AREAS OF PRACTICE

REAL PROPERTY LAW

A number of Acts govern Real Property Law in The Bahamas. The International Persons Landholding Act, 1993 was enacted to repeal former, restrictive legislation and facilitate the holding of land by non-Bahamians and by companies under their control. There is additional legislation relating to time sharing (The Bahamas Vacation Plan and Time-Sharing Act, 1999), to leasing (the Landlord and Tenant Act), and the Real Property Ac, which remains basic English law, and has its commencement date in the Bahamas in 1845.

INTERNATIONAL OWNERS OF SECOND HOMES: Overseas Investors may acquire residential properties in The Bahamas of up to five acres without prior Government approval. Such acquisitions are required to be registered in accordance with the International Persons Landholding Act.

HOME OWNERS RESIDENCE CARD: Second Home Owners are eligible for a Home Owners Residence Card, renewable annually. This card will facilitate entry into The Bahamas; entitle the owner, his spouse and minor children to enter and remain in The Bahamas for the duration of the validity of the card.

ANNUAL OR PERMANENT RESIDENCE: Accelerated consideration of applications for annual or permanent residence will be given to: - major international investors; and –fit and proper owners or residence valued at $500,000 or more.

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CONVEYANCING

The Conveyancing and Law of Property Act governs the transfer of property in the Bahamas. Although amended many times over the years, the principal legislation dates back to 1909. The Act covers Contracts for sale, general words to be used in the conveyance of land, covenants for title, methods of execution, production and safe custody of title deeds, leases, mortgages and construction and effect of deeds and other instruments.

All transfers of real property situate in the Bahamas must conform to Bahamian law. It should be noted that instruments that are effective to transfer real property in jurisdictions outside of the Bahamas are most frequently ineffective to make such transfer within the Bahamas, as they do not comply with the provisions of this Act.

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COMPANIES

Incorporation and Management of general Bahamian companies is governed by the Companies Act, 1992. Constitutive documents are the Memorandum of Association and the Articles of Association. The Articles prescribe the regulations of the Company. The Companies Act of 1992 consolidates and revises previous amendments and establishes a modern legal regime for the incorporation, management and control of Bahamian Companies. Subject to the Act, a company incorporated under the Act has the capacity and all the rights, powers and privileges of an individual of full capacity

International Business Companies (IBC’s)

Incorporation registration and operation of IBC’s is governed by the International Business Companies Act, 2000 as amended ("the Act"). IBC’s are flexible vehicles for the conduct of international business. Only those persons, banks and trust companies licensed and approved may incorporate an IBC. An IBC may be incorporated for any legitimate purpose that is not prohibited by the Act or by any other law in the force in The Bahamas.

The recent amendment to the Act provides for the management of an International Business Company by a sole Director. It also allows an International Business Company to carry on the business of External Insurance.

ABOUT IBCs

The Flexibility of Bahamian IBC’s

Imagine a company structure that respects the confidentiality of its shareholders, is not required to file annual statements, financial statements or keep accounts, can hold its meetings anywhere in the world and conduct its business anywhere in the world. Imagine that such a company can be incorporated in an economically and politically stable country which is a member of the British Commonwealth and which imposes no income, capital gains or inheritance tax. This is the profile of a Bahamian IBC.

Bahamian IBC's are state of the art, modern business vehicles designed with the offshore investor in mind. They are easily incorporated, infinitely flexible, inexpensive and of course, private.

The Bahamas is ideally situated for such companies. Its geographical location (2 ½ hours from New York, 50 minutes from Florida, with direct flights from London, New York, Washington, Miami and numerous other U.S. cities) makes it the most accessible offshore jurisdiction in the Caribbean. In addition, with the Bahamian dollar being on a par with the U.S. dollar, financial transactions are simplified.

Getting to know the Bahamian IBC

A Bahamian IBC is permitted to engage in any activity that is not unlawful in the Bahamas. It can sell insurance, own property, advise and manage mutual funds or simply invest in global stock markets.

Bahamian IBCs are specifically exempted from any form of income tax, capital gains or transaction tax for a period of twenty years from the date of incorporation. There may be tax consequences in the investor’s country of residence and the investor should seek advice there before acting, but there simply are no tax considerations in the Bahamas. An IBC may conduct its business in any foreign currency it chooses, free of Bahamian Government regulations or restrictions.

An IBC requires only one director, and there is no requirement to have a Bahamian director. The director may be a natural person or a corporate entity; meetings of directors may be held in any jurisdiction, with participation by telephone or other simultaneous electronic link.

The corporate records of an IBC are not open to public scrutiny. Documents filed on incorporation disclose the location of the company’s registered office in the Bahamas, the identity of the registered agent (usually a lawyer or an accountant) and the officers and directors. This is the extent of public disclosure required.

So what do people use IBCs for?

In a troubled world, there is need for some people to protect themselves and their families from economic and political uncertainty in the country in which they live. Such individuals will move some of their assets to other jurisdictions, thereby diversifying their holdings. Other individuals of some wealth frequently incorporate an IBC to hold and manage the assets of trusts established in the Bahamas or elsewhere. This provides an extra layer of insulation and privacy for the trust.

Bahamian IBCs are useful components of estate planning or business strategies. On the one hand, an IBC can be a vehicle for global business. At the simplest level, IBCs are often used by investors in global stockmarkets.

There are a myriad of other uses for IBCs including holding title to real estate in jurisdictions outside of the Bahamas, e-commerce and freight-forwarding transactions.

Getting Started

IBCs can be incorporated in 24 to 48 hours. An IBC can generally be incorporated and managed in its first year (to the end of December in that year) for an all inclusive fee of $1,500. In subsequent calendar years, the cost including annual government license fee and ongoing management fees can be as little as $750. Where authorized capital requirements exceed $50,000 or its equivalent in other currencies, or where Bahamian practitioners are asked to sere as directors of the company, additional costs will apply. However, a Bahamian IBC can assist offshore investors in establishing themselves in a stable, reputable jurisdiction at a very reasonable cost.

To prepare the incorporation documents, Holowesko & Company will require its "Know your Client" (due diligence) forms to be completed. We will need to know the proposed name of the company, its authorized capital, names of persons to be appointed as directors and related details. Those details concerning ownership and control of the company are strictly private but are required for the company’s records which are secured within the company’s registered office.

Once the Company Registry has given its approval for the proposed name of the company, incorporation may be completed within the day, with corporate documents available shortly thereafter.

Conclusion

The Bahamian IBC is a highly flexible corporate vehicle that is ideal for the offshore investor who requires a company which can be incorporated quickly and at a reasonable cost. Beyond that, the Bahamas has established itself as one of the premiere offshore jurisdictions in the world. It has a well-deserved reputation for economic and political stability, and for the professionalism of its financial institutions.

All this and sunshine as well! What better location can there be in which to test the waters offshore?

Segregated Accounts Companies

Among the most recent new financial services legislation is the Segregated Accounts Companies Act, 2004. A Segregated Accounts Company is a single legal entity with a general account or core cell containing assets and liabilities which are statutorily separated from the assets and liabilities of the other segregated (separated) accounts.

This type of company protects the assets and liabilities of a segregated account from any claims of creditors of the general account or another segregated account which is insolvent, so that the investments of the account owners or creditors of a solvent segregated account shall remain secure on insolvency.

In the operation of the Segregated Accounts Companies Act, the Companies Act and the International Business Companies Act shall apply mutatis mutandis to this new Act, except where otherwise provided.

Partnerships

Partnership Act

The Act sets out the rules which determine whether a partnership does or does not exist. Persons who enter into partnership with one another are collectively a firm, and the name under which their business is carried on is called the firm-name. Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership. The acts of every partner who carries on in the usual way business of the kind carried on by the firm of which he is a member, bind the firm and his partners.

Partnership Limited Liability Act

This Act authorizes the formation of partnerships with limited liability, for the transaction of any mercantile, mechanical or manufacturing business within The Bahamas, except banking or insurance. In any such partnership one or more of the members thereof is/are the general partner(s who are jointly and severally responsible. The other members are special partners, who contribute a specific amount of capital to the common stock. Special partners are not liable for the debt of the partnership beyond the amount of the fund contributed by them to the capital. There are exceptions that are provided for in the Act.

Exempted Limited Partnership Act, 1995

This Act provides for an exempted limited partnership to be formed for any lawful purpose or purposes to be carried out and undertaken either in or from within The Bahamas or elsewhere upon the terms, with the rights and powers, and subject to the conditions, limitations, restrictions and liabilities mentioned in the Act. Such partnerships may not undertake business with the public in The Bahamas other than so far as may be necessary for the carrying on of the business of that partnership exterior to The Bahamas. An exempted limited partnership consists of general partners who are liable for all debts and obligations of the partnership and one or more limited partners who are not liable for the debts or obligations save as provided in the partnership agreement, except as provided for in the Act.

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FINANCIAL SERVICES

Regulation of the Financial Services Industry

The Bahamas has established a comprehensive regulatory framework that includes five regulators and supervisors in the financial sector.

The Central Bank of The Bahamas, the Securities Commission of The Bahamas (SCB) and the Registrar of Insurance Companies ensure adherence to international standards of oversight, service and confidentiality through progressive regulation and supervision.

Regulation of the securities industry is structured to protect the interests of those who do business with financial institutions licensed in The Bahamas, and to ensure the Bahamas’ business environment continues to meet the highest international standards.

The Securities Commission was established in 1995. As part of its endeavour to keep abreast in a never-changing global regulatory environment, and to ensure a Bahamian contribution in improving the efficiency and conduct of international markets, SCB became a member of the International Organization of Securities Commissions (IOSCO) and the Council of Securities Regulators (COSRA) in 1996 and 1997 respectively.

SCB’s mission is to effectively oversee and regulate the activities of the securities and capital markets, and to protect investors, while strengthening public and institutional confidence in the integrity of those markets.

In addition, a unique supervisory body, the Bahamas Compliance Commission, was established in 2000. The Compliance Commission, an essential part of the jurisdiction’s rigorous anti-money laundering efforts, is a supervisory body for non-traditional financial institutions such as lawyers, accountants and other professionals, who hold funds on behalf of clients.

Investments Funds Act

Investment Funds Act, 2003

The Act repeals the former legislation, the Mutual Funds Act, and provides a more modern and up to date regulatory framework within which Investment funds may operate in The Bahamas. The various types of investment funds are described, and the licensing and regulation of those funds is prescribed. The Act also sets the parameters for the administration of an investment fund, the licensing of an investment fund administrator, and the duties and responsibilities of the administrator, who is responsible, inter alia, for reporting issues relating to the fund to the Securities Commission.

The Investment Funds Regulations, 2003 provides for the independence of the investment fund custodian, operator and administrator and prescribes who can hold such positions and the duties of the holders of those positions. The Act also provides regulations for self-administered funds, approved auditors and the operation of investment funds generally, including non-Bahamas based investment funds. The Schedules to the Act set out the information to be disclosed in the Offering document, the constitutive documents, the application forms for the various types of funds and the Schedule of government fees.

Smart Funds

The Investment Funds (SMART Fund) Rules, 2003

A SMART Fund is described in the Investment Funds Act, 2003 as a fund established by the Securities Commission as a Specific Mandate Alternative Regulatory Test Fund that satisfies certain prescribed parameters and requirements of a category, class or type of investment fund previously approved by the Commission.

These rules set out the qualification for four different classes of SMART funds. Generally, SMART funds are more useful to smaller funds with a restricted number of investors.

Securities Industry Act

The Securities Industry Act, 1999 provides for the establishment of a Securities Commission for the regulation of securities exchanges and the securities industry, and for connected purposes. The functions of the Commission are to formulate principles to regulate and govern mutual funds, securities and capital markets; to maintain surveillance over mutual funds, securities and capital markets ensuring orderly, fair and equitable dealings; to create and promote conditions to ensure the orderly growth and development of the capital markets, and to advise the Minister of Finance regarding mutual funds, securities and capital markets. The Commission is responsible for satisfying itself that the provisions of the Financial Transactions Reporting Act, 2000 are being complied with. The Securities Industry Regulations, 2000 provide the regulations by which the provisions of the Act are enforced.

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TRUSTS

Trusts (Choice of Governing Law) Act, 1989

By the provisions of this Act, a settler of a trust, whether resident in the Bahamas or not, may expressly declare in the trust instrument that the laws of The Bahamas shall be the governing law of the trust. Such a term in a trust is "valid, effective, and conclusive regardless of any other circumstances. A term of a trust that the laws of The Bahamas shall govern a particular aspect of a trust of that The Bahamas shall be the forum for the administration of the trust is conclusive evidence, subject to any contrary term of the trust, that the settler intended the laws of The Bahamas to be the governing law of the trust and is valid and effective accordingly.

Fraudulent Dispositions Act, 1991

This Act has the effect of insulating assets placed into Bahamian trusts against foreign jury awards, thereby encouraging the creation of "asset protection trusts" in The Bahamas. Further, by Section 8 of the Reciprocal Enforcements of Judgments Act, nothing in that Act can create or enable any right, claim or interest on behalf of a creditor or person which right, claim or interest would be avoided or defeated by the Trusts (Choice of Governing Law) Act.

Trustee Act, 1998

This Act gives trustees full powers of investment and of changing investments of individual beneficial owners, including investing through nominees, investing in or upon the security of property of any kind in any part of the world, whether or not yielding any income or involving any liability. These powers are exercisable in the discretion of the trustees and are in addition to those conferred by the trust instrument or by law.

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ENVIRONMENTAL LAW

Environmental law, and the responsibility for enforcement of national environmental policy, is fragmented between a number of Government Ministries and Departments, and includes the Attorney General’s Office. The matter is further complicated by the involvement of local government authorities in the Family Islands. At present, there is no single, comprehensive Act that embodies the bulk of environmental law for The Bahamas.

The Ministry of Health and Environment houses both the Department of Environmental Health Services (sold waste, landfills, discharges into the environment, clean-up orders and prosecution of Environmental offences) and the Bahamas Environment, Science & Technology Commission, which regulates environmental impact assessments.

Land Use Planning and Town Planning, as well as private roads and subdivision approvals are under the responsibility of the Ministry of Public Works and Utilities. This Ministry also is responsible for building control, septic tanks and wells, and has the Water & Sewerage Corporation within its portfolio.

The Ministry of Agriculture, Fisheries and Local Government controls agriculture and fisheries resources, but also has authority in land use planning for agriculture.

The Public Utilities Commission is charged with regulation of controlled public utilities.

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IMMIGRATION

Immigration matters in The Bahamas are governed by the Immigration Act. Applications for residence or work permits are made to the Director of Immigration. Holders of residence permits are not permitted to engage in any form of gainful occupation without first having obtained a work permit.

Applications for permanent residence are made to the Minister. Such applications are considered by the Board, a committee of Cabinet. Any person who is granted permanent residence may have endorsed on his certificate the name of his/her spouse and dependent child or children.

Residents of The Bahamas must make application to the Department of Immigration for permission to employ non-Bahamian staff. Staff may be daytime employees or resident on the property of their employer.

It is helpful to have a local representative, usually an attorney, make applications on Immigration matters to the Department of Immigration on behalf of the client.

For investors making application for approval of development projects in conjunction with the National Investment Policy, certain immigration provisions apply:

1. Work permits. Necessary work permits for key personnel will be granted. Businesses requiring permits for persons other than key personnel are encouraged to discuss such requirements with their local representative, or the Director of Immigration in advance.

2. International Owners of Second Homes: Overseas investors may acquire residential properties of up to 5 acres without prior Government approval. Such acquisitions are required to be registered in accordance with the International Persons Landholding Act. Second home owners are eligible for a Home Owners Residence Card, renewable annually. Annual residence cards facilitate entry into The Bahamas, and entitle the owner, his or her spouse and minor children, to enter and remain in The Bahamas for the duration of the validity of the card.

3. Annual or Permanent Residence: Accelerated consideration of applications for annual or permanent residence is given to major international investors and/or owners of residences valued at $500,000.00 or more.

For additional information on Immigration matters, please contact us: holoweskolawfirm@holowesko.com

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WILLS & ESTATES

The making of Wills and Administration of Estates is governed by several pieces of legislation, namely the

Administration of Estates Act, 2002

Perpetuities Act, 1995 (as amended in 2004)

Wills Act, 2002

Inheritance Act, 2002

These recent laws repealed and replaced previous legislation, and modernised the laws of The Bahamas relating to Wills and Estates.

The Administration of Estates Act, 2002 provides for the administration of a deceased person’s property, both real and personal. In the case of an interest in real estate to which a deceased person was entitled at the time of his death, such interest, notwithstanding any testamentary disposition, devolves on the personal representative of the deceased. The personal representative holds such estate, both real and personal, as trustee for the persons entitled to it. The rights and liabilities of administration, duties of personal representatives and duties regarding administration of assets are all set out in this Act.

The Perpetuities Act, 1995 modifies the law relating to the avoidance of future interests in property on grounds of remoteness. The recent amendment to the Act establishes the perpetuity period at 150 years.

The Wills Act, 2002 establishes the capacity for making wills and the formalities for execution. Subject to the Act, every person may by will executed in accordance with the Act dispose of all real estate and all personal estate owned by him at the time of his death.

The capacity of persons to make a will is set out in Section 4. Every person who is eighteen years or older, of sound disposing mind can execute a will. One should know the general nature and extent of his or her property and be clear about who the beneficiaries are to be and to what extent each beneficiary will inherit property.

The formalities for the execution of a will are set out in Section 5. The will must be in writing, signed by the testator, or someone must sign for him in his presence and by his direction. The signature must be at the foot or end of the will, and must be made or acknowledged in the presence of two witnesses present at the same time, who in turn sign, or acknowledge their own signature, in the presence of the testator.

A witness need not read or know the contents of the will. However it is recommended that the testator and at least one of the witnesses sign in the margin on each page of the will.

A testator who is not domiciled in The Bahamas, who wishes to dispose of property situate in The Bahamas, may declare in his will that the law of The Bahamas shall be the governing law of the disposition of such property in The Bahamas.

The Inheritance Act, 2002 provides for succession to the property of deceased persons, and in particular the testamentary disposition and distribution on intestacy of such property. It also makes financial provisions for the dependants of deceased persons. All existing modes, rules and canons of descent, and of devolution by special occupancy or otherwise, of real estate, or of personal estate, tenancy by the curtesy and dower are abolished by the Inheritance Act. Modern provisions for succession to real and personal estate on an intestacy are established.

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