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Here’s how the shell companies exposed in the Panama Papers work

A massive leak -coming from Mossack Fonseca- of 11.5 million tax documents on Sunday exposed the secret offshore dealings of aides to Russian president Vladimir Putin, world leaders and celebrities.

Leaked documents from a Panama-based law practice have revealed how politicians, celebrities and other famous people use banks, lawyers and offshore shell companies to cover their assets.

Here’s a glance at shell companies and just how they are utilised:

Q What is really a shell company?

A A shell company, or holding company, is really a corporation without any active business or operations, a treadmill that passively owns the shares of another company. It might have had operations previously that are presently dormant or been wound down.

Q How do you generate a shell company?

A Incorporation of the company in many jurisdictions is straightforward and inexpensive, according to Christopher Steeves, leader of the tax practice group at law practice Fasken Martineau DuMoulin LLP in Toronto. He says establishing a shell or holding clients are generally no different than setting up any other kind of company.

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