private and corporate clients.

CSP’s specialise in the provision of companies, partnerships, trusts or foundations for clients. They provide the officers (directors and trustees), administrators and registered office, and frequently employ bookkeepers, accountants and often tax advisors and other specially qualified staff members.

CSP’s offer a range of expertise within aviation, yachting, wealth management, commercial property, e-gaming etc. The majority of CSP’s are located in jurisdictions such as the Isle of Man, Ireland, Jersey, Guernsey, Malta and the Cayman Islands.

Why would a client consider a CSP?

Corporate vehicles are used to house businesses, hold assets and make investments across the world. They can take many shapes – companies, LLC’s, partnerships etc – and come in all sorts of sizes. However, little is known about the businesses that form these vehicles and why it is important to get it right when considering corporate structuring for business and family matters.

While many clients employ staff to take care of their personal affairs and lifestyle, they will at some point in time turn to a CSP for support. The decision to outsource to a CSP is often decided when specialist services are required outside of the company/client’s realm. CSP’s therefore relieve pressure and resources from an organisation and limit risk by offering a focused team with a unique set of expertise and specialist knowledge.

Top 3 reasons for using a CSP:

1. Expertise for special projects

From time-to-time clients will have a specialist project, such as buying a business aircraft or investing in an international business, which requires the in-depth and specialist knowledge we mentioned above, to complete successfully.

Employing a CSP with the hands-on experience in a specialist field can often prove a wise and cost-efficient method; specialist skills of the CSP can be accessed without the client needing to permanently employ extra staff into the private office. Engaging a CSP team also means access to a far broader and deeper level of understanding and experience in contrast to employing a single person. A team approach also means automatic holiday and sickness cover.

Special projects often have their own timescales together with workloads which can’t always be easily accommodated into the workflow of a private office. CSP teams can pick up the “heavy lifting” required for unusual and demanding projects leaving the private office to concentrate on their regular workload.

2.Regulated specialists ensuring good governance

CSP’s are highly regulated businesses. When a client engages a CSP they have access to an entire highly qualified team under one engagement, saving time and money as opposed to outsourcing individually. If the CSP is in an offshore jurisdiction they should hold a licence issued by a government regulator, hold professional indemnity insurance, be skilled in ensuring compliance with AML and other legislation tackling financial crime, and have a wealth of experience in their specialist field. Although it is not often mentioned, international legislation will often require offshore jurisdictions to operate at a higher level of compliance to international rules than many onshore jurisdictions.

3. Long term relationship with client and asset

Whilst lawyers are experts in leading and completing transactions, the long-term management of the resulting investment or asset is often looked after by a CSP. The CSP provide the appropriate corporate structure for the client based upon legal and tax advice at the outset. In the longer term, the CSP will monitor, administer and review the corporate structure for the client with appropriate updates during its lifetime, managing the day to day running of the company.

The CSP administrators will develop long-term relationships with the client and their private office to ensure seamless operations when the unexpected occurs.

In conclusion, CSP’s are used to house businesses, hold assets and make investments across the world. Each structure is bespoke to the client’s needs and comes with a range of complexities only a well-qualified team can manage. Outsourcing to a CSP relieves pressure, saves time and provides expert knowledge to a client/organisation.

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