This memorandum deals with the incorporation of a company in The Bahamas under the Companies Act, Chapter 279 : -

NAME

The first matter to attend to is the reservation of a name with the Registrar General for the purpose of obviating any similarity in name to that of an existing company. We would suggest that a choice of at least three (3) names be given in order of preference. There are certain restrictions on the use of names which suggest patronage of the Royal Family or that the company is a bank or insurance company.

EXCHANGE CONTROL

[This section is relevant only in cases involving Non-Bahamian participation]

No company can be incorporated in The Bahamas having non-Bahamian participation without the prior approval of the Exchange Control Department of The Central Bank of The Bahamas. The purpose of that department is to monitor the flow (especially outflow) of foreign currency.

In applying to this authority for approval, a brief outline of the purpose(s) for which the company is being formed must be stated, together with the name(s) of the beneficial owner(s) of the shares (if more than one, the ratio of their respective holdings), their nationality, business or residential address and the Authorized Capital of the proposed company. This information is not available for public inspection.

Under the Exchange Control Regulations, a company may be designated as either a "Resident" or a "Non-resident" company. A company with Resident status can engage in actual business enterprises within The Bahamas and can borrow or deal in Bahamian currency (i.e. operate Bah$ bank accounts) and securities. Such status is required where the proposed company intends to actively engage in business and /or hold real estate in The Bahamas. Resident companies need specific Exchange Control approval to maintain bank accounts in other than Bahamian currency.

It is assumed that the investment of non-Bahamian shareholders will be paid for in foreign currency and that investment in a Resident company is registered with the Exchange Control department as an "approved" investment. Evidence will be required of the conversion of the foreign currency into Bahamian currency by lodgment with a bank locally. Dividends and other earnings, and return of capital are then, on application, reconvertible to foreign currency for repatriation.

On the other hand, a company with Non-resident status must be owned entirely by non-residents of The Bahamas and all issued shares paid for with non-Bahamian currency. It cannot deal in Bahamian currency or assets, other than the maintenance of an administrative office in The Bahamas.

SHAREHOLDERS, OFFICERS & DIRECTORS

A Bahamian company must at all times have at least five (5) shareholders (corporate or individual), who need not be Bahamian nationals or resident here. Similarly, there is no restriction as to nationality or residence with regard to officers and/or directors of the company.

For the purpose of incorporation, nominee shareholders from our staff are usually named who can either transfer their individual shares subsequently to the Beneficial Owner(s), or to other nominees, or can continue to hold the shares indefinitely at the discretion of the Owner(s), where for matters of privacy or convenience this is preferred. In such circumstances, the annual statutory returns to the Registrar General as well as the company's Register of Members will list only the names of persons in whose names the shares have been issued.

Nominee shareholders endorse the Share Certificates issued in their name "in blank" to facilitate transfer and also sign Declarations of Trust in favour of the Beneficial Owner(s). The Declarations acknowledge the actual owner of the shares and binds the nominee to vote and otherwise deal with the shares represented by the Certificates issued in the nominee's name, in accordance with the instructions and directions of the Beneficial Owner. The Declarations are not registered nor are they a matter of public record. We do not charge for providing nominee shareholders from our staff.

The names, addresses and occupations of the intended officers and directors of the company should be provided with the instructions to incorporate the company. A minimum of two directors are required. A company need only have a President and Secretary as these are the officers who ordinarily execute documents on its behalf. Normally there are the usual four officers, and we recommend that a member of our staff be appointed Assistant Secretary (for which there is no charge) as a convenience in signing and filing the various statutory returns and reports as well as other routine documents.

We do not normally provide directors, however, should we agree to do so our usual fee is $500.00 per annum, per director.

OBJECTS & PRIMARY PURPOSES

[Memorandum of Association]

As might be expected, the constitution of a company is set out in its Memorandum of Association. This document describes, apart from the statutory requirements, the raison d'être for the company, the purpose(s) for which it has been incorporated, e.g. land holding, general investment, etc. Since a company will be prevented from doing anything not contemplated by its Memorandum of Association (e.g. a land holding company might be prevented from operating a commercial shipping fleet), we normally draft the Memorandum of Association in the widest possible terms. Nevertheless, it is necessary that we be informed of the principal objects of the proposed company which must be stated among the first paragraphs of the "objects clause". Additionally, we should be informed of any special or ancillary objects or powers for inclusion in the Memorandum.

BYE-LAWS

[Articles of Association]

Rules for the internal management of the company are embodied in its Articles of Association. Standard form Articles are employed in most cases, but if there are to be any special provisions (e.g. special voting rights or procedures or more than one class of shares) we should be advised so that the necessary drafting can be undertaken.

CAPITAL & SHARE STRUCTURE

Save for specific types of companies (e.g. insurance and banking) there are no minimum capitalization requirements for Bahamian companies. However, in light of the method of calculating the stamp duty payable to the Public Treasury on incorporation, most companies choose to have an authorized share capital of $5,000.00, being the largest amount of authorized capital that still attracts only the minimum stamp duty rate. The authorized capital can be increased at any time by resolution of the shareholders and upon payment of additional stamp duty. It should be noted that the company's capital may not be reduced except with the confirmation of our Supreme Court.

A Bahamian company is unable to purchase or redeem its own shares unless such shares have been issued as redeemable and then only if either an appropriate reserve fund is set up or the redemption is effected by the issue, and out of capital raised by the sale of new shares. As the share structure is specified in both the Articles and Memorandum of Association, any special requirements must be advised prior to incorporation. Finally, because of Exchange Control requirements, shares cannot be issued in "bearer" form, nor may "no par value" shares be created.

FEES & EXPENSES

Our minimum fee for incorporating a Bahamian company is $800.00. This includes drawing the Memorandum and Articles of Association, the holding of the first meeting of the incorporators to appoint the officers and directors (who are elected annually thereafter), initial issuing of share certificates and (if applicable) the initial application to the Exchange Control Department referred to above.

The expenses incurred for incorporation amount to approximately $800.00, covering filing fees payable to the Registrar General's Department, stamp duties payable to the Public Treasury (based on an authorized share capital of $5,000.00), the cost of a Common Seal, Share Certificate Book, the publication of Registered Office notices and other incidentals.

Stamp duties are based on the Authorized (not the Issued) Capital and are calculated on a sliding scale ($60.00 on the first $5,000.00 and $3.00 per $1,000.00 in excess of $5,000.00). Unless a greater Authorized Capital is required, or thought desirable, we would suggest a capital of $5,000.00.

The company must at all times have a Registered Office within The Bahamas at which legal processes may be served and where the statutory records must be kept. If the company's Registered Office is located in our Chambers and we maintain the statutory Registers and prepare and file the annual returns to the Registrar General, we charge a minimum annual retainer of $550.00, adjusted upwards to reflect increased work or responsibilities. Naturally, the annual retainer fee does not include special services such as conveyancing, leases, etc., nor the holding of Directors' or Shareholders' meetings other than the routine Annual General Meeting.

The Bahamas Government charges an annual corporate registration fee payable on the first day of each year. If the company is 60% (or more) beneficially owned by Bahamian citizens, then the fee is B$300.00 per annum, otherwise the fee is B$1,000.00 per annum. A Declaration must be filed annually stating the percentage of Bahamian beneficial ownership. If a company is incorporated prior to the 1st July in any year, then the payment of the corporate fee is deferred to the following January. If it is incorporated on or subsequent to the 1st July, then the corporate fee is not payable until the second January following incorporation.

If the proposed company will not be carrying on business with persons resident in The Bahamas, or owning or leasing real estate in The Bahamas (other than its own office), or carrying on trust or insurance business, enquire about the formation of a company under the International Business Companies Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.