More on International Business Companies in The Bahamas

INCORPORATION

A company (an “IBC” or “the company”) incorporated under the International Business Companies Act, 2000 (the “IBC Act”) may carry on business in The Bahamas or anywhere in the world. An IBC is not required to file an annual return, however, it is required to pay an annual fee which is based on the size of its authorized capital.

 SHARE CAPITAL

The IBC Act permits IBC’s to issue common shares, preference shares, redeemable shares or any combination thereof (subject to any limitation in its Memorandum or Articles).

An IBC may (subject to any limitation in its Memorandum or Articles) issue shares for money, services rendered, personal property (including other shares, debt obligations or other securities in the IBC), an estate in real property, a promissory note or any other binding obligation to contribute money or property or any combination thereof.

Where shares are issued with a par value, the consideration paid, to the extent of the par value, constitutes capital and any excess constitutes surplus. If there is no par value, the directors would determine what would constitute capital and surplus.

An IBC may (subject to any limitation in its Memorandum or Articles) increase or reduce its authorized capital by amending its Memorandum pursuant to a resolution of its directors. In this connection, the IBC may increase or reduce the number of shares which it may issue and/or increase or reduce the par value of any of its shares. An IBC may also increase its capital by transferring funds out of the surplus account into capital or reduce its capital by returning capital to surplus for the purpose of acquiring its own shares. The shares acquired may be held as treasury shares or cancelled, however if they are acquired out of capital they must be cancelled, and the amount of those shares is deducted from capital.

An IBC may not reduce its shares unless the directors determine that immediately after the reduction the company would be solvent, that is, it would be able to satisfy its liabilities as they become due in the ordinary course of its business and the realizable value of its assets will not be less than the sum of its total liabilities (other than deferred taxes).

Subject to any limitation in its Memorandum or Articles and the exceptions contained in section 32 of the IBC Act, an IBC may purchase, redeem or otherwise acquire and hold its own shares, provided it meets the solvency test above.

DIVIDENDS & DISTRIBUTIONS

The Directors of an IBC may, by resolution, declare and pay dividends in money, shares or other property, subject to a solvency test and its Memorandum and Articles of Association.

 MERGER, CONSOLIDATION AND DISPOSITON OF ASSETS

Pursuant to the IBC Act, two or more companies may merge or consolidate. On a merger or consolidation, members holding 90% of the votes of the outstanding shares or the outstanding shares of a class or series of shares entitled to vote, may give written instructions to a company directing the company to redeem the share held by the remaining members. The IBC Act further provides that an IBC may sell, transfer, lease, exchange or otherwise dispose of more than 50 per cent (by value) of its assets (if not made in the usual manner or regular course of its business). In order to effect such disposition of the assets, the directors must approve same and thereafter, submit the proposal to the members for their approval.

ACCOUNTING & AUDITING REQUIREMENTS

The IBC Act stipulates that an IBC shall keep such financial statements, accounts and records as the directors consider necessary or desirable in order to reflect the financial position of the company.

SHARE REGISTER

An IBC is required to keep a Share Register at its registered office but it is not required to file the same at the Companies Registry. The Share Register may be in such form as the directors may approve but if it is magnetic, electronic or other data storage form, the company must be able to produce legible evidence of its contents. Failure to keep a Share Register is an offence under the IBC Act, the penalty which, upon summary conviction, is a fine of $10,000.00 or 2 years’ imprisonment.

INSPECTION OF BOOKS & RECORDS

The IBC Act makes provision for a member of an IBC to inspect the Share Register, books, records, minutes and consents of such IBC in furtherance of a proper purpose.  A proper purpose is defined as a purpose reasonably related to the members interest as a member. The directors may, by resolution, refuse an inspection request if they determine that it is not in the best interest of the company to comply with the request.

SUBSIDIARIES OWNING SHARES IN PARENT

There is no express prohibition in the IBC Act with respect to a subsidiary acquiring and holding shares in a parent company.

LIQUIDATION

An IBC may be wound up voluntarily or by an order of the court. A liquidator is appointed whose duties are to identify the assets and the creditors of and claimants against the IBC and to pay or provide for payment of, or to discharge all claims, debts, liabilities and obligations of the IBC. Thereafter, the liquidator would distribute any surplus assets to the members in accordance with the Memorandum and Articles and prepare a statement of account of his actions and transactions.

INDEMNIFICATION

Subject to any limitations in its Memorandum or Articles or any unanimous shareholder agreement, an IBC may indemnify a director, an officer or a liquidator if he is or was a party or is threatened to be made a party to any threatened, pending or completed civil or administrative proceedings, provided such person acted honestly and in good faith with a view to the best interests of the company. An indemnity may also extend to any person who is or was, at the request of the company, serving as a director, officer or liquidator, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise.

STAMP DUTY ON TRANSFERS

The Stamp Act provides that where an IBC disposes of real estate or a resident business in The Bahamas (whether it owns the business or real estate wholly or in part), it will be subject to Government stamp tax.

Subject as hereinafter provided, an IBC and its members and shareholders are exempted under the IBC, for 20 years from the date of incorporation, from payment of any business licence fees, income tax, corporation tax, capital gains tax and any other tax on income or distributions. Further, no estate, inheritance, succession or gift tax, rate, duty, levy or other similar charge would be payable in The Bahamas with respect to any shares, debt, obligations or other securities of the IBC or shareholder.

The foregoing exemptions do not apply to a person who is a resident of The Bahamas within the meaning of the Exchange Control Regulations Act or to a company incorporated or continued under this Act if a resident of The Bahamas within the meaning of the Exchange Control Regulations Act and the regulations made thereunder is the beneficial or legal owner of any of the common or preferred shares issued or to be issued by such company or acquires a legal or beneficial interest in any debt or other securities issued or to be issued by such company or is otherwise directly or indirectly entitled to receive any dividends or distributions from such a company.

EXCHANGE CONTROL

The Exchange Control Regulation Act and the regulations made thereunder do not apply to an IBC the operations of which are conducted exclusively outside of The Bahamas. 

This post is for your information only and nothing in this post is intended to constitute a legal opinion.  If you require specific advice you should contact a Bahamian corporate attorney or a Bahamian corporate services provider.  You can contact a Bahamian corporate attorney or a Bahamian corporate services provider by clicking here.

Acquiring a Copyright in The Bahamas

WHAT IS COPYRIGHT?

Copyright is an exclusive right to print, copy, or distribute literary works to the public.

RIGHTS OF COPYRIGHT

Copyright confers on the owner economic rights, for example, the right to grant an exclusive licence to third parties of the rights of ownership such as reproduction, distribution, sale, rental, loan, display, and performance. 

Copyright also confers on the owner the moral right to be identified with the work by publication of his name in association with the work; and as well to disassociate his name from any derogatory treatment of the work, and to prevent its bastardisation or destruction.

“Derogatory treatment in relation to a work means any distortion, mutilation or other modification of that work which would be prejudicial to its author's reputation.” [Copyright (Amendment) Act, 2004]

WRITING REQUIREMENT

  - In order to be protected by copyright, a work must be reduced to written form.

  - Licences, consents, permissions, and waivers are required to be evidenced by writing.

RANGE OF WORKS

Copyright extends to literary works; musical works including any accompanying words; dramatic works including any accompanying music; artistic works; motion pictures and other audiovisual works; choreographic works; sound recordings; and including compilations and derivative works.

EXCEPTIONS

  - Copyright is available only to completed works and not for its components. Ideas, concepts, processes, principles, procedures, systems or matters similar in nature regardless of the form in which it is described, explained, illustrated or embodied in the work are not copyrightable.

FAIR DEALING

  -  fair dealing with a copyrighted work, including reproduction in copies or phonorecords by public libraries or otherwise for purposes such as research, private study, scholarship, teaching, parliamentary or judicial proceedings does not infringe copyright in protected work provided it contains a sufficient acknowledgement of the author of the work.

  -  usage of copyrighted work for the purpose of criticism, comment, parody or review or for the purpose of reporting current events constitutes fair dealing

  -   an essential component of fair dealing is proving sufficient acknowledgement of ownership

INCIDENTAL INCLUSION

  -  The incidental inclusion of protected work into a publication or programme does not constitute copyright infringement.

RESIDUAL RIGHTS

The benefits of copyright also include the right to prevent the distribution of copies of the work to the public; public display of the work; public performance of the work; reproduction or copying of the work.

COMMISSIONED WORKS

Where a work is commissioned or made under employment, the author of the work is deemed to be the person for whom the work is prepared or made, and as such owns all the rights and benefits of copyright. These include photographs and audiovisual works.

PIRACY

The infringement of copyright constitutes piracy, the penalties for which may range from a fine of $25,000.00 - $100,000.00 and/or a term of imprisonment of up to 4 years.

Infringement occurs when, for public use, a person, without permission or licence from the owner, makes commercial use of a copyrighted work.

The law affords the copyright owner a civil remedy in damages. This may include actual damages sustained together with the profits earned by the infringer, or in the alternative, an award of statutory damages to be determined by the Court where the infringement can be proved to have been wilfully committed. However copyright infringement by unlicensed possession, sale, or distribution of copyrighted material also constitutes a criminal offence punishable by fine or imprisonment.

DURATION OF PROTECTION

Copyright endures for the lifetime of the author plus 70 years, and in the case of joint authorship the protections ends 70 years after the death of the last surviving author. Where the author is anonymous or pseudonymous, the period of copyright is either 70 years from its first publication, or 100 years from its creation, whichever expires first.

Copyright is an enduring right which may not be taken away by any government or individual.

TRANSFER AND TRANSMISSION OF COPYRIGHT

The ownership of a copyright, being a right of property, may be transferred in its entirety by any means of conveyance, memorandum of transfer, or by operation of law, or by will, or pass as personal property by intestate succession.

Where an original unpublished work is left by Will, the bequest will be construed to include the copyright in the work, provided the testator was the owner of the copyright at the time of death.

NOTICE OF COPYRIGHT

A notice of copyright must contain the following constitutive elements:

1. the symbol ©, the word "Copyright", or the abbreviation "Copr."; or in the case of sound recordings the symbol;

2. the year of first publication of the work; and

3. the name or alternative recognised designation of the owner of the copyright

USE BY DEPARTMENT OF ARCHIVES

With limited exceptions, the owner of a copyright is required to deposit 2 copies of the work for use by the Department of Archives. Exceptions include valuable limited edition items, and works produced in minimal quantities.

PROCEDURE FOR COPYRIGHT REGISTRATION

1. Application on the prescribed form;

2. Examination by the Registrar (a) to determine that the material is copyrightable; and (b) for compliance with legal and formal requirements

3. Issue of a Certificate of Registration by Registrar under Seal

4. The effective date of a copyright registration is the day on which the application, fee, and deposit of two copies of the work are delivered to the Registrar.

WIPO

The Bahamas has been a member of the World Intellectual Property Organisation since 1977.

This Memorandum is for your information only and nothing contained in this Memorandum is intended to constitute a legal opinion. If you require any detailed advice please contact a Bahamian commercial attorney.  You can contact a Bahamian commercial attorney by clicking here.

Registration of a Trademark in The Bahamas

WHAT IS A TRADEMARK?

A Trademark is a distinctive sign, mark, or design such as a logo used in the branding of goods or services and is both visible and registrable.  It uniquely identifies a particular product or service in the trade or industry. Brand names like Coca~Cola ™, McDonalds ™, Apple ™, and Geico ™ famed by the irresistible gecko leave no question in anyone’s mind about the product or service being associated in each case.  Registered Trademarks are denoted by the symbol ™.

 WHAT MAY BE REGISTERED

Generally words, designs, symbols, or logos which are not currently registered as a Trademark in The Bahamas may be registered.  Registrable Marks (“Marks”) must bear at least one of the following properties:

 The name of the individual or business with which it is associated

 The applicant’s (or predecessor’s) signature

 An invented word(s)

 A distinctive mark

 It may not describe the character or quality of the goods

 It may not connote a geographical name

 It may not be a surname

 WHAT MAY NOT BE REGISTERED

• Current, registered Marks

• Offensive words, designs or marks

• Marks which are calculated to deceive

 REGISTRATION

In The Bahamas, Trademark registration is a multiple-part process:

1.   The Mark must be submitted for approval. An approved Mark means that the same Mark has not been previously registered or submitted for registration in The Bahamas. A Mark may be conditionally or unconditionally accepted.

2.   The accepted Mark may be filed for registration. An accepted Mark is first provisionally registered, and confirmed by a Certificate of Provisional Registration.

3.   The Mark is published by Gazette. This constitutes a public notice of the intent to register, and any objections may be received within a prescribed period.

4.   After the prescribed period, the Mark is granted final registration, retroactive to the date of registration. In other words, the date of application for registration constitutes the date of registration.

EFFECT OF REGISTRATION

Registration equips the applicant with an exclusive right to use the Mark in respect of the goods or services for which it is registered for the protected period.

DURATION OF PROTECTION

A registered Mark is protected for a period of 14 years from the date of registration, and the registration is renewable. If registration lapses, the Mark may enter the public domain.

EXTENT OF PROTECTION

Trademarks registered in The Bahamas are protected within the jurisdiction of The Bahamas only, and not worldwide.

COST

The costs of Trademark registrations include search fees, if required, registration fees, and legal fees.  Trademark registrations are relatively cost-efficient in The Bahamas.

This post is for your information only and nothing contained in this post is intended to constitute a legal opinion.  If you require any detailed advice you should contact a Bahamian commercial attorney.  You may contact a Bahamian commercial attorney by clicking here.

Incorporating a Non-Profit Company in The Bahamas

A non-profit company may be incorporated in The Bahamas under Sections 160 to 169 of the Companies Act, 1992 (as amended) (“the Act”) for social, cultural, charitable, and other non-pecuniary causes, as specified in Section 14 of the Act.

Section 170 of the Act defines a “non-profit company” as a company with no authorised share capital, which is carried on without pecuniary gain to its members.

As a company with no authorised share capital, the non-profit company may be incorporated as a company limited by guarantee, as an alternative to a trust structure.

By its very nature, as a company limited by guarantee, the non-profit company is not permitted to make distributions to its members, but can only make payments for charitable purposes, as the objects in its Memorandum of Association must specifically state.

Notwithstanding that fact, each member participates equally in the assets of the company, irrespective of any variation in subscriptions paid, unless contrary provisions exist in the Articles of Association.

Each first director becomes a member of the company upon the incorporation of a non-profit company. The directors of the non-profit company may also make the by-laws of the company. The minimum number of directors for a non-profit company is three (3) directors. There is no restriction on the number of members of a non-profit company, unless otherwise determined by the Articles of Association.

The Articles of Association of the company may provide for more than one class of membership, the designations and terms of which must be specifically stated. A person is permitted to be admitted to a non-profit company by resolution of the directors, subject to the provisions of the Articles of Association. Each member of a non-profit company may have one or more votes or no votes, depending upon the Articles of Association.

With regard to the transferability of membership in a non-profit company, the interest of a member may not be transferable, unless otherwise stated in the Articles of Association, and such membership will lapse and cease to exist upon the resignation or death of the member. However, the interest in the non-profit company may continue, notwithstanding the cessation of membership.

Section 178 (2) of the Act states that: “where the Articles do not provide for the distribution of its remaining property, the company, resolution the property of a non-profit company may, by resolution of directors, after payment of all debts and liabilities, distribute or dispose of the remaining property to any organisation in The Bahamas, the undertaking of which is charitable or beneficial to the community at large.”

The non-profit company is incorporated similar to that of domestic company with the requirement to reserve and confirm the availability of the name at the Companies Registry of the Registrar General’s Department for ninety (90) days, and prepare and submit the Memorandum and Articles of Association of the company (with its specific objects), in order to incorporate the company.

However, a draft copy of the Memorandum and Articles of Association of the non-profit company is required to be submitted to the Registrar General for review, before submission for incorporation of the company, in order to verify and confirm the objects and purpose of the company, in accordance with the provisions of the Act.

Once the Registrar General has confirmed that the objects of the non-profit company are for a charitable or non-pecuniary purpose, in conformity with Section 14 of the Act, the draft Memorandum and Articles of Association must be finalised, properly executed by the first directors, and re-submitted to the Companies Registry, for incorporation.

Stamp duty in the amount of dollars ($5.00) must be paid to the Public Treasury and an incorporation fee of $330.00 must be paid to the Companies Registry, on submission of the Memorandum and Articles of Association and incorporation of the non-profit company.  More information can be obtained from the Registrar General's website.

This post is for your information only and nothing in this post is intended to constitute a legal opinion.  If you require specific advice, you should contact a Bahamian corporate attorney or a Bahamian corporate services provider.  You may contact a Bahamian corporate attorney or a Bahamian corporate services provider by clicking here.

Fundamentals of Residential Leases

Because a lease is a contract obligating landlords and tenants for a set period of time and, a disposition of an interest in real property, the parties are urged to examine a lease closely before signing it.  If there is something you do not agree with you can always attempt to negotiate a change in terms even if the lease is on a pre-printed form.  If you are a tenant seeking a landlord concession get it in writing and initialed by the landlord. 

How Long Does the Lease Run?
A typical residential lease will span one year.  However, a month-to-month lease will provide a tenant and landlord more flexibility. 

What Limitations Does the Lease Contain?
Leases may contain provisions preventing activities and uses of the property.  Typical limitations include: 

• Limiting the number of people who can live on the premises
• Preventing the unit from being used as a home business
• Prohibiting pets
• Preventing sub-letting or assigning the lease
• Restricting illegal activities

What Will Happen at the End of the Lease?
The lease may indicate what type of notice a tenant must give the landlord before moving out.  The lease may indicate if proper notice is not given then the lease is automatically renewed.  The lease may also indicate what would happen if a tenant does not move out on time. 

What Will Happen if a Tenant Breaks the Lease?
A lease may contain a clause that requires the tenant to pay a fixed amount of money upon a breach of the lease.

What about Rent Payments?
Besides the agreed upon rate, a lease should contain information about when the payment is due, when it is considered late, what happens if it is paid late and what the penalty is. 

What other Provisions Should be Included?
Other lease provisions you should look for include: 

• How and when the security deposit is returned?
• Who is responsible for utilities?
• Who performs maintenance and repairs?
• Is there a lien on personal property for failure to pay rent or cause damage?
• How and when can a landlord enter the property?

Do I Need a Lawyer to Review My Lease?
You may want a Bahamian real estate lawyer to review a lease before you sign it.  An experienced Bahamian real estate lawyer can help you understand all the provisions of your lease and make sure there are no unfair or illegal clauses in it.  You may contact a Bahamian real estate lawyer by clicking here.

Licensing of Banks and Trust Companies in The Bahamas

The Bahamas is one of the world’s largest international financial centres, with progressive legislation and a cohesive regulatory structure. With convenient air travel, a highly-skilled workforce, modern infrastructure, and a politically sound government, The Bahamas has become the jurisdiction of choice for banking and financial services.

The jurisdiction’s commitment to maintaining a tax neutral platform, offering exemption from taxes on income, capital gains, profits, gifts, inheritance and estate, taxes, and common law and statutory recognition of confidentiality in customer relations contributes to its global success in banking and financial services. With an asset base in excess of $200 billion, The Bahamas’ banking centre is positioned among the top ten countries in the world, behind the United States, Switzerland, and the United Kingdom.

The international community has continued to affirm The Bahamas as a safe jurisdiction for the deposit of financial assets of both individuals and corporations.

Banks and trust companies in The Bahamas are supervised by The Central Bank of The Bahamas (“the Central Bank”), a responsive regulator which ensures the highest standards of operations and conduct in the financial services industry. The Bahamas has instituted Know-your-customer procedures and has passed a series of laws in relation to banks and in conformity with international concerns, including but not limited to legislation geared towards eradicating international financial crime e.g. the Financial Transactions Reporting Act, 2007 and the Proceeds of Crime Act, 2008.The private sector also has in place regulations to govern banks and trust companies. The Association of International Banks and Trust Companies of The Bahamas also governs itself and its operations by its code of conduct, which deters the use of financial operations for criminal activities and maintains confidentiality in banking and financial affairs.

Bank or Trust Company Defined

The Banks and Trust Companies Regulation Act, 2000 defines “banking business” as “the business of accepting deposits of money which may be withdrawn or repaid on demand or after a fixed period or after notice and employing those deposits in whole or in part by lending or otherwise investing them for the account and at the risk of the person accepting them.”

“Trust business” is defined as “the business of acting as trustee, executor or administrator.”

Who May Own a Bank or Trust Company in The Bahamas

Individuals may participate in the ownership of banks, but only with a minimum 25% participation from a Central Bank approved financial institution. The Central Bank also favours granting licenses to the branches and subsidiaries of established, reputable banks and trust companies originating from jurisdictions with similar regulatory controls in place. Parallel-owned banks, i.e. where a bank in one jurisdiction has the same or similar ownership as a bank in another jurisdiction and where one is not a subsidiary of the other, are not eligible to apply for licensing.

License Classifications

There are four classes of licenses issued by the Central Bank:

- Public License: A public bank and/or trust company is one which is permitted to carry on banking and/or trust business with members of the public.

- Restricted License: A restricted bank and/or trust company is one which is allowed to carry on business for certain specified persons which are usually named in the license.

- Nominee Trust License: A nominee trust license restricts the services that may be offered by a licensee to the provision of nominee services only. Nominee services include the holding of securities and other assets in the licensee’s name and the provision of corporate directors and officers on behalf of its parent company’s clients.

- Non-Active License: A non-active bank or trust company is one which is either in voluntary liquidation and requires monitoring of its winding up or one that is an approved dormant licensee.

Procedures and Documentation

Any person or company wishing to carry on banking or trust business is required to make an application to the Governor of the Central Bank for the grant of a license. The Central Bank licenses all banks and trust companies operating in and from within The Bahamas.

In the case of a bank or trust company making application for a license to operate a subsidiary, branch or representative office or in the case of a corporate applicant which is not a bank or trust company, the following information is required:

- name of the corporate applicant (if not a bank or trust company);

-address of head or parent office of the corporate applicant including mailing address;

- for a subsidiary bank or trust company, the corporate name;

- address of the proposed office in The Bahamas;

- scope of activities proposed;

- an outline of planned business activities in The Bahamas;

- where the applicant is a body corporate:

• History, activity, present structure and organization;

• Annual reports (including audited consolidated financial statements) of the corporate applicant or parent for the three consecutive financial years immediately preceding the date of application;

• Unaudited consolidated financial statements of the applicant or parent as at the end of the most recent quarter prior to submission of the application, certified by a director or senior officer.

In the case of individual applicants for a license to operate a bank or trust company, applications may be made as a group (so long as the group consists of more than five individuals), the following information is required:

- name of each individual making application;

- business and personal address of each individual applicant including mailing address;

- proposed corporate name of the bank or trust company;

- address of the proposed entity in The Bahamas;

- purpose of opening the bank or trust company;

- a description of planned business activities; and

- where the application is made by a group;

• date of formation, history, present structure and organization of the group applicant, and details of all business activities of the group;

• detailed comments regarding the position within the group, of any dominant member(s) of the group;

- a current statement of assets and liabilities, certified by public accountant and prepared no earlier than three months prior to the date of application for each member of the group who is to acquire, own, hold or exercise voting control of share capital in excess of 10% of the share in a proposed licensee or

- A concise net worth statement certified by a public accountant for each member of the group who is to acquire, own, hold or exercise voting control of share capital in a proposed licensee of 10% or less, and which statement indicates that the individual member’s net worth is at least five (5) times the value of the shares to which the individual member is subscribing.

Corporate and other applicants are also required to provide a host of other documentation to enable the Central Bank to assess the soundness of the applicant and the integrity of its members. The Central Bank has promulgated “General Information and Guidelines for License Applications” which sets out the procedures and documentation necessary for license applications (see specifically Part 2, page 7).

Timeframe

The typical timeframe for processing a license application is 2 months; however, the time frame is dependent upon the nature of the application.

This Memorandum is for your information only and nothing contained in this Memorandum is intended to constitute a legal opinion.  If you require specific advice you should contact a Bahamian commercial attorney. You can contact a Bahamian commercial attorney by clicking here.