This year, 1999 commemorates fifteen years since the launch of the Nevis' offshore financial services sector. In 1984, a year after gaining full political independence along with its sister island from Britain, the Nevis government identified the offshore financial services sector as a sector that could offer novel opportunities for economic diversification and economic growth of a small island state, like Nevis. It also recognized that the sector had the potential to generate foreign exchange earnings and make significant contributions to government revenues, with favourable spin-off effects on the overall gross domestic production. In recognition of these benefits, the government launched the offshore financial services industry with the enactment of The Nevis Business Corporation Ordinance, 1984 (NBCO), which is modeled in large part on the United States Delaware Corporation statutes. Today, Nevis currently has four attractive pieces of offshore legislations in place with the NBCO remaining one of the most popular vehicles for company formation.
Nevis is known for its stability, its financial integrity, well-planned modern legislation, the implementation of its protective regulations, and low cost efficient services. Nevis' conscientious and conservative approach has attracted thousands of companies, trusts, limited liability companies and contributed significantly to the economic development of the island. Today, Nevis is known in the international arena as a predominant trust and company jurisdiction in the world.
POLITICAL & ECONOMIC STATUS
The island is politically independent and has had a history of political stability. The major source of revenue on the island is tourism, followed by international financial services. Over the years, the island has experienced a stable economic development; minimal unemployment, one of the highest growth rates in gross national product and per capita income; a balanced budget; a manageable inflationary pace and an impressive current account surplus.
HISTORICAL DEVELOPMENT OF NEVIS' FINANCIAL SERVICES SECTOR
After establishment of the offshore sector, the government concentrated its efforts on company formation and on the development of its infrastrucure. Ten years later, in 1994, Nevis responded to the needs of lawyers and fiduciaries in the international arena with the enactment of the Nevis International Exempt Trust Ordinance, 1994. This initiative was undertaken as a direct result of the increased use of trusts in the international community to fuel and facilitate a wide range of activities. International Trusts formed under this Ordinance can be used in conjunction with a Nevis Business Corporation to create a powerful vehicle that can be used by both corporations and individuals alike.
More recently, in response to the needs of offshore professionals and to comply with United States Tax Laws, the Nevis Island Administration enacted the Nevis Limited Liability Company Ordinance, 1995. This legislation is known to be one of the most modern pieces of legislations found in all offshore centres for the establishment of limited liability companies used for estate and asset protection planning.
In 1996, to round out its legislation, the Nevis Offshore Banking Ordinance was enacted by the Nevis Island Administration. It was aimed at encouraging the development of Nevis as an offshore banking financial centre and to provide incentives by ways of tax reduction, exemptions and benefits for offshore banking carried on within Nevis.
In reaffirmation of its commitment to responding to the international community, Nevis is again seeking to ensure that the legislation remains progressive and avant-garde. As a result, plans are underway for the government to introduce partnership legislation. Additionally, with the aid of an internationally renowned expert, the government of Nevis is currently updating its Trust and Limited Liability Company laws. The Trust amendments will incorporate many of the provisions that experience has taught to be both useful and needed by the ultimate user and the LLC amendments will incorporate changes to conform the Ordinance to changes in U.S. regulations as they relate to LLCs.
Nevis has now developed into a mature international financial services jurisdiction that is serious about providing a wide range of onshore and offshore business opportunities at low cost for financial institutions and investors seeking ways to increase their opportunities in the ever-changing global marketplace.
THE NEWLY ESTABLISHED NEVIS FINANCIAL SERVICES DEPARTMENT
In recognition of the maturity of its international financial services sector, the Nevis Island administration recently replaced the Offshore Registry with the newly established Nevis Financial Services Department within the Ministry of Finance and appointed several new key personnel including a Director of international stature and a Superintendent of Offshore Banks and Trusts. This new department is charged with overseeing the offshore registry system; promoting the jurisdiction; regulating the offshore sector; and developing new strategies aimed at attracting new business to the jurisdiction.
COMMITMENT TO THE MAINTENANCE OF NEVIS' SUPERB REPUTATION
Nevis jealously guards its reputation and recognizes the need to be increasingly vigilant to maintain the island's high degree of respectability and protect its reputation. Consequently, Nevis has increased its commitment to performing extensive due diligence and other prudential examinations on all potential service providers as well as directors and major players of companies.
As a further commitment to maintaining the reputation of the jurisdiction, the government in collaboration with the service providers on the island has embarked on the establishment of a Service Providers Regulations Order. This Order will set forth required principles and ethical considerations, and institute standardized rules which must be adhered to by all service providers. Nevis firmly believes that with this increased level of vigilance within the provider community comes the attraction to Nevis of respectable Trust operators who are committed to continued growth and success of Nevis as a reputable Offshore Financial Centre, and the natural selection of reputable clients ultimately utilizing the island's financial resources.
FEATURES OF NEVIS' OFFSHORE LEGISLATION
The offshore legislation in Nevis possesses several important provisions that have been found to be attractive to investors in the international arena. Some of these features are delineated in the following paragraphs: The Nevis Business Corporation Ordinance, 1984 as amended (NBCO). A company formed under this Ordinance is similar to an International Business Corporation (IBC). There are no disclosure or reporting of ownership requirements; there are flexible provisions for share issuance, including bearer shares, shares of no par value; and no residency or nationality requirements for Directors, stockholders and principal officers.
In addition, offshore companies registered under this Ordinance need not file annual returns; may keep corporate records anywhere in the world and are not required to hold meetings in Nevis. Furthermore, the Ordinance facilitates streamlined transfer, amendment and dissolution provisions and facilitates the easy transfer of domicile of any foreign corporation to or from Nevis.
The Nevis International Exempt Trust Ordinance, 1994
To qualify as an international trust, the trust must meet the following criteria:
- At least one of the trustee must be either a trust company doing business in Nevis or a company incorporated under the NBCO; and
- The settler and beneficiaries must at all times be non-residents of Nevis; and the trust property must not include any land situated in Nevis or the sister island St. Kitts.
The Trust Ordinance provides for the creation of several types of trusts including charitable, spendthrift; and protective trusts. The Ordinance also includes special provisions tailored to make Nevis a preferred jurisdiction for the establishment of "Asset Protection Trusts" (APTs). In recent years, there has been an increase in demand for these types of vehicles especially in industrialized nations with increased frivolous litigation.
Under the Nevis International Exempt Trust Ordinance, the registration process is very simple and the trust can have the following features: it can be created with only one trustee; the trust deed is not required to be registered; the trust is exempt from all forms of taxation and exchange controls; the rules against perpetuities do not apply; the maximum duration of a Trust shall be 100 years; and forced heirship rules cannot invalidate the trust.
The Ordinance provides for the office of the protector of the trust. The protector may have a dual role as a settlor, a trustee or beneficiary of the trust. This provision gives an added protection feature in that the protector has a fiduciary duty to the beneficiaries of the trust or to the purpose for which the trust was created.
Subject to the provisions of the Trust Ordinance and to the terms of the trust, a trustee who commits or concurs in a breach of trust is liable for any loss or depreciation in value of the trust property resulting from the breach and any profit which would have accrued to the trust had there been no breach.
An important feature of the Ordinance relates to fraudulent dispositions. A creditor seeking to set aside a transfer to an International Trust is required to establish beyond reasonable doubt that the transfer constituted a fraudulent disposition. The Nevis Ordinance expressly states that a trust settled, established or disposed shall not be fraudulent as against a creditor or a settlor:
- if settlement, establishment or disposition to the trust takes place more than two years from the date the creditor's cause of action accrued, or
- if the settlement, establishment or disposition takes place before the expiration of two years from the date that the creditor's cause of action accrued, and that the creditor fails to commence such action before the expiration of one year from the date of settlement, establishment or disposition.
Any action to set aside settlement or disposition to an International Trust must be commenced in the High Court of Nevis within two years from the date the trust was settled or the disposition took place.
Furthermore, an EC$25,000 bond trust must be placed within the Ministry of Finance in Nevis before a creditor may commence an action or proceeding against trust property to secure the payment of costs.
Other features of the Nevis International Trust is that Trust assets and income deriving from the corpus of an international trust are exempt from all exchange controls and estate, corporate, gift, income, inheritance, withholding, succession and stamp taxes in Nevis.
Additionally, the trust deed or declaration of the trust itself is not required to be registered in the registry but remains a private document, which ensures confidentiality of the name of the settler and beneficiaries.
Nevis Limited Liability Company Ordinance, 1995.
The Nevis Limited Liability Company (LLC) Ordinance, 1995 permits planners to structure their Nevis LLC in any manner that suits their needs. Hence, if partnership tax treatment is desired, the Nevis LLC could be structured to lack continuity of life, free transferability, centralized management, and even limited liability. The Nevis LLC can be used as a structure to provide asset protection features similar to those of a trust without the limitation on control. It can also be used for any business venture or professional practice anywhere outside of Nevis. Structured appropriately, a Nevis LLC, either free standing or together with a Nevis trust could ensure reduced gift and estate taxes and stronger asset protection than is currently available with domestic business structures.
The owners of Nevis LLCs are referred to as members, and may be thought of in the same way as one think of partners in a partnership or shareholders in a corporation. Their precise nature depends on the nature of the LLCs management. As constructed, the statute provides maximum flexibility. The most important feature being the operating agreement, which defines the operation and rights among members. The statute provides a series of default rules that apply to the LLC unless the operating agreement fails to dictate otherwise. Whereas the statutes of the United States and other jurisdiction requires at least two members, the Nevis LLC may have a single member.
Additional features include the following: only the LLC is liable for its debts; no members, except those who have affirmatively guaranteed the LLCs debts, have liability for any company obligations; there are flexible ownership and management provisions and no return or reporting requirements.
A Nevis partnership may convert to a Nevis LLC by adopting a plan of conversion and then filing articles of organization. A foreign LLC could become a Nevis LLC by simply redomiciling to Nevis. Other foreign business entities, including partnerships and corporations, may convert to a Nevis LLC under an equally simple process.
The Nevis Offshore Banking Ordinance, 1996
The legislation provides that licenses are only granted to eligible companies of local banks incorporated under the Domestic Banking Act of 1983 or qualified foreign banks. A qualified foreign bank is defined as a bank with adequate capitalization and assets licensed to do domestic banking in its jurisdiction of incorporation or a financial institution that is directly or indirectly a wholly owned subsidiary of a foreign bank. Once an application is made and all the required stipulations have been met, a license is issued to the successful applicant upon the payment of a licensing fee of EC$15,000.
Other Attractive Features
Exemption from Taxes
Offshore companies, limited partnerships and trusts are exempt from income; social security; capital gains; with-holding; gift; estate and succession taxes. Furthermore, under the Fiscal Incentives Act of 1985, several enterprises qualify for tax holidays, such as concessions and exemption from import duties on parts, raw materials and production machinery.
Secrecy of Information
Secrecy of Information is protected by the Confidential Relationships Act of 1985 of St. Kitts and Nevis. This Act prohibits the disclosure of any information obtained in the course of business, and applies to banks and professionals as well as Government officials.
Support Services
Nevis has a wide array of professionals, such as lawyers, accountants, bankers as well as asset management companies on the island to attend to all of your financial needs. The staff of the Nevis Financial Services Department are committed to their watchwords of quality, integrity, efficiency and confidentiality. The department's registry prides itself on same-day company formation, expeditious document issuance and filing procedures.
CONCLUSION
Nevis has always maintained itself as a reputable jurisdiction, committed to facilitating legitimate international financial activity in an efficient and effective manner at low cost. With legislation that is innovative, progressive and user friendly, Nevis is well positioned to continue well into the new millenium as a premier contender among offshore jurisdictions for trust and company formation in the world.
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.
This article also appears in the 'International Offshore and Financial Centres Handbook 1999/2000'. For further information about this highly informative guide to offshore centres, or to order your copy, please phone +44 (0) 207 820 7733 or send an email to iofch@mondaq.com
