ABOUT THE BAHAMAS INTERNATIONAL BUSINESS ... - Lex Justis

As one of the most popular traveler destinations worldwide, there is no doubt that the Bahamas is considered by many as an island state possessing strong economic, political, and social foundations. Apart from its natural attributes inherited from its archipelagic landscape, the country also holds prominent potential as a burgeoning financial service centre with more than 6000 professionals engaged in every aspect of financial services. Private banking and trust services, investment fund administration, accounting and legal services, e-commerce, insurance, and shipping registration and corporate services are common products and services found within the financial service centre. The mere existence of the country?s financial service industry hinges not only on the jurisdiction?s geographical assets but also on the tax advantages offered, creating the ideal synergy between the nation?s tourism and financial service sectors.

The formation of a corporate vehicle is perhaps the first step for individuals interested in having some form of commercial presence in the Bahamas. For non-residents who are interested in benefiting from the advantages offered by the Bahamas, the formation of an International Business Company (or IBC) is an ideal preference, popularly known for its efficient and convenient incorporation process and for its ability to obtain a bank account from a local financial institution.

General

Generally speaking an International Business Company is a legal entity incorporated and holding its registered office outside the residential jurisdiction of its beneficial owner. In normal circumstances an IBC is prohibited from conducting business within the jurisdiction in which it was incorporated, however the it may conduct business within the Bahamian jurisdiction once obtaining approval from the Bahamas Central Bank. Other features of an IBC include preservation of confidentiality of beneficial owners, wide corporate powers to engage in different businesses and activities, and its ability to enjoy substantial tax benefits provided its home jurisdiction. IBCs are commonly used to conduct various investment activities and for asset protection purposes ranging from the purchase and sale of goods and services, hold bank accounts and managing business entities. IBCs are also commonly used for the ownership of chattels (i.e. vehicles, equipment, artistic paintings, etc.) and real estate, for ownership of intellectual property, licensing and franchising, personal service by individuals working overseas, e-commerce activities, and other business activities.

IBC Activities

According to the International Business Companies Act, IBCs are permitted to carry on any activity anywhere that is not prohibited by statute or any other law in force in the Bahamas. The traditional activities of IBCs is to conduct business outside of the jurisdiction in which it is incorporated, however Bahamian IBCs may conduct business with persons residing in the Bahamian jurisdiction once it has obtained approval from the Bahamas Central Bank in accordance with the Exchange Control Regulations with respect to its planned operations.

Administrative Activities

For those IBCs which conduct its business primarily outside the Bahamian jurisdiction, local legislation allows for activities which are fundamental for the IBC?s administrative activities. Although no financial reporting requirements exist, an IBC must keep certain documents, such as share register, minutes of meetings, and resolutions at the company?s registered offices in The Bahamas. Generally speaking an IBC is not considered engaged in business with persons residing in the Bahamas if:

• Creating or maintaining deposits with a person carrying on business within the Bahamas.
• Creating or maintaining professional contact with counsel and attorneys, accountants, bookkeepers, trust companies, management companies, investment advisers or similar persons carrying on business within The Bahamas.
• Prepares or maintains books and records within The Bahamas.
• Holds meetings of its directors and members within The Bahamas.
• Holds a lease of property for use as an office from which to communicate with members, or to prepare or maintain company books and records.
• Holds shares, debt obligations and other securities in an IBC or an ordinary company.
• Holds shares, debt obligations or other securities which are owned by any person, IBC or ordinary company resident in The Bahamas.

Traditional Activities

Bahamian IBCs have such powers as are permitted by law for the time being in force in The Bahamas, irrespective of corporate benefit, to perform all acts and engage in all activities necessary or conducive to the conduct, promotion or attainment of the object of the company. Traditional uses for Bahamas IBCs include:

• Owner of company shares or other legal entities;
• Holder of bank accounts, fixed deposits, and any other financial or commercial title;
• Borrowing or lending money, paying or receiving commissions, royalties or others;
• Owner of real estate and any other movable or immovable property or goods;
• Provision of, or obtaining Mortgages;
• Manager and promoter of international business transactions;
• International leasing of aircraft, vehicles, equipment and others;
• Marketing and promotion of products and services;
• Legal Rights of Inheritance;
• Asset Protection purposes;
• Emigration purposes;
• Other commercial and financial activities;

Prohibited Activities

In accordance with the IBC Act 2000, IBCs cannot be incorporated for the purposes of facilitating a criminal activity or activity which is prohibited by Bahamian law. Bahamian IBCs are not allowed to carry on banking, trust, or insurance business (save for the use of an IBC to conduct insurance activity under the External Insurance Act), nor are they allowed to act as Registered Agents/ provide a Registered Office for companies. According to the IBC Act 2000, only Bahamian licensed bank and trust companies and licensees under the Financial and Corporate Service Providers Act are permitted to act as Registered Agents for Bahamian IBCs. In addition Bahamian IBCs are prohibited to issue ?bearer shares? and all bearer shares previously issued under the Bahamas International Business Companies Act 1989 are considered null and void and without effect for all legal purposes.

Registered Offices & Agents

As previously mentioned, only Bahamian licensed banks and trust companies and financial and?corporate?service providers licensed under the Bahamas Financial and Corporate Service Providers Act are permitted to act as Registered Agents of Bahamian IBCs in accordance with the IBC Act.?At all times the IBC must maintain a Registered Agent and Registered Office within the Bahamas, the name and address of which must be submitted to the Registrar during the registration process. Should the Directors of the IBC decide to change its Registered Office/ Agent it is required by law to notify the Registrar within 14 days of the change and to provide the required information on the new Registered Office/Agent.

Resignation of Registered Agent

Should a Registered Agent decide to resign from representing the IBC and is unable to reach an agreement with the IBC regarding the Registered Agent?s replacement the Registered Agent may resign provided that the steps provided under Bahamian statute are followed. This involves the Registered Agent providing notice to the IBC?s Directors or Officers no less than 90 days to the IBC?s the last known address or to the individual responsible for the incorporation of the IBC, and providing written notice to the Registrar of the same. Should the IBC fail to provide the Registrar with information concerning the newly appointed Registered Agent the Registrar will publish a 30 day notice in the Gazette requesting that the IBC provide notice of the change of name and address of the Registered Agent and informing them of their intention to ?strike off? the IBC from the Company Register.

If the IBC fail to provide the details of the newly appointed Registered Agent within 30 days, the Registrar will take the necessary actions to strike off the IBC from the Company Registry, unless there is reasonable cause to suspect that the a Registered Agent has died or has otherwise ceased to act or to qualify to act as a Registered Agent and the Bahamas company has not notified the Registrar of any change in the name or address of its registered agent, the Registrar shall serve on the company at its registered office a notice directing the Bahamian company to replace the registered agent.

IBC Share Capital

Shares in a Bahamas IBC may be issued for money, services rendered, personal property (including other shares, debt obligations or other securities in the company), an estate in real property, a promissory note or other binding obligation to contribute money or property, or any combination thereof. IBC shares may also be issued for such amount as may be determined from time to time by the directors, and in the absence of fraud, the decision of the directors as to the value of the consideration received by the company in respect of the shares is conclusive, unless a question of law is involved.

Ownership & Issuing IBC Shares

There is no minimum authorized capital for an Bahamian IBC or a minimum capitalization requirement. The standard authorized share capital is US$50,000.00, as this is the maximum authorized capital permitted for the minimum government license fee payment. The capital may be expressed in any currency. Subject to any limitations in its memorandum or articles of association or any other law for the time being in force in The Bahamas, a Bahamas IBC may issue:-

• registered shares but not shares issued to bearer;
• voting and non-voting shares;
• shares that may have more or less than one vote per share;
• shares that may be voted only on certain matters or only upon the occurrence of certain events;
• shares that may be voted only when held by persons who meet specified requirements;
• no par value shares;
• unnumbered, common, preferred, or redeemable shares; and
• shares that entitle participation only in certain assets.

IBCs may be partially or wholly owned by one or more persons or entities and Bahamian Residents may, on approved by The Central Bank of The Bahamas, act as shareholders. An IBC may also purchase, redeem or otherwise acquire and hold its own registered shares but only out of surplus or in exchange for newly issued shares.

Altering IBC Capital

A Bahamian IBCs may, by a resolution of directors, amend its memorandum of association to increase or reduce its authorised capital and in connection therewith the company may in respect of any unissued shares increase or reduce the number of such shares, increase or reduce the par value of any of its shares or effect any combination of the foregoing. Further amendments can be made to the memorandum of association to divide the shares, including issued shares, of a class into a larger number of shares of the same class; or combine the shares, including issued shares, of a class into a smaller number of shares of the same class, provided, however, that where shares are divided or combined the aggregate par value of the new shares must be equal to the aggregate par value of the original shares.

The capital of an IBC may by a resolution of directors be increased by transferring an amount of the surplus of the company to capital and may be reduced by returning to members any amount received by the company upon the issuance of any of its shares, the amount being surplus to the company or by cancelling any capital that is lost or not represented?by assets having a practicable value. IBC capital may also be altered by transferring capital to surplus for the purpose of purchasing, redeeming or otherwise acquiring shares that the directors have resolved to purchase, redeem or otherwise acquire. The IBC Act further outlines the circumstances in which an IBC?s capital is reduced to minimal amounts, and the practice in which the Directors of the IBC must undertake in order to satisfy any liabilities encountered as a result.

The Shareholder and Director Register

The Bahamas IBC holds a high degree of confidentiality due to its limited filing requirements. The IBC Act only requires the name of the Company, its Registered Agent?s name and address, the company?s Memorandum and Articles of Association along with an imprint of its common seal and any amendments to be filed with the Registrar. The Registered Office of the IBC is required to maintain one or more registers known as Share Registers containing the names and addresses of the persons who hold registered shares of the Bahamas company, the number of each class and series of registered shares held by each person, the date on which the name of each person was entered in the Share Register, and the date on which any person ceased to be a member.? The Share Register is not publicly filed with any government authority, however the register of members must be kept and maintained at the Registered Office but is not available for inspection by the public.

The Registered Office is also required to maintain a current copy of the Register of Directors and Officers which must be filed with the Registrar. The Register of Directors and Officers must contain the names and addresses of the persons who are directors and officers of the IBC, the date on which each person was appointed as a Director or Officer of the company, and the date on which each person as a director or officer ceased to be a director or officer.? Any changes must be filed within one year of such changes.

Officers & Directors of Bahamian IBCs

Subject to any limitations in its memorandum or articles of association or in any unanimous shareholder agreement, the business and affairs of a Bahamas company shall be managed by at least one director who may be an individual or a company.? Directors are usually appointed by the shareholders, however there is no Bahamian residency or share qualification requirements to be a director of an Bahamas IBC.?The IBC Act, however requires that all corporate books, records and minutes of meetings must be kept at the Registered Office and copies at such other places as determined by the directors or the Articles of Association. Bahamian IBCs are not required to have an annual general meeting of the members.

There is no requirement to appoint any officers of a Bahamas IBC. The Register of Officers and Directors must be filed with the Registrar within 12-months of their appointment and the Registrar must be notified of any change in the directors or officers of the IBC within 12-months after the change occurs.

Indemnification of Directors, Officers and Liquidators

In accordance with the IBC Act and subject to any limitations in a Bahamas IBC?s memorandum and articles of association or in any unanimous shareholder agreement, a Bahamas IBC may only indemnify a director or officer against all expenses, including legal fees, and against all judgments, fines, amounts paid in settlement and reasonably incurred in connection with legal and administrative proceedings where such director or officer acted honestly and in good faith with a view to the best interests of the IBC.?IBCs may purchase and maintain insurance in relation to any person who is or was a Director or an Officer against any liability asserted against the person and incurred by the person in that capacity, whether or not the IBC has or would have had the power to indemnify the person against any of the liability.

Should the Registrar has reasonable cause to believe that a Bahamas company no longer satisfies the requirements prescribed for a Bahamas IBC the Registrar shall serve an Order for Compliance to the IBC. Once the IBC has complied with the requirements of the IBC Act the Registrar will issue a Declaration of Compliance at the request of the IBC. Failure to reply with 90 days immediately following the date of service of the Compliance Order, the Registrar will be required to strike the name of the Bahamas company off the Register unless the Bahamian company or any other person satisfies the Registrar that the Bahamas company should not be struck off. Once the IBC is struck off the Company Register the Registrar is required to publish a Notice of the striking off in the Gazette.

Fees & Penalties

IBC?s are required to pay registration fees upon incorporation and an annual licence fee of $350 to the government. License fees are payable before the 31st of January each year, beginning the year following the incorporation of the company. Penalties are due for late payment and the Registrar may strike IBC?s off the register for non-payment. The penalty rates are:

• 10% increase of the prescribed fee should an IBC fails to pay the prescribed registration fee to the Registrar by the 1st day of April in each year;
• 50% increase of the prescribed fee should an IBC company fail to pay the amount due by 31st October;
• If a Bahamian IBC fails to pay the registration fee by 31st December, the name of the Bahamas IBC will be struck off the Register from 1st January of the following year.

Exemptions

A Bahamas IBC is exempted from the Bahamas Exchange Control Regulations only if its operations are intended to be exclusively overseas, however Bahamian IBCs seeking to carry on business with persons resident in The Bahamas must first obtain exchange control approval from the Central Bank of The Bahamas with respect to its planned operations.? Exemptions are granted for a period of 20-years from the date of incorporation of a Bahamas company or from the date of its continuation under the IBC Act.

A Bahamas IBC or any member or shareholder is not subject to:-

• any business licence fees, income tax, corporation tax, capital gains tax or any other tax or income or distributions accruing to or derived from such company or in connection with any transaction to which that Bahamas company or shareholder, as the case may be, is a party;
• any estate, inheritance, succession or gift tax, rate, duty, levy or other charge payable in The Bahamas with respect to any shares, debt obligations or other securities of that company or shareholder;
• the payment of stamp duty on any transactions in respect of shares, debt obligations or the securities of a Bahamas company and any other transactions relating to the business of the Bahamas IBC; provided however, stamp duty is payable in relation to real property situated in The Bahamas which is owned by the Bahamas IBC, or which is owned by any company in which it holds shares or for which it holds a lease.

These exemptions do not apply to:-

• a person who is a ?resident? of The Bahamas within the meaning of the Bahamas Exchange Control Regulations Act; or
• to a company incorporated or continued under the Bahamas IBC Act if a ?resident? of The Bahamas is the beneficial or legal owner of any of the common or preferred shares issued or to be issued by such Bahamas company or acquires a legal or beneficial interest in any debt or other securities issued or to be issued by such Bahamas IBC or is otherwise directly or indirectly entitled to receive any dividends or distributions from such a Bahamas company.

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Source: http://www.lexjustis.com/blog/2011/09/about-the-bahamas-international-business-company-ibc/

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