SPECIAL REPORT: THE BAHAMAS
ENTER
CONTENTS
Intro • Features • Videos
From Tanya McCartney of The Bahamas Financial Services Board
INTRODUCTION
With International Investment's Gary Robinson
FOREWORD
Wendy Warren, MD, Caystone on The Bahamas 360 initiative
FEATURE
BFSB's Fania Joseph on staying ahead of regulatory changes
Kevin A. C. Moree of McKinney Bancroft & Hughes, discusses the residency rules
Ian S. Winder of Higgs & Johnson looks at the advantages of IBCs
Ricardo Evangelista of ActivTrades looks back on the year of lockdown
RBC Dominion Securities Global on how the pandemic hit the industry
SCB Executive Director Christina Rolle discusses the Digital Assets and Registered Exchanges Bill
Guilden M. Gilbert Jr, of CG Captive Managers on how small can be beautiful in the captive world
All the videos from this report
VIDEO
RETURN TO CONTENTS
Kevin A. C. Moree of McKinney Bancroft & Hughes discusses residency rules
Guilden M. Gilbert Jr of CG Captive Managers says small can be beautiful in the captive world
Lightening does not strike twice but as Gary Robinson, Commercial Director at International Investment notes, dealing with two major crisis in a row seems to have brought out the best in The Bahamas financial services companies…
Being in lockdown limbo does not mean that the financial services industry stands still, and as Gary Robinson, commercial director at International Investment notes, The Bahamas has been busier than ever during the ongoing pandemic…
VIDEO LINKS
FEATURES
CEO MESSAGE
HOME
The Bahamas is an undeniably beautiful place to be locked-down in
s the world has endured this seemingly endless period of limbo and restricted international travel, there has been no time to stand still for The Bahamas financial services industry.
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Foreword
It is an undeniably beautiful place to be locked-down in, but the endless sun, sea and sand has been a breathtaking backdrop rather than a distraction as the work undertaken during the last 12 months has seen the jurisdiction continue to cement its reputation within the international financial centre world. Being able to demonstrate resilience and innovation while dealing with increased remote working has been seemless thanks to an excellent infrastructure and has led to some interesting technological advances in both digital currencies and investment vehicles.
The introduction of Digital Assets and Registered Exchanges Bill, 2020 (DARE) has been a landmark for fintech companies and importantly the Covid-19 pandemic has not stopped the ongoing flow of legislation as The Bahamas has risen to the challenge of meeting international regulatory changes. With woman in important roles in The Bahamas – a number of which feature in the articles and videos within this special report – we were delighted to see the judges at the 2020 International Investment Awards honour The Bahamas Financial Services Board’s CEO and Executive Board member Tanya McCartney, with a richly-deserved highly-commended award in The Woman of The Year category last October. This is the fourth annual special report on The Bahamas that International Investment has been involved in and we are proud to bring you this ezine. We hope you enjoy reading and watching the features and videos housed within. Gary Robinson is Commercial Director and Head of Video at International Investment
The unpredicted and rapid spreading of the virus around the Caribbean resulted in sudden lockdown protocols, leaving financial institutions with little time to deal with the necessary logistics to have their workers fully operational from home. At the same time, financial markets were extremely volatile and as a consequence, financial services had even more pressure to execute on this transition in order to maintain their high standards of service. However, after the initial shock, financial markets stabilised and the home office setup appeared to be quite efficient and productive for the fiscal sector. As the world slowly moves towards a “new normal”, many financial operations will most likely downsize their office spaces to improve their cost efficiency and allow more flexibility with work from home days for their employees.
s the world has endured this seemingly endless period of limbo and restricted international travel, there has been no
time to stand still for The Bahamas financial services industry.
Tanya McCartney, CEO and Executive Director of The Bahamas Financial Services Board introduces this special report in a video message
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The Bahamas is the first country to introduce a central bank digital currency
CEO message
CEO Message
The Bahamas is the leading international financial centre in the Latin America and Caribbean region respected for its expertise in fiduciary services
The Bahamas provides a 360 Offering
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Wendy Warren, Managing Director, Caystone outlines how taking a 360 approach can build the perfect platform for a juridisdiction, so that in times of global uncertainty the foundations remain strong, solid and sustainable
Feature
e have all become quite familiar with the concept of “KYC” (Know Your Customer). However, what should be equally important is to “KYJ” – that is, Know Your Jurisdiction! The issue for international financial centres after a year of the pandemic and after years of scrutiny by
international bodies is one of retaining the trust and confidence in the clients it serves. Knowing your jurisdiction – its essence, character and offerings – should lead to a clear choice of where you should do business and perhaps even settle in life.
In considering a jurisdiction, due diligence must be done on the character and inherent nature of the country as well as its suite of product and service offerings, overall governance and regulatory environment and capability. When you put The Bahamas under the lens and examine for these conditions, its strong and well -established platform of services, its value proposition as a jurisdiction and its strategic risk management response have not only enabled it to survive but come through it even stronger and a more compelling jurisdiction for financial services.
A case in point: The Central Bank of The Bahamas has released summary results from a survey of internationally active banks and trusts, regarding operational impacts since March 2020 from the COVID-19 pandemic. The results from the survey are reassuring. The results indicate institutions in The Bahamas have been able to maintain effective operations in the new environment, and to date financial impacts have been minimal.
Should one scrutinise The Bahamas from a KYJ perspective what emerges is an international financial centre cultivated by a culture based on experience, innovation, government commitment, an ideal location, exceptional lifestyle and a diverse product portfolio. It is a 360-degree offering with interweaving elements that support each other, creating a strong sustainable platform with the ability to provide solutions at any level.
The Bahamas 360
Any country heavily engaged in financial services bears the responsibility and a commitment to the international community of which it is intricately involved, the financial institutions operating within its borders, the clients whom it serves and its citizens which rely on the sustainability of the industry for continued economic development. The Bahamas is such a country. The Bahamas has always sought to provide superior financial products and services and a world class client experience. It has proven itself to be nimble and responsive to global changes – always mindful of the need to adhere to international standards with respect to compliance, cooperation and transparency.
The Bahamas is the leading international financial centre in the Latin America and Caribbean region respected for its expertise in fiduciary services. The financial services sector has been impressively resilient and progressive in the face events such as Hurricane Dorian, the current Covid-19 pandemic, international initiatives, and in midst of the continued and sometimes challenging evolution of the global industry.
None of the forgoing challenges have impeded the country’s financial services industry from conducting business and delivering bespoke solutions to meet changing diverse client needs. Robust business continuity plans that are in place with all financial institutions have allowed industry to continue doing business during Hurricane Dorian in 2019 and now as the world deals with Covid-19. The foresight evidenced by vigorous business continuity measures have clearly been in play in cushioning the implications of these events and reinforces why the country is seen by many as an ideal location for financial institutions and the services they provide to their international client base. This adaptability has been especially evident in the Bahamas’s response to international initiatives which has ensured adherence with the highest standards of compliance with every internationally agreed standard of conduct.
With financial services as the second most important industry in The Bahamas after tourism, successive governments have recognised the importance of financial services to the country’s continual economic and social development. The financial sector’s viability is therefore a priority for both the public and private sectors and there is collaboration to support growth and sustainability.
With an 80+ year track record in financial services, few jurisdictions offer the wealth management experience that The Bahamas has to offer. This heritage is the basis for the strong legal framework that has been cultivated for financial services, an investment climate that has been nurtured through years of maturity and a stable and predictable business environment anchored by the thousands of Bahamian wealth management professionals who work side by side with expatriate colleagues in the more than 250 financial institutions that call The Bahamas their home.
The Bahamas 360: Expertise and Innovation
Market responsiveness has also long been a part of The Bahamas’ DNA as a forward thinking international financial centre, and has been the basis of legislation creating innovative, client-centric products and services in a modern, compliant regulatory regime. Such innovation can be seen in the country’s evolving and often ground-breaking trust legislation. It led The Bahamas to become the first major common law jurisdiction to introduce foundations. It sparked the Bahamas Executive Entity and has strengthened The Bahamas position at the forefront of the investment funds industry with the introduction of SMART Funds and the Investment Condominium (ICON) fund. And with this innovative spirit it should come as no surprise that the country’s once dormant insurance is emerging and being as a destination for captives.
The recently introduced Digital Assets and Regulatory Exchange Act (DARE) was developed with the view of how we approach the wider picture. DARE is not a stand- alone single solution but rather the broad features of the jurisdiction such as private banking and funds coming together to recognize why it and a broader based Fintech capability is required. It is just the latest example of the strength and flexibility of the jurisdiction – the weaving together of elements to create a financial services fabric that is durable and responsive.
The unique geographical location of The Bahamas, a sovereign parliamentary democracy, just 50 miles off the coast of Florida and positioned as the gateway to the wider Americas, is an undeniable advantage for The Bahamas. Our proximity to the United States, Central and South America places The Bahamas in an enviable position to serve both our traditional and emerging markets and presents an opportunity to link commercial and financial interests. This unique geographical location at the crossroads of the Americas benefits from a high level of scheduled airlift into The Bahamas.
In recent years, as more and more individuals have chosen to ‘follow their money’ with respect to where they live and work, The Bahamas with its tropical environment has become the preferred choice for many who yearn for an excellent quality of life while being able to manage their global affairs.
The Bahamian lifestyle however goes beyond world class real estate developments, restaurants, marinas and other amenities. It includes catering to non-financial needs of life such as high-end medical and dental facilities, for example. And while the sheer number of such amenities cannot match London or New York the quality of these services is certainly equal. What cannot be matched is the warmth and friendliness that is inherently Bahamian, and which is especially evident in the level and quality of service provided in the financial services community. We see the client as a person first, not a transaction. We are not here just for the business but to provide bespoke client services that meet individual needs. The Bahamas is a place that has an enviable perspective on what should be cherished and enjoyed in life and business.
The Bahamas offers a broad choice of financial institutions that deliver a myriad of services including banking, private banking and trust services, investment fund administration, capital markets, investment advisory services, accounting and legal services, e-commerce, insurance and corporate and shipping registries. There are a wide array of bespoke products and services designed to meet unique client needs, especially with respect to family offices:
The Bahamas 360: A Diverse Portfolio of Client Solutions
The Bahamas 360: The Place
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Trust legislation in The Bahamas is robust and in many cases precedent-setting, providing families with the benefits of asset protection, control, succession planning and confidentiality.
Trusts
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Like a trust, a foundation, provides benefits and protections that are important to a family. It certainly can be called the “hybrid vehicle” of the estate planning world in that it is a unique mix between a trust and a company since it has several aspects in common in with one or the other.
Foundations
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The first of its kind, the Bahamas Executive Entity (BEE), was designed to fill governance roles within wealth structures. The BEE has no shareholders or beneficiaries because its purpose is not to hold assets but to perform “administrative functions” of an executive, administrative, supervisory, fiduciary or office holding nature.
The Bahamas Executive Entity
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A private trust company (PTC) is usually a limited liability company formed for the express purpose of acting as a trustee of a specific trust, or group of trusts for members of a family. Its Board of Directors is usually comprised of the patriarch of the family and other family member, allowing the family to retain control over the strategic management of underlying assets, thus enabling a family to retain control without prejudicing the validity of the trust. A PTC offers a long-term approach to governance of family wealth with the possibility of the next generation of family members to be included on the board of the PTC at an appropriate time.
Private Trust Companies
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Much of the growth in Bahamian funds has primarily come from family offices but increasingly large institutional investors are starting to look at The Bahamas, demonstrating the solid framework in place to support larger funds and with that, larger institutional investors. The legal regime governing investment funds is efficient, innovative and flexible.
Asset Management
What better place for a captive owner to conduct board meetings and then enjoy all The Bahamas has to offer afterwards?
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Substance requirements and economic permanent residency in The Bahamas
Kevin A. C. Moree, partner at McKinney Bancroft & Hughes, discusses the residency rules governing entities' qualification to be registered in The Bahamas
ensure that entities are engaged in real economic activity in the jurisdiction they are deemed to be resident for tax purposes.
s in many other jurisdictions, The Bahamas now has substance requirements legislation in the form of the Commercial Entities (Substance Requirements) Act (“CESRA”) which came into force on 31 December, 2018. The general purpose of substance requirements legislation is to
Under CESRA, all Bahamian entities incorporated, registered or continued under the Companies Act (including foreign entities which have been registered under that Act), International Business Companies Act, Partnership Act, Partnership Limited Liability Act and Exempted Partnership Act are required to submit annual substance reports to the Minister of Finance to demonstrate that they are either tax compliant in the relevant jurisdiction if they claim to be tax resident in a jurisdiction other than The Bahamas or, if not tax resident outside The Bahamas, compliant with the requisite substance requirements, if any, in The Bahamas.
Where an entity existing pursuant to one of the statutes listed in the paragraph above is engaged in the activity of banking, insurance, fund management, financing and leasing, headquartering, distribution and service centres, shipping, the commercial use of intellectual property or is a holding company that has a subsidiary engaged in any of the aforementioned activities (collectively defined in CESRA as “relevant activities”), that entity is required to have substantial economic presence in The Bahamas. To satisfy that requirement, the entity must conduct all of its core income generating activities in The Bahamas and be centrally managed and controlled there.
The Commercial Entities (Substance Requirements) Act
However, an entity is not required to have substantial economic presence in The Bahamas where it is i) wholly owned, either directly or indirectly, by one or more persons who are either a) ordinarily resident and domiciled in The Bahamas or b) an annual or permanent resident of The Bahamas and physically resides there for at least three months cumulatively each calendar year; and ii) conducts its core income generating activities in The Bahamas.
Whether an entity has substantial economic presence in a jurisdiction can be challenging to ascertain in certain circumstances because of the qualitative nature of the test. Consequently, individuals may prefer to avoid that uncertainty by becoming a permanent resident in The Bahamas and qualifying under the exception detailed in the paragraph above. This is a particularly attractive option where the ultimate beneficial owner of an entity also conducts the core income generating activities (e.g. consultancy and certain technology businesses, etc.).
Economic permanent residency
Individuals who invest at least $750,000 in The Bahamas are entitled to apply for a certificate of permanent residency. Where the amount invested is $1.5m or greater, the application is expedited. The most common form of investment associated with applications for economic permanent residency is the purchase of a residential property to be used as either a primary or secondary home.
Economic permanent residency is not a citizenship by investment programme and no such programme exists in The Bahamas. Rather, permanent residency status provides individuals who have invested a significant amount of money in The Bahamas with certainty that they will have the right to enter the jurisdiction as they please without having time restrictions (which apply to those who enter as tourists) or needing to make yearly applications for renewal (which annual residency holders are required to do).
It is important to note that where an individual intends to work in The Bahamas, application can be made to have the certificate of permanent residency endorsed with the right to work or a work permit will be required. Further, where an entity that is owned by a non-Bahamian intends to conduct business in The Bahamas, approval from the Bahamas Investment Authority/National Economic Council and a business licence may be required.
2020, a year to remember
Whether an entity has substantial economic presence in a jurisdiction can be challenging to ascertain in certain circumstances
Obscure companies, of which only a few of us had previously heard about, are now familiar names. Who’d heard about Zoom before March 2020, and who hasn’t been in one of their meetings since?
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been the history of the struggles to adapt to the new dynamics that we either create or can’t help but face. Changes are a constant, as is the need to adapt to them and, ultimately, this is what history consists of; the journey of humanity through time can only be traced by cataloguing and timestamping the evolution of knowledge and of our social dynamics, ranging from science to politics, from technological advancements to wars.
Ricardo Evangelista of ActivTrades looks back on 'the greatest social experiment ever to take place during a time of peace', as the world learned to work and shop from home
About the author
Ricardo Evangelista Ricardo joined ActivTrades in 2011 and has undertaken a number of senior roles including running the international desk, SEO of the ActivTrades Branch in Dubai and Executive Director of ActivTrades Europe. Ricardo also acts as a regular public speaker at events and contributor to TV and other media through interviews, market analysis and generalist articles. Prior to joining ActivTrades Ricardo worked in the IT and Financial Services industries.
However, the pace of change appears to be accelerating. The last 12 months could almost be described as the greatest social experiment ever to take place during a time of peace; hundreds of millions discovered the advantages and disadvantages of working, shopping and socialising from home. At the same time governments were forced to inject unprecedented fiscal stimulus and almost all central banks adopted extremely accommodative monetary policies, in efforts to avoid even more pronounced economic contractions. Thankfully, it appears that the worst may already be behind us, with most economies coming back to life or preparing to do so soon. However, according to many we won’t come out the other side looking the same as we did a year ago.
The tech sector emerged as, so far, the greatest winner of the last 12 months. Obscure companies, of which only a few of us had previously heard about are now familiar names. Zoom, for example; who’d heard about them before March 2020, and who hasn’t been in one of their meetings since? But it’s not just the relatively newbies that managed to ride this unstoppable wave. The business of delivering take-away meals, conveniently ordered via mobile phone apps, grew exponentially, as illustrated by the recent IPO of Just Eat, at the London Stock Exchange. Not to mention online shopping habits, which accelerated the pace at which the segment has been catching-up and overtaking traditional bricks and mortar retail; the sales of Amazon, which last year became the world’s most valuable company, increased by 44% over Q4 of 2020 in relation to the homologous period of the previous year.
Despite the promises of a return to ‘normal life’ in the not too distant future, it would be naïve to expect a return to the December 2019 reality. Last year’s changes will, to a still undefined extent, stay with us, creating unforeseen challenges and opportunities. Every aspect of life has been impacted; the way we shop, work, how we relate and communicate with our friends and families, our traveling habits, how we consume and interact with information and, of course, the financial markets’ landscape is no exception.
For many, one of the most mystifying dynamics to emerge during 2020 has been the discrepancy between an underlying economy that remained under the strain of lockdowns and mass unemployment, and the euphoria experienced in the financial markets, with the main stock indices reaching new maximum after new maximum. This unusual correlation is of course the fruit of a combination of various factors: The massive gains of the tech sector, with both Apple and Amazon becoming the first trillion dollar companies; gargantuan fiscal and monetary stimulus deployed by the world’s governments and central banks and, last but not least, the exponential growth of the retail trading sector, with millions of furloughed workers and recipients of stimulus cheques dabbing in financial instruments for the first time. This last point is particularly relevant for our industry, encapsulating the challenges and opportunities that online brokers such as ActivTrades faced in 2020, which ended-up being a record year in terms of trading volumes and revenues, largely because of this massive influx of new retail traders.
There is one episode, which occurred this last January, that dramatically illustrated the growing importance of retail in the financial markets: thousands of individual retail traders, communicating via Reddit, an online forum, artificially inflated the share price of GameStop, a struggling games retailer. These amateur traders, using leveraged derivatives such as options and CFDs, successfully fought-off the short selling strategy of the Wall Street firm Melvin Capital, causing a loss of $7bn to this large hedge fund. This incident captured the attention of the global media, highlighting the growing importance of a sector that until recently had been overlooked by an industry predominantly focused on the activity of large institutional players.
2020 was a year of consolidation for ActivTrades Corp. Revenues and trading volumes increased, while the firm managed to maintain very high levels of customer satisfaction, which remained above 95%. These are achievements that one should be proud of, especially if considering the challenges of the last 12 months, which included deploying the entire work force to a home office environment, while handling record volumes of client activity.
Quickly adjusting to the evolving landscape, and with the needs of this fresh wave of traders in mind, ActivTrades launched a new analysis page which is freely available on www.activtrades.com/en/news. This new section of the company’s website is updated regularly with contents that are both informative and easy to digest. The more experienced trader will certainly find value in the in-depth technical analysis and market insights, while those who are looking to learn more about the underlying forces that dictate the behaviour of financial instruments will welcome the in-house produced weekly videos, which strive to explain in layman’s terms the geopolitical and economic developments that make the markets move and generate trading opportunities.
Meanwhile, at the group level, the big news was the launching of ActivTrades Europe SA. The new subsidiary was set up in Luxembourg, licenced and approved by the local regulator, the CSSF, and started operating on 1 January 2021, allowing the firm to maintain its ability to serve customers based in the key European Union market, in the aftermath of the Brexit transition period.
Finally, a word to those who make all of this possible: Amidst the torrent of changes of the last 12 months, one constant remained; I am of course referring to the professionalism and dedication of the Nassau based staff who, despite the challenging environment, ensured the smooth running of operations, contributing enormously to the success experienced by the ActivTrades group over the last year. Back in 2017, one of the reasons for choosing Nassau to establish a new hub was, alongside the global reputation of the local regulator, the availability of an educated and experienced workforce; the firm’s senior management couldn’t be happier with the choice and we look forward to another year of growth, knowing that we can rely on a stable and reputable regulatory environment and on the dedication and talent of our Bahamian colleagues.
Read more about ActivTrades at www.activtrades.com
he social and technical changes we are currently living through aren’t in themselves an extraordinary event. Since our evolutionary ancestors started using technology and organising themselves in increasingly complex social groups, the history of humankind has to a large extent
Obscure companies are now familiar names. Who’d heard about Zoom before March 2020, and who hasn’t been in one of their meetings since?
Focus on IBCs
While the trust structure benefits many clients, there are those who wish to retain legal ownership in their assets through a company. The Bahamas has a versatile and adaptable regime that can suit a range of clients’ desires for their estate strategy
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nshore, The Bahamas is known as a preferred forum for succession planning among high-net-worth individuals. Moreover, as an international financial centre, The Bahamas benefits from industry leading banks and trust companies that tailor their business to meet the demands of
Ian S. Winder of Higgs & Johnson looks at the advantages of IBCs – International Business Companies – the challenges in creating one, and how The Bahamas can help
Ian S. Winder Ian is an Associate in the Higgs and Johnson’s Commercial Transactions and Financial Services, Insurance Law & Regulation Practice Groups. He assists on a variety of corporate and commercial matters, including corporate structuring, M&A transactions, securing governmental and regulatory approvals, financing transactions and securities offerings in The Bahamas.
International Business Companies
Succession Planning in The Bahamas: The International Business Company and Shareholders’ Agreements
The Memorandum of Association (the “Memorandum”) is the constitutive document of the IBC that sets out its structure, powers and limitations. The Memorandum identifies, among other things, the authorised share capital, the number of shares and the classes or series of shares with their respective share entitlements. By contrast, the Articles of Association (the “Articles”) operate as a contract that binds the company and its shareholders and the shareholders between themselves. This is particularly beneficial in succession planning as the Articles, when filed with the Companies Registry; also bind each member’s heirs, personal representatives and assigns. The Articles generally offer a certain predictability regarding its administration and the interaction of its members. Both the Memorandum and the Articles can be amended at any time, subject to their respective terms and such amendment being filed with the Companies Registry within twenty-eight (28) days of the passage of the same. Beneficial owners can take comfort in knowing that they can create the preferred mechanisms for amendment that would be applicable to the IBC and govern the relationship of the shareholders. Such amending power can be fortuitous since circumstances often change at short notice.
Memorandum of Association and Articles of Association
The shareholders of an IBC may decide to enter into a supplemental contract among themselves; this is commonly known as a shareholders’ agreement. Such shareholders’ agreement operates in tandem with the Memorandum and the Articles of the IBC. Frequently, the objective of a shareholders’ agreement is to regulate how its shareholders relate to one another. As the Memorandum and Articles are both public documents that are filed with the Companies Registry, the shareholders may elect to include information that they desire to remain confidential because while the International Business Companies Act, 2000 mandates that a notice of a shareholders agreement be filed at the Companies Registry, such shareholders agreement itself does not have to be filed. Moreover, that agreement can be a fertile source for the protection of minority shareholders.
Shareholders’ Agreements
In any plan for successive ownership in a company, the transfer of shares is the most salient issue. In drafting appropriate clauses in any shareholders’ agreement, the intentions and objectives of the shareholders must be taken into consideration. If the shareholders wish to have a long-term business amongst themselves (and their heirs), they can take a restrictive approach regarding the transfer of any shares. For example, they may decide that any transfer (including one to a current shareholder) shall be subject to vote amongst the shareholders whereby 75% of the vote is required to approve the transfer. While this may be considered repressive, it is effective in managing the succession of shareholders.
The transfer of shares
Similarly, the shareholders may also desire to include the imposition of pre-emptive rights. This would require that where a shareholder desires to transfer their shares, they must first offer their shares to the other shareholders by notice in writing. The failure to adhere to this provision could render any transfer ineffective thereby controlling the succession of membership in the IBC.
In order to avoid the issue of a difference of opinion in the value of the shares, most comprehensive Articles or shareholders agreements will contain a method of calculating the value of shares prior to the transfer of such shares, which would normally be conducted by an independent third party. This inclusion of a provision of this nature ensures that the estate of a shareholder is paid the appropriate value for the shares of the deceased shareholder.
The shares of an IBC can be divided into different classes, with different rights attaching to each share class. Typically, there are management shares that carry voting rights in an IBC, and one or two lower classes of shares that do not carry any voting rights. Should the initial shareholders chose to retain control, while allowing new shareholders voting rights, such initial shareholders could the right to appoint a director to the board of directors. This can be supplemented by provisions limiting the number of directors that can be appointed to the board of the IBC. Classification of shares can be an ingenious mechanism to preserve control for a particular person or group.
Classes of shares
There are many challenges that shareholders can face in creating a company that is intended to be a long-term investment vehicle. The IBC procures for shareholders the framework to implement their succession goals. When paired with a comprehensive shareholders’ agreement tailored to meet the financial objectives for future generations the IBC becomes an appealing and discriminating vehicle for successful wealth transfers.
Conclusion
It must have at least one director and one shareholder (a director need not be a Bahamian resident or a shareholder of the IBC); There is no maximum or minimum capital requirement and no requirement to conduct audits; and No filing requirements except filing registers of directors and officers (and any amendments thereto within twelve (12) months of the appointment of any director or officer) and filings and reporting obligations that may arise as a result of the Commercial Entities (Substance Requirements) Act, 2018.
1) 2) 3)
Conditions and restrictions on how the shares in the IBC are transferred; and The different classes of shares of the company and their respective rights.
1) 2)
IBCs have proven to be an effective and efficient vehicle for managing offshore activities. Usually, the shares in an IBC would be owned by a domestic company, another IBC or by a company in another offshore jurisdiction. Practically, beneficial owners on the advice of their attorneys and financial advisors utilise various ownership structures that suit their individual needs. An IBC’s flexibility affords the beneficial owners the option to change the structure of the company when needed.
In The Bahamas there are two types of companies: those formed under the Companies Act, 1992 (a “domestic company”) and those formed under the International Business Companies Act, 2000 (an “IBC”). Domestic companies are generally used by Bahamian citizens; therefore, this article does not focus on these vehicles. Instead, focus is placed on the IBC, a corporate vehicle initially created to facilitate the business of offshore individuals and companies. An IBC has fewer administrative requirements than its domestic company counterpart. Generally, IBCs are easy to incorporate and have a flexible corporate structure. The following are some requirements for an IBC:
their clients. The most common form of succession planning in The Bahamas typically involves the formation of a trust. While the trust structure does benefit many clients, inevitably there are those who, for whatever reason, wish to retain legal ownership in their assets through a company. The Bahamas has a versatile and adaptable regime that can suit a range of clients’ desires for their estate strategy.
Building client trust in times of change
Globally, by the end of March 2020, RBC Wealth Management moved nearly 10,000 employees to work from home while processing more than 15m transactions totaling over $46bn
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Grégory Métrailler, Investment Advisor, and Lainey Broderick, Assistant Manager, at RBC Dominion Securities Global Limited, discuss the effect of Covid-19 on the company, the Bahamas and the financial sector worldwide
How did Covid-19 impact the financial sector?
The financial sector overall has been consolidating for a while now and the Bahamas has also been part of that trend. Some major players have exited the jurisdiction or downsized their operation but most of these decisions were strategic and not related to Covid-19. One of the major impacts the pandemic had on the sector locally was the acceleration of the digitalisation for documentation and payments. Sometimes external disruption is needed to force a change in habits and in that sense not only the financial sector, but all industries in the Bahamas have made a big step forward. For RBC, we are proud to say that the bank has been able to implement the necessary measures to continue to serve its clients with the highest service level required. RBC has even further grown its local footprint during the last year with our colleagues from Private Banking opening a new office at the Albany Financial Center. In the course of a pandemic, this is definitely a major achievement.
What about the financial sector in the Bahamas?
In this period of crisis, the benefits of working with a global firm with RBC’s assets (being among the world’s best capitalised banks) showed their strength. Locally, when the Covid-19 pandemic triggered lockdown, our team was able to transition fully to work from home within a matter of days. Globally, by the end of March 2020, RBC Wealth Management moved nearly 10,000 employees to work from home while processing more than 15m transactions totaling over $46bn, which represents over triple the normal volume. On the investment management front, our Investment Advisors and Portfolio Managers were working tirelessly to help clients navigate these challenging times. At RBC Wealth Management we are now broadcasting multiple times the usual quantity of high quality investment content and thought leadership – articles, blogs, conference calls and more, designed to inform the decisions of our Advisors and their clients. Our advice during the pandemic is to remain disciplined in the execution of the investment plan you have formulated with your Investment Advisor. Execute today but look to tomorrow.
How did Covid-19 impact RBC Dominion Securities specifically?
Section 1: Impact of Covid-19 on the financial sector
Section 2: Building client trust in times of change
During a time when it is difficult to imagine circumstances that would drive more uncertainty in our lives, here at RBC Dominion Securities we are striving to provide our clients with a source of stability and reliability. As a result of strong support from our parent company, along with astute and decisive leadership from our local management team, we were proud to be able to reassure our clients and their professional advisers that our offices have been and will remain fully operational, to provide our clients with the first class service that they are accustomed to, regardless of our physical location from one day to the next. Nobody likes uncertainty, hence the importance of being proactive. When the pandemic hit, clients and communities were already experiencing hesitations regarding their personal situations. Some were worried about their savings; some about their investments; others about their businesses and most importantly their family safety. It is important to us for our clients to feel supported in the Wealth Management arena so as they can concentrate on solving other matters. In our industry, professionals can disappear during difficult times and it is specifically in these periods when clients require our full attention. With a pre-emptive approach, we aim to solve problems before they become overwhelming and also create new openings. Building trust is a long process and situations like we experienced over the last year are unique opportunities that contribute to forging strong relationships with our clients.
You spoke about servicing clients, how do you build client trust during times of change?
In each of our Caribbean branches we have been doing what we can to engage with and support the local communities. With our clients kind collaboration we have been delighted to be able to donate through our contribution matching campaign over $38,000 to the Cayman Food Bank, the Red Cross Society in Barbados and Hands for Hunger in the Bahamas.
How else did RBC Dominion Securities build client and community relationships during this time?
As the world turns its attention to reopening, we are developing plans to gradually return employees to RBC premises. We are taking a measured approach to ensure we proceed at the right pace, with enterprise standards that keep the health and safety of employees, clients and service providers our top priority. During the transition from work from home to partial occupancy of our offices, our clients can expect to continue to receive uninterrupted world-class wealth management services. While it may be a while before this can be done fully in literal terms; our door is always open.
Looking forward – how does RBC see the return to 'normal'?
About the authors
Grégory Métrailler Grégory joined RBC Dominion Securities Global Limited as Investment Advisor in 2020. He started his career in 2012 with a graduate program in his native Switzerland where he worked in various wealth management teams (including High Net Worth and Ultra High Net Worth). In May 2014, he moved to Zurich and joined a Swiss private banking corporation as a relationship Manager/Investment Advisor, servicing clients domiciled in Latin America, Europe and Switzerland. After five years in Zürich, the opportunity to relocate in his role to Nassau arose and he moved to the Bahamas in January 2019. There, he worked as Investment Advisor/Portfolio Manager and also served as investments’ competence center for the booking center Bahamas. As a trusted advisor, Grégory uses a holistic approach to understand and define clients’ needs. He leverages his expertise and the Bank’s value chain to help them achieve their wealth management objectives. His main focus is to provide clients with comprehensive investment advice and build a suitable investment strategy according to the client’s risk and return expectations. Grégory holds a degree in Banking and Finance from the Swiss Finance Institute and is a certified wealth management advisor (CWMA). In addition, Grégory speaks fluently five languages (French, English, German, Spanish, Italian and Portuguese). In his spare time Grégory enjoys the outdoors with a passion for skiing, being from the Swiss Alps. He previously competed as a semi-professional skier but has now swapped the snowy mountains for sandy beaches and relishes in spearfishing, snorkeling, climbing and triathlons.
Lainey Broderick, LL.B, LL.M Lainey brings a variety of skills and investment experience to her role as Assistant Manager, having worked for the previous decade in Grand Cayman, in both a local fund directorship company and a global investment banking and management firm. Lainey holds a Bachelor of Laws (Honours) from the University of Edinburgh, Scotland and KU Leuven, Belgium and a Master of Laws from NUI Galway, Ireland. She is currently an MBA Candidate with Imperial College Business School, London, England. Beginning her banking career in 2006 with the largest financial services group in Ireland, Lainey graduated from their prestigious management training programme in 2009. Her previous roles have included investor relations, global markets, corporate architecture, multinational marketing and fund administration and directorships. Lainey has excellent proficiency in offshore funds, financial services and business management. In her spare time Lainey enjoys contributing to the local community and is a Director of the Green Tie Charitable Association; an Officer of the Cayman Islands Kids Gaelic Football Club; prior Chairwoman of the Cayman Islands Ladies Gaelic Football Club; and a regular volunteer for the Cayman Islands charities of the Pink Ladies, Jasmine Hospice and 100 Women in Finance.
Contact: RBC Dominion Securities Bahamas Albany Financial Center, 2nd Floor, South Ocean Boulevard, Nassau, Bahamas Web: www.rbcdsbahamas.com Phone: (242) 702-5950 Email: rbcdsbahamas@rbc.com
DARE legislation opens the door for new industry
SCB Executive Director Christina Rolle discusses the Digital Assets and Registered Exchanges Bill, and the opportunities it creates for Fintech firms based in The Bahamas
More important from a DARE perspective is that the FCSP provides for the custody of digital assets and wallet service providers.
We left no stone unturned to ensure DARE creates a digital asset environment that is on par or exceeds what is being offered in other jurisdictions
The SCB is a statutory body established in 1995 pursuant to the Securities Board Act, 1995. That Act has since been repealed and replaced by new legislation. The SCB’s mandate is now defined in the Securities Industry Act, 2011 (SIA, 2011). The Commission is responsible for the administration of the SIA, 2011 and the Investment Funds Act, 2003 (the IFA), which provides for the supervision and regulation of the activities of the investment funds, securities and capital markets. The Commission, having been appointed Inspector of Financial and Corporate Services effective 1 January 2008, is also responsible for administering the Financial and Corporate Service Providers Bill, 2020.
he passage of the Digital Assets and Registered Exchanges Bill, 2020 (DARE) has put in place the legal framework for a vital, well-regulated and compliant industry in The Bahamas for those interested in entering the digital asset space.
It also creates specific opportunities for entrepreneurial Bahamian Fintech firms to enjoy the credibility of being licensed and functioning under a comprehensive regulatory regime and participate in the Fintech industry that is being forged with the DARE Bill.
DARE legislation passed in the House of Parliament on 3 November, facilitates the registration of digital token exchanges, and the provision of services related to digital token exchanges. It also provides for the regulation of digital assets-based payment service businesses and for the registration of financial services related to the creation, issuance or sale of digital tokens and other digital assets. The SCB has been working in close consultation with industry and outside consultants on the development of DARE for past two years. SCB Executive Director Christina Rolle noted that with the intense interest in digital asset related business it was essential for the jurisdiction to have an appropriate regulatory framework in place.
“The number of queries the jurisdiction has received from entrepreneurs interested in venturing into this form of capital raising has mandated that we ensure legislative and regulatory parameters are in place to address how operators conduct themselves and how token issues come to market,” she said. She added, “DARE solidifies a legislative structure with standards for entry into and participation in the digital assets space. These requirements stipulate who may participate, the level of capital required, the rules for reporting and seeking the Commission’s approval, and the penalties for failure to comply.”
Strict adherence to established anti-money laundering (AML) and counter-financing of terrorism (CFT) laws by DARE participants is also included in the legislation to ensure data protection measures related to the personal information of clients, and implement measures to prevent data breaches that would jeopardize clients’ digital assets. Specifically DARE participants are required to implement the same AML/CFT measures as Designated Non-Financial Business Professionals and financial institutions.A Fidelity Digital Assets’ Institutional Digital Assets Report to illustrate the explosive growth of virtual currencies and the need for a jurisdiction like The Bahamas to equip itself with compliant and competitive legislation to participate in the digital asset space. The survey of almost 800 institutional investors across the US and Europe indicated that 36% of respondents are invested in digital assets, and that six out of ten believe digital assets “have a place in their investment portfolio.” According to the report, more than 80% of investors indicated that they would be interested in institutional investment products that hold digital assets.
By establishing the legal foundation for a new industry, DARE expands the playing field for financial services activity in the country, potentially creating new businesses and providing expansion opportunities for existing financial services providers and corporate services providers to grow their businesses into the digital space. It also allows for new fintech operators to establish operations in The Bahamas, or to work with firms already in country.
In developing the legislative framework for DARE the SCB examined the status and regulatory environment of crypto currencies in competitive IFCs such as Switzerland, Hong Kong, Malta and Gibraltar as well as the United States. “We left no stone unturned in analysing what others are doing to ensure DARE creates a digital asset environment that is on par or exceeds what is being offered in other jurisdictions,” said Ms. Rolle.
On the same day DARE legislation was passed, Parliament approved The Financial and Corporate Service Providers Bill, 2020 (FCSP), providing legal clarity for both corporate and financial service providers. FCSP modernizes the two-decade old legal framework of the existing Act and establishes a full regulatory, internationally compliant framework with appropriate powers vested in the SCB as regulatory authority.
Similar to DARE, the SCB began its extensive engagement with the industry in 2016 to develop a modern framework for FCSP that is in keeping with international best practices and standards. With 344 financial and corporate services licensees in The Bahamas the FCSP bill directly impacts Bahamian entrepreneurs and operators, perhaps more than any other financial services legislation.
“As an international financial centre with a considerable wealth management focus, this trending investor interest speaks to the potential for Bahamas-based wealth management experts to offer financial service related to digital assets,” said Ms. Rolle.
Captives find a home in The Bahamas
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esearch indicates there are over 6,500 captives operating worldwide and more than a 1,000 global companies successfully using captives. A common misconception is that captives are only for and formed by large public companies, but there is a growing trend for small private companies to
own captives. Data suggests that 47% of captives are owned by private and this helps to dispel the myth that only Fortune 500, or Fortune 1000 companies use captives. This is where jurisdictions such as The Bahamas offer a unique advantage with a well-regulated insurance sector and a collaborative public-private sector approach.
The Bahamas’ captive environment is comprised largely of small to medium-sized international enterprises seeking to establish a captive insurance presence through a stand-alone or segregated account entity. The Bahamas’ growth in the captive space continues to be attributed to the use of segregated accounts (cell captives) given that their cost effectiveness is more favorable than operating a stand-alone captive. The Insurance Commission of The Bahamas, the insurance industry’s supervisory authority, continues to enhance the captive industry by streamlining the application process and maintaining a robust regulatory and supervisory framework that meets international standards. As a result, The Bahamas has registered captives insuring risk emanating from various industries such as medical and healthcare administration, retail and wholesale distribution, agriculture, construction and real estate.
The ICB works very closely with the private sector through broad consultation on legislation and policy. In 2005, for example, the Domestic Insurance Act was completely re-written to modernise it and have it match the needs of the domestic insurance market. The Domestic Act was re-written through weekly round table dialogue and input from the domestic insurance market from both the insurance carrier side and the intermediary side. In 2009 the ICB did the same thing with a review of the External Insurance Act.
The ICB has recently advised that it will be undertaking an initiative to merge the two legislative regimes into one comprehensive Bahamas Insurance Act and it has stated, very clearly, its intention of seeking broad private sector input with this endeavour.
The ICB has proven to be extremely flexible in its approach to insurance matters as while it recognises the need for prudent supervision it is also cognisant that it must play a part in the ease of doing business in The Bahamas in order to grow the domicile as an international insurance jurisdiction.
The Bahamas is a relatively low-cost captive domicile with an application fee of $250 for each captive application or for each cell in a Segregated Accounts Company. There is an annual license fee of $2,500 for a restricted insurer and $3,500 for an unrestricted insurer.
All captives are licensed in accordance with the External Insurance Act, 2009. The captive insurer application process includes:
A scheduled pre-application meeting to discuss the proposed business plan Submission of a completed application which includes, but is not limited to, the following:
Detailed business plan Actuarial review or feasibility study Projected financial statements for three years (inclusive of balance sheet, income statement and solvency calculations) Sample policies to be marketed and sold by the applicante Details of the reinsurance program Due diligence documents for proposed shareholders, directors and senior officers.
Application review and consideration for approval by the Board of Commissioners. (An approved application receives approval in principle where the applicant is given 30-60 days to meet the conditions of approval).
1 2
a) b) c) d) e) f)
The country’s mature financial services industry, established infrastructure, progressive government, tax-neutral environment and luxury lifestyle have all been carefully cultivated to satisfy the specific needs of this most exclusive clientele. The many advantages of doing business in The Bahamas are as clear as the crystal waters surrounding the 700 islands of the archipelago. These include:
The Bahamas is situated at the crossroads of the Americas, just 65 miles off the east coast of Florida. It is an ideal hub for regional investment and business in the Eastern United States and Canada, and much of Central and South America.
Strategic location
The Bahamas has an outstanding record of political and economic stability, progress and stewardship. With more than 280 years of uninterrupted parliamentary democracy, it has been an independent nation since 1973, and retains a Westminster-based system of Government and an English-based legal system.
Political and economic stability
The Bahamas offer owners of capital a broad choice of financial institutions that deliver myriad services including banking, private banking and trust services, investment fund administration, capital markets, investment advisory services, accounting and legal services, e-commerce, insurance and corporate and shipping registries.
Wealth and asset management options
The Bahamas has developed its land, premises and fit-for-purpose infrastructure with the singular focus of facilitating international business.
Physical resources
The Bahamas has a highly educated local workforce and a long tenure in financial services excellence which has created a deep pool of skill and experience that is recognised and trusted worldwide.
Human Capital
The Bahamas’ government is committed to building an economic environment in which free enterprise can flourish.
Investment Policy and Incentives
Finally, The Bahamas ranks high as one of the most popular tourism destinations. What better place for a captive owner to conduct board meetings and then enjoy all The Bahamas has to offer afterwards?
CESRA demonstrates The Bahamas’ seriousness to continuing as an important and viable global international financial center
Once the conditions of approval are met, a certificate of license is issued to the applicant.
While the primary purpose of a captive insurance company is to insure the risks of its owner(s), The Bahamas engagement of the captive insurance sector provides a few benefits to its overall economy. These include:
1. An economic stabiliser: Insurance, overall, is an economic stabiliser. During difficult economic times companies tend to buy more insurance, which results in a better return on capital for those who have put up capital in the insurance sector. Through economic growth there tends to be increased incorporations and thus a greater demand for insurance.
2. Promotes growth in the overall insurance sector: Specifically, with captives, markets tend to experience increase growth through hard insurance markets, where premiums are rising and available limits are being reduced. We are seeing this trend currently with clamping down that Lloyds of London began early in 2018.
3. Creates opportunities for professionals such as accountants and attorneys: As the sector grows employment numbers will grow as will the revenue of existing service providers like attorneys and accountants.
4. Creates employment and can attract foreign direct investment: Many captives ultimately become full stand-alone insurance companies and often they establish these full insurance companies within the domiciles of the former captive. Therefore, they have a physical presence. This means investment in real property, which gives them a long-term relationship with the domicile.
How captives benefit domiciles such as The Bahamas
It is not by chance that The Bahamas is the most diverse and successful international financial centre in the Caribbean region today. More than 80 years of thought, effort and co-operation have produced ideal conditions for captives, investment by and relocation of (ultra) high net worth individuals, efficient management of wealth by families and businesses in comfort and style.
The Bahamas advantage
Guilden M. Gilbert Jr, CEO at CG Captive Managers points out that in the world of captives, size isn't everything as smaller privately owned companies can be just as easily accommodated alongside Fortune 500 companies
Committed to international best practices in financial services and meeting client needs
The Bahamas maintains it is attaining the highest standards against money laundering, terrorist financing and other identified risks
I
n the past few years international financial centres have had to respond to a number of international initiatives focused on fighting financial crime, tax transparency, and cooperation measures. They have required IFCs to implement robust legal and regulatory regimes to address
economic substance, preferential tax regimes, and access to beneficial owner information. Situated off the eastern coast of the United States, The Bahamas used a suite of legislation and focused attention to reposition the jurisdiction, revitalising the financial services sector, making it more attractive to service providers and ultra high net worth individuals. All of this has taken place in the midst of a global pandemic that has forced persons to rethink the way that they conduct business as well as to rethink wealth-planning strategies.
The Covid-19 pandemic has significantly impacted the way that we do business in general. The international financial services sector is no exception. Nonetheless, as our business is based on deepening client relationships, travel restrictions, lockdowns, and concerns around health and safety have forced us to rethink how we maintain client relationships, develop new ones, and sharpen our focus for the advice given to clients. In a sector where relationships are everything, it is important that we hold on to the ones we have. Considering the economic impact of the pandemic it is also imperative that we develop new business. One must also be mindful that the pandemic did not stop the onslaught of regulatory requirements.
Meeting client needs in uncertain times
The Bahamas prides itself on being a compliant jurisdiction that follows international best practices, and therefore, continues to work diligently to demonstrate its commitment at the highest political level to ensure that as a jurisdiction we comply with international standards on information exchange, tackling harmful tax practices, dismantling artificial tax structures and prevention of financial crimes.
Within the past few years The Bahamas has passed a compendium of legislation to address concerns regarding economic substance, removal of preferential exemptions, and automatic exchange of tax information, to meet the EU and OECD’s criteria on tax matters. The legislation includes: the Commercial Entities (Substance Requirements) Act, 2018; the Removal of Preferential Exemptions Act, 2018; the Multinational Entities Financial Reporting Act, 2018; the Register of Beneficial Ownership Act, 2018 and its subsequent amendments in 2019 (expands the definition of legal entity to include Partnerships) and 2020 (expands the definition of legal entity to include the Non-Profit Organization limited by Shares and the Segregated Accounts Companies); and the Exchange of Financial Account Information Act 2016.
On 18 February 2020, The Bahamas was removed completely from the European Union’s list of Non-Cooperative Jurisdictions for Tax Purposes, after being deemed fully compliant with the bloc’s tax standards. The move by the EU underscores The Bahamas’ commitment to adhere to global regulations and best practices as a premiere international financial centre.
The Bahamas maintains that it is attaining the highest standards in the fight against money laundering, terrorist financing and other identified risks, and therefore has been making significant strides in the fight against financial crime. The AML/CFT/CFP legislative, regulatory and enforcement landscapes have been thoroughly reviewed and strengthened.
The following legislation, among others, were enacted to address deficiencies in existing law and to strengthen the AML/CFT/CFP regime: the Financial Transactions Reporting Act, 2018 and the Financial Transaction Reporting Regulations 2018; the Proceeds of Crime Act, 2018; the Anti-Terrorism Act 2018; The Financial Transactions Reporting (Wire Transfers) Regulations, 2018 and the Travellers Currency Declaration Amendment Act, 2018. This suite of legislation was passed in an attempt to place the country in compliance with the FATF 40 recommendations. In 2019, The Bahamas improved its compliance with the FATF’s 40 recommendations, from 18 ‘compliant or largely compliant’ in 2015 to 30 ‘compliant or largely compliant’ in December 2019.
In February 2020 the FATF agreed The Bahamas had “substantially addressed” all matters of concern raised in the 2017 Mutual Evaluation Report. This was confirmed and formalised with the removal of The Bahamas from the Grey List on “Jurisdictions under Increased Monitoring” by the FATF on 18 December 2020. The FATF noted that: “The Bahamas has strengthened the effectiveness of its AML/CFT system and addressed related technical deficiencies to meet the commitments in its action plan and remedy the strategic deficiencies identified by the FATF in October 2018” from said list.
The global economic environment and prevailing geopolitical factors have created an opportune time for clients to review their estate plans and financial strategies. Advisers in The Bahamas have been focused on the following matters:
Covid-19 planning considerations
• Creation of emergency funds; • Refinancing options for clients; • Preservation of wealth; • Managing family dynamics; • Maintaining philanthropic goals; • Gifting strategies.
The Covid-19 pandemic means that advisers must review client relationships and offer advice to guide clients through these challenging times. Income generating assets need to be secured. Measures must be put in place to ensure sustainability over the long term. With interest rates being low, opportunities to review estate planning strategies have arisen. Obviously, wealth preservation is of paramount concern with clients considering the impact of dispositions on the overall value of their portfolios. The stress of the pandemic has strained family dynamics as well. Hence, family governance documents need to be reviewed and updated.
financial crime, tax transparency, and cooperation measures. They have required IFCs to implement robust legal and regulatory regimes to address economic substance, preferential tax regimes, and access to beneficial owner information. Situated off the eastern coast of the United States, The Bahamas used a suite of legislation and focused attention to reposition the jurisdiction, revitalising the financial services sector, making it more attractive to service providers and ultra high net worth individuals. All of this has taken place in the midst of a global pandemic that has forced persons to rethink the way that they conduct business as well as to rethink wealth planning strategies.
Fania Joseph, Legal and Policy Officer at the Bahamas Financial Services Board, discusses how keeping up with international regulatory changes has poitioned The Bahamas as the jurisdiction of choice
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