You might guess — and it would be a reasonable guess — that most New Hampshire LLC lawyers are engaged exclusively in forming New Hampshire LLCs for New Hampshire clients. But you’d be wrong. A major task for at least a few of these lawyers is to form “offshore” (i.e., non-U.S.) LLCs for New Hampshire and non-New Hampshire clients who have substantial wealth but who are concerned that a major creditor could take all of this wealth in a single lawsuit. A brain surgeon might fear such a suit no matter how much medical malpractice insurance she has.

If you’re a college student, a law student or a recent law graduate, you might find this offshore asset protection practice pretty interesting. And the main offshore asset protection authority you need to know about is also pretty interesting. It’s the non-U.S. LLC act that many offshore asset protection lawyers view as the best such act — namely, the Nevis Limited Liability Company Act.

As you may know, Nevis is a small eastern Caribbean island with only a few thousand inhabitants. Next to tourism, its main business entities are investment organizations that invest globally cash contributions made by wealthy Americans to LLCs formed under the Nevis LLC Act. In this column, I won’t attempt to provide a general overview of offshore asset protection practice; instead, I’ll briefly describe the chief characteristics of Nevis LLCs. But these LLCs are the heart and soul of this practice.

If you’re a New Hampshire LLC lawyer and you review the Nevis LLC Act online, you’ll find that most of its provisions closely resemble those of the New Hampshire LLC Act — e.g., the New Hampshire LLC Act’s provisions about LLC formations, liability shields, members, managers, contributions, allocations, distributions, and dissolutions.

However, you’ll also see that three Nevis LLC Act provisions — namely, the provisions in sections 60 through 62 — are designed to make it virtually impossible that any U.S. judgment creditor, however well-financed, will ever be able to recoup any cash contributed by its judgment debtor in a Nevis LLC in order to protect this cash from the debtor’s creditors. No U.S. LLC act contains any such provisions.

To illustrate: Section 60 of the Nevis LLC Act provides that the only remedy that a judgment creditor can obtain against a judgment debtor under that act is a charging order. On the basis of this charging order, a Nevis court may order the LLC to pay to the creditor the share of LLC income that would otherwise go to the debtor. However, the court has no authority to order the debtor to transfer to the creditor any other rights of the debtor as the member of a Nevis LLC.

In addition, Section 60 provides that any charging order that the creditor obtains under the Nevis LLC Act will expire within three years of the date of “accrual” of the creditor's claim. But under Nevis LLC Act rules, this expiration may occur before the creditor even knows it has a claim under that act.

Furthermore, Section 61 provides that if the creditor makes a claim in a Nevis court that the debtor’s contribution to its Nevis LLC was “fraudulent” — i.e., was intended to defraud the creditor — and thus that the debtor’s contribution to its Nevis LLC must be “voided,” the creditor must prove this claim “beyond a reasonable doubt.” Obviously, this is an essentially impossible standard of proof unless the creditor has compelling documentary evidence.

Finally, before it even files its claim against a debtor in a Nevis court, a creditor must post a bond under Section 61 of the Nevis LLC Act to cover the creditor's litigation expenses; and Section 61 provides that even if the creditor wins its claim, the Nevis court may award the litigation costs of the creditor to the debtor unless the creditor proves that the debtor has defended the case in bad faith.

So if you’re a U.S. brain surgeon, think about wiring your money to Nevis.

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