Bahamas: A Guide To International Business Companies In The Bahamas

This information contains a summary of the principal provisions of the International Business Companies Act.

• Introduction
• Requirements of an IBC
• Objects and Powers of an IBC
• Memorandum and Articles
• Share Capital
• Protection of Shareholders
• Registered Office and Agent
• Directors, Officers and Agents
• Mergers, Consolidations and Arrangements
• Continuation
• Winding up, Dissolution and Striking Off
• Registration, Licence and Other Fees

The International Business Companies Act ("the Act") received Assent on 11th January, 1990 and provides for the incorporation, registration and operation of International Business Companies ("IBC's"). A company may be incorporated or registered as an IBC provided it satisfies certain criteria, the substance of which is to establish 'non- resident' status.

IBC's are a modern form of corporate vehicle having certain advantages not previously available to companies incorporated in The Bahamas. Legislation has been in existence in other jurisdictions such as the Cayman Islands and British Virgin Islands to provide for the incorporation and administration of IBC's and the Act is therefore an important item of legislation in order for The Bahamas to maintain its position as a competitive offshore financial centre.

The information in this article outlines some of the principal provisions of the Act, some of which include:-

• an exemption from the Exchange Control Regulation Act,
• an exemption for both the company and its shareholders from any taxes arising from any transaction to which the company or shareholder is a party,
• an exemption from Stamp Duty in respect of all transactions involving transfers of property to or by an IBC, and also in respect of shares, debt obligations and other securities and transactions of an IBC,
• an exemption from income taxes, stamp duties and death duties by estates of deceased shareholders for a period of 20 years from registration,
• an exemption from public or government reporting requirements. The names of directors, officers, attorneys-in-fact and shareholders are not registered,
• provision for meetings of directors and shareholders to be held by telephone or by any other electronic means either within or outside The Bahamas,
• a relatively swift and simple incorporation procedure taking one or two days,
• a lack of any special share capital requirements,
• special powers to protect the interests of the company, its creditors and share-holders; and,
• an ability to change domicile to another jurisdiction by registering and continuing in that jurisdiction.

The effect of the legislation is to make provision for the administration of corporate entities which reflects a modern business environment and the regulations therefore give greater flexibility to IBC's than is normally given to companies incorporated under more traditional legislation.

An IBC must be incorporated with a name which includes the word "Limited", "Corporation", "Incorporated", "Societe Anonyme", "Sociedad Anonima" or a given abbreviation thereof. There are a small number of other regulations which govern the choice of name. A number of words such as "Bank" or "Trust" are specifically prohibited.

Request may be made to the Registrar for a name to be reserved for future adoption by a company (for a period of 90 days).

A company may be incorporated under the Act by two or more subscribers to a Memorandum of Association. Any company may be incorporated as an IBC unless:-

• it carries on business with persons resident in The Bahamas (see below),
• it owns an interest in, or a lease of, real estate situated in The Bahamas (unless a lease of office space),
• it carries on banking or trust business,
• it carries on insurance or reinsurance business,
• it carries on the business of providing the registered office for companies.

A person resident in The Bahamas is defined as "a person who ordinarily resides in The Bahamas or carries on business from an office or other fixed place of business within The Bahamas " but does not include a company incorporated under the Act. An amendment to the legislation effective from December 30, 1992 prohibits any shares in an IBC from being beneficially owned by persons resident in The Bahamas.

Certain actions will not be construed as carrying on business with persons resident in The Bahamas. An IBC will not be treated as carrying on such business by reason only that:-

• it makes or maintains deposits with persons carrying on business in The Bahamas,
• it makes or maintains professional contact with counsel and attorneys, accountants, bookkeepers, trust companies, management companies, investment advisers or other similar persons carrying on business in The Bahamas,
• it prepares or maintains books and records within The Bahamas,
• it holds meetings of its directors and/or shareholders in The Bahamas,
• it holds a lease or property for use as an office,
• it holds shares, debt obligations or other securities either in another IBC or in a company incorporated under the Companies Act; or,
• shares, debt obligations or other securities in the IBC are owned by any person resident in The Bahamas, by another IBC or by a company incorporated under the Companies Act.

An IBC may be incorporated for any object or purpose provided that it is not prohibited by the Act or by any other law for the time being in force in The Bahamas. An IBC has full power to perform all acts in the furtherance of its objects subject only to specific limitations which may be imposed by its Memorandum and Articles. Thus an IBC incorporated with the purpose of pursuing any activity not prohibited by the Act or by Bahamian law will have virtually unlimited objects.

Specifically, an IBC may issue a variety of shares including convertible securities, voting and non-voting shares, shares carrying more or less than one vote per share, no par value shares, bearer shares, common, preferred or redeemable shares and unnumbered shares. An IBC may also purchase, redeem or otherwise acquire and hold its own shares.

The Act contains several provisions to allow the directors to protect the assets of the IBC, including the power to transfer the assets of the IBC in trust to one or more trustees either within or outside The Bahamas.

An IBC's Memorandum of Association must contain the following particulars:-

• the name of the company,
• the address within The Bahamas of the registered office of the company,
• the name and address within The Bahamas of the registered agent of the company,
• the objects or purposes for which the company was incorporated,
• the currency in which shares of the company shall be issued,
• a statement of the authorised capital of the company detailing the aggregate of the par value of the shares that the company is authorised to issue and the amount, if any, that is to be represented by shares without par value that the company is authorised to issue,
• a statement of the number of classes and series of shares together with the number of shares of each such class and series. The par value of shares with par value should also be given along with a statement that the shares may be without par value if this is the case,
• a statement of the rights and powers attaching to each class and series of shares that the company is allowed to issue,
• a statement of the number of shares to be issued as registered shares and as shares issued to bearer,
• whether registered shares may be exchanged for bearer shares or vice versa; and,
• if bearer shares are authorised, the manner in which a required notice to members is to be given to the holders of bearer shares.

The Memorandum (and Articles) must be registered with the Registrar of International Business Companies before a certificate of incorporation can be issued.

The Memorandum and Articles may be changed subsequently upon notification to the Registrar and upon payment of the appropriate fee.

The Act makes certain general provisions, which may be amended by the Memorandum and Articles.

• Shares may be issued for consideration which includes money, services rendered, personal property, an estate in real property, promissory notes or other binding obligations to contribute money or property.
• Shares may be issued for such amount as the directors determine to be appropriate with the condition that shares of par value may not be issued for an amount which is less than par value.
• The directors may dispose of treasury shares or unissued shares on such terms and conditions as they may determine.
• An IBC may issue fractions of a share.
• An IBC may purchase, redeem or otherwise acquire and hold its own shares (but only out of surplus or in exchange for newly issued shares of equal value).

An IBC may amend its Memorandum and Articles or increase or reduce its authorised share capital by directors resolution. Such resolutions will be effective upon notification in writing to the Registrar and upon payment of the appropriate fee.

An IBC must state in its Articles whether or not share certificates are to be issued. Where share certificates are to be issued, they must bear the signatures of two directors or officers of the company as well as the company's common seal. These may be facsimiles if authorised by the company's Articles.

An IBC must maintain one or more share registers which are to be kept at the company's registered office. Specifically, where bearer shares are issued, the share register(s) must contain information showing:-

• The identifying number of the certificate(s),
• the number of each class or shares issued and
• the date of issue of the certificate(s).

Where a governmental authority in any jurisdiction outside The Bahamas takes or seizes any shares or other interest in an IBC incorporated under the Act, the company itself or any other person holding shares or other interest in the IBC may apply to the court for the company to disregard such seizure. This would apply in cases of nationalisation, expropriation, confiscation, coercion, force or duress and also in cases connected with the imposition of confiscatory taxes, assessments or other governmental charges.

An IBC must have a registered office and a registered agent in The Bahamas at all times. An amendment to the Act effective December 30, 1992 provides that no person may act as registered agent unless:-

• he is a counsel and attorney in actual practice;
• he is a public accountant registered and licenced under the Public Accountants Act; or
• it is a bank or trust company licenced under the Banks and Trust Companies Regulation Act.

An IBC must maintain registers of the directors and officers at the registered office. The books, records and minutes of the company must also be kept at the registered office unless otherwise authorised either by the company’s Articles or by a resolution of the directors filed with the Registrar. Where the books, records and minutes are kept at a location other than the registered office, the address of this location must be notified to the Registrar by the directors or the registered agent.

The Board of Directors of an IBC may comprise one or more persons who may be individuals or companies. There is no formal re-election procedure and the office of director will be held for a period determined by the Memorandum and Articles or by the members. The number of directors must be fixed by the Memorandum or Articles.

The directors have all the powers of the company which are not reserved to the members or in the Memorandum and Articles and may appoint any person to be an agent or officer of the company.

Directors meetings may be held either within or outside The Bahamas at such times as the directors deem necessary or desirable. Directors meetings may also be held by telephone.

A director may appoint an alternate (who need not be a director) to attend, vote or otherwise consent in the place of the director.

The Act contains specific provisions with respect to mergers, consolidations or other arrangements involving an IBC and companies incorporated either under the Companies Act or the IBC Act. Reference should be made to the legislation for further information.

A company incorporated either under the Companies Act or under the laws of a jurisdiction outside The Bahamas may continue as a company incorporated as an IBC provided it satisfies the prescribed requirements outlined earlier. Such a company must provide articles of continuation written in English (or accompanied by a certified translation) approved either by a majority of the directors or by other persons charged with exercising the powers of the company or in such other manner as may be established by the company for the exercise of its powers.

The articles of continuation must contain:-

• the name of the company and the name under which it is to be continued,
• the jurisdiction of the country under which it was incorporated,
• the date on which it was incorporated,
• the information required to be included in a Memorandum under the Act and
• any amendments to its Memorandum or Articles, or their equivalent, that are to be effective upon the registration of the articles of continuation.

The company must also provide articles of continuation to the Registrar for registration together with a copy of the Memorandum and Articles (or their equivalent) written in English (or accompanied by a certified translation). In the case of a foreign company, evidence must be provided to the Registrar's satisfaction that the company is in good standing.

Provisional registration is possible whereby the required documents are provided to the Registrar together with written authorisation designating one or more persons who may give notice for the articles of continuation to become effective. Where such notice is not given within one year of the submission of the documents to the Registrar, the articles of continuation will be rescinded.

Continuation under the Act will not serve to release the company or its officers, members or agents from any existing conviction, judgement, ruling, order, claim, debt, liability or obligation due or to become due. Neither will continuation serve to abate or

discontinue any civil or criminal proceedings against the company, its members, officers or agents which were pending at the time of issue of the certificate of continuation.

Subject to any limitations in its Memorandum and Articles, an IBC may, by directors or members resolution, continue as a company incorporated under the laws of a jurisdiction outside The Bahamas in the manner provided under those laws.

The Act contains numerous provisions with respect to the winding up, dissolution and striking off of companies incorporated under the Act. The various procedures to be applied are laid down in the Act together with the powers and duties of liquidators and directors. Reference should be made to the legislation for specific requirements applicable to each case.

A significant feature of an IBC is the relatively low cost of registration and administration compared to other corporate vehicles. The following tables outline the fee scales which were approved as part of the Act.

Registration fees are payable upon registration as follows:-

Authorised capital of $5,000 or less. Fee - $250

Authorised capital does not exceed $50,000 and is represented by shares which have a par value. Fee - $250

Authorised capital does not exceed $50,000 some or all of which is represented by shares of no par value. Fee - $350

Where the company has no authorised capital and all of its shares have no par value. Fee - $350

Authorised capital in excess of $50,000. Fee - $1,000

Annual licence fees are payable for companies included on the Register of IBCs at December 31 in any year. Fees are payable on or before July 31 of the following year.

Where the authorised capital does not exceed $5,000. Fee - $250

Where the authorised capital does not exceed $50,000 and the company's shares have a par value. Fee - $250

Where the authorised capital does not exceed $50,000 and some or all of the company's shares have no par value. Fee - $350

Where there is no authorised share capital and all of the company's shares have no par value. Fee - $350

Where the authorised capital exceeds $50,000. Fee - $1,000

• Failure to pay the licence fee by the due date will attract a penalty equal to 10% of the amount due.
• Failure to pay the licence fee together with the penalty supplement by October 31 will serve to increase the penalty to an amount equal to 50% of the original licence fee due.

The information contained in this article is of a general nature and it is not intended to be an exhaustive reference guide. Prior to acting on any of the information contained herein, proper professional advice should be sought.