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INTERNATIONAL BUSINESS COMPANY (IBC) RESTORATION IN THE BAHAMAS

http://www.lexjustis.com/2015/11/international-business-company-ibc-restoration-in-the-bahamas/

The Bahamas has always been an attractive destination for offshore investment for the lovers of sun, sand, and sea since the days of Henry M. Flagler, a railway and shipping tycoon who became the country’s first major investor in the local tourism industry in 1898, having opened the Hotel Colonial in Fort Nassau and steamship business which transported both tourist and freight from Nassau to Florida. The budding tourism industry in the Bahamas were soon accompanied by the introduction of the nation’s financial service industry by renown financial institutions such as the Royal Bank of Canada who expanded its operations to the Bahamas in or around the year 1900. As the world became to know the Bahamas as an ideal destination for vacations and tax free wealth management, the country began to attract high net worth individuals who made the Bahamas their home, as the world’s distinguished and well-known names such as Sir Thomas Sean Connery and Sir John Templeton took residence in wealthy subdivisions of the capital while many of the world’s rich and famous made the water ways and isolated beaches of the archipelago’s cays their playground.

As the Bahamas’ financial service industry continued to develop, a new corporate entity known as the International Business Company (also known by the acronym ‘IBC’) was introduced to the Bahamas by the passage of the International Business Companies Act 1989, tailored aspiringly after the British Virgin Islands’ IBC legislation which had proven wildly successful in the BVI jurisdiction as hundreds of thousands of nonresidents were able to incorporate offshore companies expeditiously and without the bureaucratic confines of their homeland governments. This success followed the Bahamas soon after the 1989 Act was implemented as the country’s reputation of catering solely to high net worth individuals were soon overshadowed by the average income clientele who incorporated IBCs as a means to hold their savings confidentially and without being subjected to the tax regimes of their respective homelands. Clients were not only guaranteed incorporation of their IBCs within days, but also strict confidence regarding the identity of the IBC’s beneficial owner.  As long as IBC complied with the provisions of the IBC Act and pays its annual government fees on time, IBCs were free to conduct business worldwide with little government intervention. It is believed that when the IBC Act was introduced in 1989, some 8,000 IBCs were incorporated in 1990 alone which exploded into some 53,000 company formation following that period.

Historical Conundrum

According to the International Business Companies Act of 1989 if an IBC had failed to comply with the provisions of the IBC Act or had failed to pay its licensing fees, the Registrar had the power to strike out the IBC from the Register of Companies pursuant to s.97(4) and s.97(6) respectively. However, once the IBC was struck off certain persons were allowed to apply to the Supreme Court to have the IBC restored to the Company Register if the IBC were struck off for failing to comply with the provisions of the Act pursuant to s.97 (4) and could apply to the Registrar to restore the IBC if it were struck off for failing to pay its annual fees under s.98 (3). Such stipulations lasted until a decade later when the IBC Act 1989 was repealed by the International Business Companies Act 2000 however since coming into force the 2000 Act came with its own legislative dilemma, proving problematic as the new Act seemed to have limited the power of its own regulatory bodies to restore IBCs to the Register of Companies.

 In contrast with the 1989 Act, the sections 166(2) and 163(3) of the 2000 Act allowed the Court and the Registrar to restore an IBC who was struck off for non-compliance with the prescribed conditions, however the 2000 Act held no expressed authority for the Registrar to restore an IBC if it were struck off for non –payment of fees. IBCs soon discovered that the 2000 Act held no provisions for IBC who were struck off the Company Register for non – payment of fees to apply to the Supreme Court for restoration as s.167 of the 2000 Act had established that “….Where the name of a company has been struck-off the Register, the company and the director, members, liquidators and receivers thereof, may not legally commence legal proceedings, carry on any business or in any way deal with the assets of the company.” Such a circumstance was found in the matter of The Tenesheles Trust and others v. BDO MANN JUDD and others [2009] 2 BHS J No. 17 where Justice Adderley held that “since the repeal of the 1989 IBC Act the Registrar ceased to have the power to restore a company that had been struck-off the Register for non payment of prescribed fees and any such purported restorations by him are null and void”, as he determined that section  167(2) was simply an enabling section and did not contain language which permitted the Court to find that Parliament gave jurisdiction to the Registrar which was wider than the jurisdiction given under section 166 of the Act.

 

Similarly in the matter of Arcadian Development Corporation Limited v. The Registrar General – [2010] 2 BHS J No. 1 where theApplicant argued that ‘an application’ in section 167(2) must mean an application to the Court, and therefore the Court must have the power to consider and accede to the application, Chief Justice Sir Michael Barnett however, did not agree with the submission and dismissed the application, stating that the 2000 IBC Act did not provide the Registrar nor the Court with the ability to restore IBCs that were struck off for non – payment of fees. The Chief Justice stated further that “…Like Adderley J, I sought to determine whether with the aid of established principles of statutory interpretation I could imply a power vested in the courts to restore a company to the Register which was struck off for non-payment of fees. I regret that I could find no such power. It is not for the Court to correct this oversight. It must be left to Parliament. A simple amendment to section 166 of the Act to include a reference to section 176 would cure this mistake. Counsel for the Company argued that there was an inherent jurisdiction vested in the Court to restore such a company which was struck off for non-payment of fees. A company is a creature of statute. All powers relating to its incorporation, registration and dissolution are created by statute. There is no inherent jurisdiction in the Court which gives it powers in relation to such matters.” Further, the Chief Justice stated obiter that a simple amendment to section 166 of the 2000 Act to include a reference to section 176 would cure this mistake.

As a result of the judicial ruling Parliament sought to remedy the deficiencies of the 2000 IBC Act, which resulted in the passage of the International Business Companies Act 2010, having amended sections 165, 169 and 176 and repeals and replaces section 166 of the 2000 Act.  Section 2 of the 2010 IBC Act amends s.165 of the previous 2000 Act and provides a particular course of action by the Registrar in which he is required to publish in the Gazette and serve a notice on an IBC that has failed to pay the increased licensing fees under s.176 (3) stating the amount of the license fee payable, and that the company will be struck off the register if it fails to pay the said fees on or before the 31st of December next ensuing. If an IBC failed to pay the increased license fees stated in the notice referred to in subsection (3A) by the 31st day of December, the Registrar shall strike the name of the company off the register from the 1st day of January next ensuing. Section 2 is not retroactive and the Registrar is required to publish and serve the said notice within 30 days following the date specified in the s.176 (3).

Section 3 of the 2010 IBC Act is considered retroactive by virtue of s.1(2) of the Act to the 29th of December 2000 when the 2000 Act came into force, repeals s.166 of the 2000 IBC Act and replaced this section with provisions similar to  the original 1989 Act which provide for restoration of an IBC which was struck off the company register for failing to meet prescribed conditions under section 165(2) of the 2000 Act, or for nonpayment of fees under section 176. The 2010 Act also provided for the ability of either the IBC or its members, creditors, or liquidators to apply for restoration to the Supreme Court to be restored to the company register after the expiration of 5 years. Section 3 provides that:

“3. Repeal and replacement of section 166 of the principal

“166. Restoration to Registrar.

(1) If the name of a company has been struck off the registrar under Section 165(2), the company, or a creditor, member or liquidator thereof, may within five years immediately following the date of the striking off, apply to the Registrar to have the name of the company restored to the Register.

(2) If upon an application under subsection (1) the Registrar is satisfied that it would be fair and reasonable for the name of the company to be restored to the Register, the Registrar shall restore the name of the company to the Register and upon restoration of the name of the company to the Register, the name of the company shall be deemed never to have been struck off the Register.

(3) If the name of the company has been struck off the Register under section 165(3B), the company, or a creditor, member or liquidator thereof, may within five years immediately following the date of the striking off, apply to the Registrar to have the name of the company restored to the Register, and upon payment to the Registrar of -(a) the restoration fee specified in the First Schedule; (b) the licence fee stated in the notice referred to in section 165(3A); and (c) the licence fee in the amount stated in the notice referred to in paragraph (b) for each year or part thereof during which the name of the company remained struck off the Register, The Registrar shall restore the name of the company to the Register and upon restoration of the name of the company to the Register, the name of the company shall be deemed never to have been struck off the Register.

(4) If the period of five years under subsection (1) or (3) has expired, the company or creditor, member or liquidator thereof, may apply to the Court to have the name of the company restored to the Register.

 (5) Where the company, or a creditor, member or liquidator thereof applies to the Court pursuant to subsection (4), to have the name of the company restored to the Register, the Court shall order the name of the company to be restored to the Register (a) where the company has been struck off the Register under section 165(2), if it is satisfied that it would be fair and reasonable for the name of the company to be restored to the Register; or (b) where the company has been struck off the Register under section165(3B) upon the payment of the fees required under subsection (3), and upon restoration of the name of the company to the Register, the name of the company shall be deemed never to have been struck off the Register.

(6) For the purpose of this Part, the appointment of an official liquidator under section 168 operates as an order to restore the name of the company to the Register.”

The 2010 Act also made crucial amendments to s.169 and s.176 of the 2000 Act by introducing an additional fee of 10% of the annual fees owed in the IBC failed to pay its fees by the 31st of March of each year while maintaining the additional fee of 50% if its annual fees were not paid by the 31st of October. It also introduced a further penalty of B$100.00 for each year the IBC was struck off the company register. Ultimately the 2010 IBC Act had cured the shortfalls of the 2000 Act in providing the Registrar and the Court the power to restore an IBC that was struck off the company register for nonpayment of fees and by retroactively legitimized the restoration IBCs that were purportedly restored during the period of the years 2000 to 2011 under powers in which the Registrar had misbelieved to have held, as shown in the matter of the International Business Companies Act 2000 and Another v. The Registrar General [2012] BHS J No.11. Over the years, the IBC Act has demonstrated not only its importance in the financial service industry but also its ability as an organic legislation having undergone several amendments which involve the requirements for an IBC to register as a Segregated Account Company (SAC) and the mandatory requirement for all registered agents of IBCs to host accounting records.

IBC Restoration Methods

As previously mentioned, section 3 of the International Business Companies Act, 2010 allows for a company, a member of the company, creditor, or liquidator to apply to the Registrar to restore the name of the IBC to the Register of Companies within 5 years of receiving notice of being struck off the company register, and may apply to the Court after 5 years has lapsed. In turn the Registrar or the Court will restore the name of the IBC to the company register if satisfied that it would be fair and reasonable to do so, and once restored to the company register the name of the IBC shall be deemed to never to have been struck off the Register. For IBCs who have been struck off the company register due to noncompliance with the IBC Act it is expected that the applicant demonstrate that the IBC is compliant with the Act and provide payment for the penalty fees applied for each year after the IBC remained struck off the Register of Companies. Similarly for IBCs who have been struck off the company register due to nonpayment of annual fees, it is expected that the applicant provide all outstanding annual fees and penalty fees for each year the IBC has been struck off the company register at the time of the application.

In the event that the period of 5 years had lapsed after the IBC was struck off the company register the Applicant may apply to a Justice of the Supreme Court in order to restore the name of the IBC to the company register. This involves the filing of an Originating Summons and supporting Affidavit in the Supreme Court Registry and the service thereof to the Registrar General’s Department and Office of the Attorney General as the relevant responding parties. The supporting affidavit should provide the IBC’s vital information (i.e. the identity of all of the company’s officers, directors, and shareholders, incorporation date, company no., etc.), and the reason why it is seeking to be restored to the Register of Companies (i.e. for the purposes of dissolving the IBC, to legally engage in business activities, etc.) More importantly an explanation as to why the IBC was not compliant with the IBC legislation or why its annual fees were not paid should be included in the affidavit.

A common reason why an IBC may have been struck off the company register is due to the failure of its registered agent to pay the company’s annual fees within the required period which may have been the result of the registered agent being dissolved (such as a bank or trust company) or the dissolution of a partnership (i.e. a law or accounting firm). Under the circumstance the Affiant should include any supportive documents as evidence thereof. In circumstances where the IBC is struck off the company register due to its failure to pay annual fees, evidence of the outstanding amount should be included, which may derive from the IBC’s accounting records or from a written correspondence from the companies registry verifying the outstanding amount. In case of the company’s failure to comply with IBC legislation, evidence of the company’s ability to conform should be demonstrated. The Applicant should also expect to pay court cost to the Respondent and if the company is allowed to be restored to the company registry by the Court, the Applicant should expect to pay the amount prior to its restoration. Once the IBC is restored, a Certificate of Restoration is issued by the Companies Registry which is mostly required in the IBC’s business activities or dissolution actions.

Mario L. McCartney is the Founder and Principal of Lex Justis Chambers, a boutique law firm providing Corporate, Private Client, and Traditional legal services in the Commonwealth of The Bahamas. Mr. McCartney is also the present editor and main contributor of firm’s blog site and welcomes all opinions and comments to his articles.
For further information on all legal services provided by Mr. McCartney please visit the Lex Justis Chambers website @ www.lexjustis.com or email him at mmccartney@lexjustis.com, mario.l.mccartney@gmail.com.

INVESTMENT FUNDS OF THE BAHAMAS (PART 2): CLASSES OF INVESTMENT FUNDS

http://www.lexjustis.com/2014/01/investment-funds-of-the-bahamas-part-2-classes-of-investment-funds/

In part 1 of this series we discussed in details the functions of governmental and private regulatory bodies which ensure that the investment fund vehicle are compliant with the laws of the Bahamas and the various entities that are legally required to engage in the management and operations of an investment fund. Upon receiving the necessary approvals and licensing the investment fund vehicle may introduce its investment fund program that has been approved to operate by the appropriate regulatory body. The Investment Fund Act of 2003 (hereinafter referred to as ‘the IFA’) governs the establishment and operations of an investment fund and its related activities in the Bahamas. The IFA has created four classes of investment fund, namely: Standard Funds, Professional Funds, Specific Mandate Alternative Regulatory Test (SMART) Funds, and the Recognized Foreign Fund.

Standard & Professional Funds

Under the IFA, a Standard Fund is defined as funds which do not satisfy the requirements of a Professional Fund, SMART Fund, or Recognized Foreign Fund. Similar to operations of traditional collective investment scheme, typical Standard Fund operates by either issuing or has equity interest in the purpose, or effect of which is the pooling of investor funds with the aim of spreading its investment risk and achieving profit or gains from the acquisition, holding, management, or disposal of investments. Licenses for Standard Funds are granted solely by the Securities Commission of The Bahamas and are considered highly regulated due to the fact that Standard Fund programs are offered to the general public.

Unlike Standard Funds, Professional Funds can be licensed by the SCB or an Unrestricted Investment Fund Administrator, the licensing process of which is faster than the licensing process of the Standard Fund. Professional Funds are considered to have a more sophisticated level of investors as the IFA restricts the provision of this license to investment vehicles hosting the following categories of investors, namely:

  • Any bank or trust company licensed under the Bank and Trust Companies Regulations Act or similarly licensed in a prescribed jurisdiction, whether acting in its individual or fiduciary capacity;
  • Any registered broker – dealer or firm registered as a securities investment adviser under the Securities Industry Act which maintain a minimum of B$120,000.00 of regulatory capital, or is a broker – dealer or firm of securities investment advisers registered in a prescribed jurisdiction;
  • Any insurance company licensed under the Insurance act or licensed in a prescribed jurisdiction;
  • Any investment fund licensed or registered under the Investment Fund Act or regulated in a prescribed jurisdiction;
  • Any natural person whose individual net worth, or joint net worth with the individual’s spouse exceeds B$1,000,000.00;
  • Any natural person who had an individual income in excess of B$200,000.00, or joint income with that person’s spouse in excess of B$300,000.00, in each of the two most recent years, and has a reasonable expectation of reaching the same income level in the current year;
  • Any trust with total assets in excess of B$5,000,000.00;
  • Any entity in which all the equity owners satisfy one of the above requirements;

Constitutive & Offering Documents

The Investment Funds Act requires all Standard and Professional Investment Funds are required to have both Constitutive and Offering Documents. Constitutive Documents are defined by the Act as the principal documents governing the formation of the investment fund, and includes the trust deed in the case of an unit trust, the memorandum and articles of association of a company, and the partnership agreement of a partnership, and all material agreements. The Investment Fund Regulations provided specific instructions describing the particular information and supplemental documents pertaining to the Constitutive Document that are required to be submitted to the SCB, which can be found here.

An Offering Document is defined by the Act as a document or series of documents on the basis of which:

  • equity interests in the investment fund are offered for sale, or;
  • persons are invited to subscribe for, or purchase equity interest in the investment fund, but does not include any other notice, advertisement, letter or other communication used in connection with the offer for sale of any equity interest in the investment fund or the invitation to any person to subscribe for or purchase any equity interest in the investment fund if before the offer or invitation is accepted or taken up the prospective investor is given the opportunity to consider an offering document containing the information prescribed in the Act.

According to the IFA, Offering Documents must describe the equity interests in all material respects, contain the prescribed details, and contain other information as is necessary to enable the prospective investor in the investment fund to make an informed decision as to whether or not to subscribe for or purchase such equity interest. Unless it is exempted from providing this information, investment funds, save for the foreign recognized fund, are required to file with the Securities Commission of the Bahamas a current Offering Document.

In the event that an investment fund hold a continuing Offering Document of equity interest to which its administrator, operator, or promoter is made aware of any material information that affects the Offering Document, it must file with the SCB an amended Offering Document in the within 21 days in the form of a supplement or sticker. Such material information includes the changing of the investment fund’s registered or principal office, change of the investment fund operator, or failing to notify the SCB of any amendments to its Constitutive or Offering Documents. The Investment Fund Regulations also provide specific instructions describing the particular information and supplemental documents pertaining to the Offering Document that are required to be submitted to the SCB.

Self – Administered & Recognized Foreign Funds

A Self – administered fund is an investment fund administered by its own operators who are responsible for the functions of the fund’s administrator. According to the Investment Fund Act only the SCB can license a Self – administered fund, and where the principal office of the self – administered fund is outside of the Bahamian jurisdiction the investment fund must have a place of business in the Bahamas where duplicate corporate and accounting records are available. Operators of the self – administered fund are restricted from dealing with the fund as a principal.

Recognized Foreign Funds are not required to be licensed in accordance with the Investment Fund Act but must be registered with the SCB. In order to be registered as a recognized foreign fund, the fund must be licensed or registered in a prescribed jurisdiction or has submitted evidence of its listing on a prescribed securities exchange (i.e. London Stock Exchange, New York Stock Exchange, Bermuda Stock Exchange, etc.) and has paid the required fees to the SCB and has submitted information of the investment fund within thirty (30) days of the date of commencement of its operations as a Bahamas based investment fund.

SMART Funds

Specific Mandate Alternative Regulatory Test (SMART) Funds are considered to be one of the industry’s most innovative financial products which offer more flexible and user friendly investment fund solutions for the management of assets. It is defined by the Investment Fund Act as an investment fund established by the Securities Commission as a Specific Mandate Alternative Regulatory Test that satisfies certain prescribed parameters and requirement of a category, class or type of investment fund previously approved by the SCB. At present there are Seven (7) established SMART Funds, the latest version, formally the Super Qualified Investment Fund and now called Model 007 was officially approved by the SCB in 2012. As its definition suggests, it is possible for other SMART Funds to be created by financial institutions or professional advisers, which may submit a written proposal to the SCB for the approval of additional templates, to which the SCB, on approval of the proposed template, will prescribe regulations for that type of SMART Fund.

Essentially a SMART Fund is an investment vehicle that provides a more effective method of formation by limiting the documentation required. In contrast to the extensive documentary requirements of a Standard or Professional fund, SMART Funds require only the submission of a term sheet, and can be licensed by unrestricted fund administrators, thereby speeding up the process involved in the licensing of SMART Funds compared to its other classes of investment funds.

Smart Fund Model 001

Under the Investment Funds (SMART Fund) (SFM 001 – 004) Rules, a Licensor may license a fund as a SFM 001 if the promoter of the fund is a financial institution and its investor(s) are party to a Discretionary Management Agreement with the financial institution. Under this model a term sheet is not required, however if it is decided that a term sheet should be provided it must contain information required by the Rules. The promoter may be domiciled either within or outside of the Bahamian jurisdiction and may be directly or indirectly involved in the formation of the fund, but does not include professional advisors or underwriters acting on behalf of the promoter. The assets of the investors that are invested into the fund are subjected to fees at either the fund or management level.

The Subscription Agreement of the fund must contain a statement by the promoter confirming the existence of a Discretionary Management Agreement between itself and its investors. Under the Investment Funds (SMART Fund) (SFM 001 – 004) Rules operators of the fund must certify to the SCB that the fund is qualified to operate as a SFM 001. The fund is also required to file unaudited financial statements to the SCB performance report with the SCB summarizing the subscriptions and redemptions to the fund, net asset value (NAV) at the end of the relevant period, return earned at the end of the period, and the asset allocation of the fund.

Smart Fund Model 002

Under SFM 002, the Investment Funds (SMART Fund) (SFM 001 – 004) Rules require no more than 10 investors who hold equity interest in the fund and the investor must be an individual that would qualify to be an investor in a Professional Fund. Under this model the majority of the investors who hold equity in the fund have the ability to both appoint and remove the operators of the fund. A Term Sheet is required for SFM 002, and the fund may be licensed and launched the same day through an unrestricted fund administrator or a 72 hour response from the SCB.

Under the requirements of the Investment Funds (SMART Fund) (SFM 001 – 004) Rules the Subscription Agreement of the fund must confirm that the investor in the fund agrees with the regulatory requirements applicable to the SFM 002 and that its constitutive documents must provide for the majority of investors holding equity interest in the fund to have the power to appoint or remove the operators of the fund. The Rules also require that the fund’s financial statements are audited unless all of the investors (holding equitable interest in the fund) unanimously agree to waive the annual audit, to which it must file a performance report of the fund within 6 months of the waiver and every 6 months thereafter as long as the waiver exists. The administrator of the fund must make the NAV reports available to the investors upon request and the pperators of SMF 002 must certify that the investment fund is qualified to operate as an SFM 002 to the SCB on an annual basis and pay the annual fee of B$950 or B$1,000 where self administered.

Smart Fund Model 003

The Smart Fund Model 003 applies only to “Exempted Funds” that existed prior to the present Investment Fund Act, 2003 under section 3(4) of the now repealed Mutual Funds Act, 1995 which at the time of the introduction of the Investment Fund Act and Investment Funds (SMART Fund) (SFM 001 – 004) Rules, were allowed to apply to the Commission or an unrestricted investment fund administrator to be licensed as SFM 003 and allowed to continue business for a limited time. Under the Rules, SFM 003 are permitted to have no more than 15 investors to hold equity interests in the fund, and similar to SFM 002, the majority of the investors who hold equity in the fund have the ability to both appoint and remove the operators of the fund. The Investment Funds (SMART Fund) (SFM 001 – 004) Rules required the administrator of the SFM 003 to submit a certified copy of the register of holders of equity interest in the fund or certification by either an attorney or the administrator of the fund that the fund has no more than 15 individuals holding equitable interest in the fund.

Smart Fund Model 004

A licensor may license an investment fund as a SFM 004 if the fund has no more than 5 investors who hold equitable interest in the fund and that the fund operates as a private investment company. A SFM 004 fund can be administered by its operators as there is no need to appoint an administrator, however it will not be categorized as a self – administered fund. Term sheet are not required to be filed, however if it is decided that a term sheet should be provided it must contain information required by the Investment Funds (SMART Fund) (SFM 001 – 004) Rules. The Investment Funds (SMART Fund) (SFM 001 – 004) Rules have imposed the same legal requirements for the SFM 004 as seen in SFM 002 with regards to the Subscription Agreements, Constitutive Documents, Annual Certification, and its financial reporting.

The Investment Funds (SMART Fund) (SFM 001 – 004) Rules have imposed similar legal requirements for SFM 004 in comparison to SFM 002 in which the Subscription Agreement must contain confirmation that the investors agree with the regulatory requirements applicable to its SFM category and that its Constitutive Documents must provide for the ability to appoint and remove the fund’s operators by majority of its investors holding equity interest in the fund. The financial reporting requirements are also similar to those imposed on SFM 002 which require that the fund’s financial statements be audited unless unanimously waived by all equitable investors, to which it must file a performance report of the fund within 6 months of the waiver and every 6 months thereafter as long as the waiver exists. The fund’s administrator must make the NAV reports available to the investors upon request and its operators must certify that the investment fund is qualified to operate as an SMF 004to the SCB on an annual basis.

Smart Fund Model 005

In accordance with the Investment Funds (SMART Fund) Rules, 2005 in order for an investment fund to be considered an SFM 005 it must operate as a private investment vehicle and requires a maximum of 5 investors holding equity interests in the fund, to which each investor must be an individual to whom a professional fund may be offered. A SFM 005 can be licensed immediately by an unrestricted fund administrator or within 72 hours through the SCB. Term sheet are not required to be filed, however if it is decided that a term sheet should be provided it must contain information required by the Rules. The Investment Funds (SMART Fund) Rules, 2005 have imposed the same legal requirements for the SFM 005 as seen in SFM 002, 003, and 004 with regards to the Subscription Agreements, Constitutive Documents, Annual Certification, and its financial reporting.

The administrator of SFM 005 can be a financial institution which does not require a license from the Securities Commission as an investment fund administrator. Where the appointed administrator is an unrestricted investment fund administrator it may license the fund provided it will be the administrator of the fund and will provide the principal office. In the event that a SFM 005 wishes to transfer to another administration the Rules provide that where the fund is licensed by the Commission it must provide a 14 day notice to the SCB prior to the date of transfer. Where the SFM 005 is licensed by an unrestricted investment fund administrator it can not transfer to another financial institution or restricted investment fund administrator unless the fund is licensed by the SCB prior to the transfer. Where the fund transfers to another unrestricted investment fund administrator, the fund will not be required to be licensed by the SCB prior to its transfer provided that the unrestricted fund administrator to whom it transfer will license the fund and provide the fund’s principal office.

Smart Fund Model 006

SFM 006 funds are considered ‘special purpose vehicles’ intended to hold illiquid assets of another Bahamian investment fund and provides a significantly streamlined administration and cost effective measures for this purpose while maintaining ownership rights of the investors of the original investment fund. All investors holding equitable interest in SFM 006 must be an individual to whom a professional fund may be offered and they along with creditors of the fund and the fund’s assets must be the same as those of the originating investment fund (which excludes recognized foreign funds) in order to facilitate the very purpose of the SFM 006 fund. Because of the nature of SFM 006 the Investment Fund (SMART Fund) Rules, 2009 prohibits the inclusion of new subscribers into the fund once it has been launched and no more than 30% of gross assets of the identified Bahamian investment fund may be invested into the SFM 006 fund. In order to establish an SFM 006 at least 75% of shareholders and creditors of the originating investment fund must approve the establishment of the fund. Such characteristics of investors holding equitable interest and creditors of the fund ought to be reflected in Statements which should be included in the fund’s Term Sheet which must be filed in the SCB.

Statements included in the Term Sheet must also state that the fund shall not be audited annually and that a performance report/ management accounts shall be filed every six months with the SCB and each shareholder of record, and that net asset valuation reports are not required and shall only be effected at the discretion of the fund’s operators, who must also confirm that they are satisfied that due diligence on each shareholder of record and that the fund itself is qualified to operate as a SFM 006. The Statements must also reflect whether the fund’s assets require a custodian/ prime broker, fees, expenses, as well as conditions pertaining to the termination of the fund itself.

The Investment Fund (SMART Fund) Rules, 2009 also provides for the optional submission of a Subscription Agreement by an SFM 006 fund, however in the event that the SCB requires a Subscription Agreement to be submitted it must confirm that the investor of the fund has complied with the regulatory requirements applicable to the SFM 006 fund and that due diligence is satisfactorily completed. Under the Rules, SFM 006 funds are not required to appoint a licensed fund administrator in accordance with the Investment Fund Act, in which case the fund’s operators will be responsible for the daily administrative functions of the fund and can appoint any reputable person in any jurisdiction on an as needed basis. Once appointed the Rules require operators to certify with the SCB that the holders of equitable interest in the fund, creditors of the fund and the fund’s assets are the same as those of another specified fund. Operators must also certify with the SCB on an annual basis that the fund is qualified as a SFM 006 and must also file a performance report/ management account every 6 months with the SCB and each shareholder of record.

Smart Fund Model 007

Smart Fund Model 007 or the Super Qualified Investment Fund is the financial service industry’s most recent template, having been introduced to the public on the 22nd of August 2012. In accordance with the Investment Funds (SMART Funds) (SFM 007) Rules, 2012 SFM 007 is limited to having no more than fifty (50) investors who hold equity interest in the fund and the minimum initial investment of each investor in the fund is five hundred thousand dollars in US currency (USD$500,000.00). SFM 007s must provide an offering document or term sheet, and the fund’s operators must certify in its statement that the fund has met the legal requirements provided by the Rules pertaining to the amount of equitable investors and the minimum initial investment by each investor. The operators must also provide a statement declaring that they (the operators) accepts responsibility for the information contained in the offering document/ term sheet is accurate and the fund must also confirm in its subscription agreement that the investors agree to the regulatory requirements provided by the Rules.

SFM 007s have proven to be more flexible than other SFM templates in its regulatory policies as the fund is not required to appoint an administrator. The operators of the fund may partake in the fund’s administration and may outsource its administrative functions to any reputable individuals on an as needed basis, however the fund will not be considered to be a self-administered fund. Similar to other SFM templates the fund’s financial statements must be audited on an annual basis unless all investors holding equitable interest in the fund unanimously agree to waive the audit, upon which a performance report of the fund must be filed with the SCB every six (6) months thereafter as long as the waiver exists. The fund is also obligated to provide NAV reports to its investors upon request.

Dormant Investment Funds

An investment fund is considered dormant when it ceases trading and liquidates its assets without formally liquidating its structure, to which the fund must inform the SCB within fourteen (14) days of becoming dormant. Once informed the SCB will suspend the fund’s license or registration and will publish a formal notice of the fund’s state in the local gazette. If the fund decides to recommence its activities it must do so within a year of it becoming dormant and must apply to the SCB to have its suspended license or registration lifted. All prescribed fees must be paid to the SCB when submitting its application. Once the SCB is satisfied that the fund is compliant with the provisions of the Investment Fund Act the SCB will lift the suspension of the fund’s license or registration and will publish a formal notice of the fund’s re-launch in the local gazette. The fund also has the option to apply to the SCB to extend the period of its dormancy which can be granted for a period no longer than eighteen (18) months.

  Mario L. McCartney is the Founder and Principal of Lex Justis Chambers, a boutique law firm providing Corporate, Private Client, and Traditional legal services in the Commonwealth of The Bahamas. Mr. McCartney is also the present editor and main contributor of firm’s blog site and welcomes all opinions and comments to his articles.
For further information on all legal services provided by Mr. McCartney please visit the Lex Justis Chambers website @ www.lexjustis.com or email him at mmccartney@lexjustis.com, mario.l.mccartney@gmail.com.

PRESS RELEASE: LEX JUSTIS AWARDED BEST BOUTIQUE CORPORATE LAW FIRM OF THE YEAR – BAHAMAS

http://www.lexjustis.com/2014/01/press-release-lex-justis-awarded-best-boutique-corporate-law-firm-of-the-year-%e2%80%93-bahamas/

On the 16th of December 2013 the publishers of Acquisition International Magazine have announced the winners of their 2013 Legal Awards, naming Lex Justis Chambers, Counsel & Attorneys -at- Law “Best Boutique Corporate Law Firm of the Year” in The Bahamas.

The awards recognize the outstanding achievements of individuals and companies with the legal sector encompassing everything from barristers and boutique firms to global players. AI’s Legal Awards identify and honor success, innovation and ethics across international legal and business communities. This year’s awards recognized over 1,200 winners in more than 115 countries all of whom have been enlisted in the winner’s supplement in AI’s online magazine found at www.acquisition-intl.com.

“Being recognized as the leading boutique corporate law firm in the Bahamas is truly a great honor. We work extremely hard to meet and surpass client expectations despite the challenges faced in this difficult economy. This acclaim pays tribute to that dedication and underlines our humble, yet strong standing in our profession,” Mario McCartney, the firm’s Principal, points out. “We were astounded in July when awarded the ‘Family Office Formation Firm of the Year’ for the Bahamas, having been included in a list of over one thousand law firms around the world. It has certainly been a great year for us.”

Winners are determined by three factors, the first of which is the number of votes received from the 53,000+ subscribers of Acquisition International Magazine along with 180,000 legal professionals. The second factor is our substantial in-house research and thirdly, nominees are asked to supply supporting documents which they feel may cement their nominations.

“The year has not been without its challenges for the legal community but it’s clear from the evidence received that the industry’s professionals have risen to the challenge,” commented Jane Peter, Chief Co-Ordinator of the 2013 Legal Awards. “They have produced some outstanding work, showcasing some extraordinary talent, and we’re delighted the industry has been so determined to recognize its stars.”

___________________________________________

About Acquisition International Magazine

Acquisition International is a monthly magazine brought to you by AI Global Media Ltd, a publishing house that has reinvigorated corporate finance news and reporting. Its topical news articles make it a valued read, and this readability ensures that advertisers will benefit greatly from their invest­ment.

 AI works alongside leading industry analysts to ensure we publish the most up-to-date figures and analysis. The magazine has a global circulation, which brings together all parties involved in deal making and, in an increasingly global deal market, we are uniquely positioned to reach the deal makers that matter.

HAPPY HOLIDAYS!

http://www.lexjustis.com/2013/12/happy-holidays-2/

THE BUSINESS OF FAST FASHION

http://www.lexjustis.com/2013/09/the-business-of-fast-fashion/

Created by OnlineMBA.com

OUR LEGAL POSITION: ON THE PROVISION OF BAIL FOR THE MURDER ACCUSED

http://www.lexjustis.com/2013/09/our-legal-position-on-the-provision-of-bail-for-the-murder-accused/

INVESTMENT FUNDS OF THE BAHAMAS (PART 1): Regulation & Operational Structures

http://www.lexjustis.com/2013/09/investment-funds-of-the-bahamas-part-1-regulation-operational-structures/

THE POOLING OF RESOURCES for the purposes of achieving a common goal is a concept that is fundamentally rooted into the basic functions of every living thing. Through enduring thousands of years of evolution many species have learned to increase its chances of survival by social based activities: lions hunt as a pack in order to increase its chance of success in capturing its prey; elephants travel in large groups for the sake of protecting its young calves. As living beings we know the power of pooling resources by a group greatly increases your chances of success while lowering the risk involved. Human beings are no stranger to this concept as our very existence as this practice caused the seemingly natural progression from small nomadic clusters to large developed nations where its citizens performed a specific working task in order to contribute to the survival of the homeland. The result and value of one’s labor was soon conveyed from the actual commodities produced to currency as authorized by the nation’s leaders, giving rise to the institutional structures of today’s economic system.

Interesting enough one of the more prominent facilities of the world’s economic system is the Collective Investment Vehicle (hereinafter referred to as “the CVI”), a financial scheme which refers to the method of combining the assets contributed by various investors that are managed by a professional entity for the purpose of generating capital for investing in a particular industrial sector (i.e. technology, agriculture, etc.). The term varies from country to country, however CVIs are often referred to as ‘Mutual Funds’, ‘Investment Funds’, ‘Managed Funds’, or simply ‘Funds’, and are formed by using a variety of financial vehicles (i.e trust, corporation, partnership, etc.), to which the shares or units thereof are owned by the investors. Collective Investment Vehicles have gained popularity within the last 30 years; however the use of this concept has been used as early as 1774 by a Dutch merchant by the name of Adriaan van Ketwich, who theorized that his created investment trust would increase the appeal of investments to smaller investors with minimal capital. Other CVIs soon followed during the 1880s and later in 1893 when the first closed end Mutual Fund, known as the Boston Personal Property Trust was established in the United States.

In the Bahamas these Collective Investment Vehicles are referred to as Investment Funds and are presently governed by the Investment Funds Act 2003, which came into force after its predecessor, the Mutual Funds Act 1995, was repealed in hopes of providing legislation that is reasonably flexible to accommodate the demands of the financial sector. In its efforts to become a more attractive financial jurisdiction the Bahamas eventually led to the creation of the Specific Mandate Alternate Test Fund, affectionately known by the acronym ‘SMART’ Funds, and to becoming the first independent country in the region to achieve an ‘A’ status from the International Organization of Securities Commissions (IOSCO).

In discussing the regulatory and operational components of the investment fund structures in the Bahamas it is best to start with its very definition as established by the Investment Funds Act, which provides in its threefold definition as:

(a) a Unit Trust, that issues or has equity interests, the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and achieving profits or gains arising from the acquisition, holding, management or disposal of investments —

  • of which the trustee, the administrator, the investment advisor or the investment manager is either a company incorporated or registered in The Bahamas or a person who has a place of business in The Bahamas or uses an address in The Bahamas; or
  • the trust instrument of which is governed by the laws of The Bahamas; or

(b) a Company (including a limited duration company) that issues or has equity interests the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and achieving profits and gains arising from the acquisition, holding, management or disposal of investments —

  • which is incorporated or registered in The Bahamas; or
  • of which the administrator, the investment advisor or the investment manager is either a company or companies incorporated or registered in The Bahamas or one or more companies or individuals any one of whom has a place of business in The Bahamas or which uses an address in The Bahamas; or
  • (iii) the administration or management, of which (including the control of substantially all of its  assets) is carried on in or from The Bahamas;

(c) a Partnership that issues or has equity interests the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and achieving profits and gains arising from the acquisition, holding, management or disposal of investments —

  • of which one or more of the general partners is incorporated or registered in The Bahamas or is a person residing in The Bahamas or uses an address in The Bahamas; or
  • whose partnership articles are governed by the laws of The Bahamas; or
  • of which the administrator, the investment advisor or the investment manager is either a company incorporated or registered in The Bahamas or a person who has a place of business in The Bahamas or uses an address in The Bahamas, and in this Act a reference to investment fund means a “Bahamas based investment fund” but does not include —
  • a person enrolled under the Friendly Societies Act; or
  • a company, unit, trust, or partnership, where the holder of an equity interest does not have the option to redeem his equity interest or require the issuer to repurchase his equity interest.

Regulatory Framework

As demonstrated in its definition, Unit Trusts, Companies, or Partnerships are the statutorily appropriate entities which provide the appropriate structure for the governance of an investment fund, coupled with the requirement for a particular ‘nexus’ to the Bahamas must also be established. A dual based regime exists for the further governance and licensing of investment fund structures. Licensing of investment funds are conducted by the Securities Commission of the Bahamas (hereinafter referred to as ‘the SCB’) which are authorized to license all classes of funds, and Unrestricted Fund Administrators (hereinafter referred to as ‘UFAs’), which are authorized to license funds offered only to accredited investors.

Role of the Securities Commission

In its role as a supervisory and regulatory body of investment fund structures the Securities Commission of the Bahamas holds a statutory duty to review and monitor the operations of Investment Funds and parties related to investment funds in the Bahamian jurisdiction and also to establish standard or educational based regulations to be followed by parties associated with investment fund structures. The SCB have the authority to conduct on and off-site examinations of investment funds in order to satisfy itself that the activities of the investment fund are compliant with the regulations of the Investment Fund Act and the Financial Transactions Reporting Act. The SCB also has the authority to instruct an investment fund or an investment fund administrator to undergo an audit of its accounts and to submit its audited financial statements within a stipulated time frame.

In its authority to license an investment fund and the administrator of the fund the SCB has the authority to revoke the investment funds’ and the fund administrator’s license in the event that the investment fund or its administrator has ceased to carry on or attempt to carry on business operations or if the fund or its administrator has become insolvent, goes into liquidation, or is wound up. The SCB also has statutory authority to conduct regulatory hearings to determine whether an investment fund or its administrator has failed to comply with regulations established by the Investment Fund Act, failed to carry out its business without complying with the conditions of its license, engaging in business activities in a manner detrimental to the public interest or is prejudicial to the investors of the fund, its administrator or its creditors (if the fund is being wound up, dissolving, liquidating, or terminating its investment fund or administration business voluntarily). The Commission may also impose sanctions, remedies, or other relief as a result of any settlements of disputes between persons, or decisions of the Commission as a result of regulatory hearings.

Role of the Fund Administrator

There are two types of Fund Administrators: Restricted Fund Administrators (hereafter referred to as ‘RFAs’) and Unrestricted Fund Administrators; both of which are required to be either: (a) a company incorporated or (b) registered in the Bahamian jurisdiction or a person who has a place of business in The Bahamas or uses an address in The Bahamas. Unrestricted Fund Administrators differ from Restricted Funds Administrators in that RFAs are restricted from providing licenses to investment funds vehicles and are only allowed to administer funds while UFAs are able to provide licenses to investment funds and administer investment funds. Fund administrators are required to be licensed by the Securities Commission, unless they apply to the SCB for an exemption. All investment funds are required to appoint an investment fund administrator, save for: self administered funds, a recognized foreign fund, an investment fund administered by a company that is exempted from obtaining an investment fund administrator’s license, or an investment fund that is provided an exemption in writing by the SCB.

Minimum Net Worth Required for Fund Administrators

In accordance with the Investment Fund Act, Unrestricted Investment Fund Administrators must maintain a net worth (inclusive of its paid up capital and non-distributable reserves) of no less than USD$500,000.00 or an equivalent in currency accepted by the SCB, or a net worth of no less than USD$150,000.00 and indemnity insurance coverage of no less than USD$1,000,000.00 (or the equivalent in an acceptable currency). In turn, Restricted Investment Fund Administrators must maintain a net worth (inclusive of its paid up capital and non-distributable reserves) of no less than USD$250,000.00 or an equivalent in currency accepted by the SCB or a net worth of no less than USD$100,000.00 and indemnity insurance coverage of no less than USD$500,000.00 (or the equivalent in an acceptable currency). Where an investment fund administrator is exempted from obtaining an investment fund administrator’s license it must maintain a net worth (inclusive of its paid up capital and non-distributable reserves) of no less than USD$150,000.00 or an equivalent in currency accepted by the SCB or a net worth of no less than USD$50,000.00 and indemnity insurance coverage of no less than USD$150,000.00 (or the equivalent in an acceptable currency).

Powers and Duties of Fund Administrators

The Investment Fund Act establishes a rigorous number of obligations for investment fund administrators to observe, and it facilitates the SCB’s role as both regulator and a ‘protectorate of the public’ in the business affairs of the investment fund. For instance the Securities Commisson reserves the use of the words “Fund Administrator” in the name solely to administrators that are duly licensed by the SCB and restricts other entities from representing that it is carrying on business in the jurisdiction as an investment fund administrator unless authorized to do so by the SCB. Investment fund administrators are also required by the Investment Fund Act to obtain approval from the Securities Commission pertaining to the issue, transfer, disposal, or dealings thereof, of shares in an investment fund administrating entity unless the SCB has waived this obligation and the prescribed fees have been paid. The investment fund administrators are also required by the Securities Commission to have its financial statements audited annually by an auditor pre-approved by the Commission and are required to submit its audited financial statement within four months of that financial year.

The Investment Fund Act requires a minimum of 2 directors to be appointed to an investment fund. All directors of investment fund administrators to be approved by the Securities Commission prior to the appointment or changing of a director or chief executive officer (or equivalent position) to the fund administration entity. When applying for to the SCB for licensing, the investment fund administrator must: (a) in respect of any Director that is an individual, submit biographical details and an account of the professional qualifications and experience of each of its directors; (b) in respect of any Director that is a company, submit its documents of incorporation as well as the biographical details and an account of the professional qualifications and experience of each director of the company. The Investment Fund Act actually restricts the appointment/ change of a director or chief executive officer unless the administrator obtains prior written approval from the SCB or if the SCB has exempted the fund administrator from its obligation to obtain prior approval and the prescribed fee has been paid.

All investment fund administrators have an obligation to undertake and execute the following statutory duties in accordance with the Investment Fund Act:

(a) take all reasonable steps to ensure that the operations of an investment fund are carried out in accordance with the investment fund’s offering memorandum and constitutive documents and these Regulations to the exclusive interest of the investors;

(b) take all reasonable steps to ensure that the investment fund maintains proper books and records;

(c) take all reasonable steps to ensure that audited financial statements for the financial year are available for each investor within four months of the end of the investment fund’s financial year or within such extension of that period as approved by the Commission;

(d) make the constitutive documents of each fund it administers available free of charge in The Bahamas at all times for inspection by the investors, during normal office hours at its place of business or at the place of business where duplicate records of the investment fund are available, and make copies of such documents available upon the payment of a reasonable fee;

(e) take all reasonable steps to ensure that the investment fund is not carrying on its business in a manner which is or is likely to be prejudicial to investors or creditors of the investment fund;

(f) make such reports to the Commission regarding investment funds for which it is the administrator as the Commission may require;

(g) take all reasonable steps to ensure that operators are meeting their obligations and are complying with the Act and these Regulations.

Licensing of Investment Fund Administrators

Entities that are seeking to become licensed fund administrators must lodge an application in the prescribed form and is to be accompanied by such information as the Securities Commission requires in determining both the submitted application and the prescribed fee. Once the SCB is satisfied that the applicant has the necessary expertise to administer investment funds and its directors and corporate officers have met the requirements by the Commission, a license will be granted. Applicants should expect the following fees to be paid to the SCB:

Application fee for an unrestricted investment fund administrator……………………………………………………B$5,000.00

Application fee for a restricted investment fund administrator…………………………………………………………B$2,000.00

Application fee for exemption from obligation to obtain investment fund administrator’s license ………….B$1,500.00

Application fee for an unrestricted investment fund administrator (prorated in the first year) ………………B$10,000.00

Annual fee for exemption from having to obtain an investment fund administrator’s license …………………B$1,500.00

Role of the Investment Fund Custodian

The Investment Fund Regulations requires the property of an investment funds to be deposited with a custodian appointed by the investment fund to which the custodian is required to take the property under its control and hold it in trust for the investment fund in accordance with the constitutive documents of the investment fund. In accordance with the Investment Fund Regulations a custodian of an investment fund shall be:

(a)    A bank or trust company possessing an unrestricted license in the Bahamas;

(b)   Licensed banks, trust companies, or financial institutions in other jurisdictions having a minimum net worth of USD$2,000,000.00 or equivalent inclusive of paid up capital and non-distributable contributed surplus, or;

(c)    Other licensed banks, trust companies, or financial institutions whose net worth is less than USD$2,000,000.00 (or equivalent inclusive of paid up capital and non-distributable contributed surplus) that are a wholly owned subsidiary of a parent company who qualifies under subparagraph (b) and who issues  a standing commitment to the SCB to subscribe additional capital to its subsidiary up to USD$2,000,000.00 (or equivalent) if required, or undertakes to the Securities Commission that it will not allow its subsidiary to default and it agrees to comply with any conditions stipulated by the SCB.

(d)   Such other entities as approved by the Commission.

All investment funds must appoint a custodian, save for funds whose structure or nature of the fund’s assets are such that they do not require that a custodian be appointed to hold the assets of the investment fund (i.e. master fund structures). In such cases, the operators of the fund are required to provide written certification that the fund does not require a custodian due to its investment structure or the nature of its assets to the SCB. When the investment fund vehicle is a unit trust, partnership or a company the Investment Fund Regulations demand that the custodian of an investment fund must be independent of the investment fund administrator unless specifically exempted by the SCB. In the event that the custodian and the administrator of an investment fund are corporate entities belonging to the same parent company, they are considered to be independent of each other if:

  • Both are subsidiaries of a financial institution;
  • Neither the custodian nor the administrator of the investment fund is a subsidiary of the other;
  • At least one director of the custodian is not also a director of the administrator or operator of the investment fund or both; and
  • The custodian and the administrator and the operator of the investment fund sign an undertaking with the Commission that they will act independently of each other in their dealings with the investment fund; or
  • The investment fund is established in a jurisdiction which applies similar rules to those provided in these Regulations with respect to the independence of persons carrying out the functions of custodians, operators and administrators.

Role of the Operator

In addition to the appointment of a Custodian the Investment Fund Regulations also requires an investment fund to appoint at least 2 entities as its Operators. Operators must be approved by the SCB, the prerequisites of which resemble the requirements of investment fund custodians. Similar to the obligations of a custodian to safeguard the assets of the investment fund, the operator also plays a protectorate based role in ensuring that the statutory obligations of the investment fund are carried out. Under the Investment Fund Regulations the operator shall ensure that the sale, issue, repurchase, redemption, and cancellation of equity interest of the investment fund are carried out in accordance with the provisions of these Regulations and the trust deed and in addition it shall:

  • Ensure that the value of the equity interest is calculated in accordance with the provisions of the trust deed;
  • Carry out the proper instructions of the investment manager or investment fund administrator;
  • Ensure that the investment and borrowing limitations set out in the trust deed are complied with;
  • Ensure that the investment fund is audited annually or as required and cooperate with the auditors; and
  • Not issue equity interest or evidence of such equity interest unless subscription moneys have been paid.

Auditors

All auditors must be approved by the SCB prior to their appointment to an investment fund or investment fund administrator, and must satisfy the Securities Commission that they are a member in good standing of the Bahamas Institute of Chartered Accountants (BICA) or of any other international accounting body as prescribed by the SCB by notice in the local gazette. In the case of a firm of accountants, all partners of the firm must be members in good standing in BICA (or of any other international accounting body as prescribed by the SCB by notice in the local gazette).

The Impact of Segregated Account Companies

A Segregated Account Company (SAC) is a company which is registered under the Segregated Account Companies Act 2004 and bears the ability to create separate accounts with assets and liabilities which are segregated from the assets and liabilities attributable to every other account and also from the company’s general assets and liabilities. According to the SAC Act 2004 companies seeking to be registered as a SAC must be governed by the Companies Act or the International Business Companies Act and that company must be engaged in the business of either investment funds, issuing securities, insurance, the subsidiary of a bank or trust company that is not licensed by the Bahamas Central Bank, or engaged in a business where the Minister responsible for companies has prescribed a primary regulator.

The ability to segregate accounts removes the need to use separate companies for each investment strategy while providing each segregated account the same limited liability that would be obtained if each separate companies were used, and enables each investment fund to be structured whereby each investor has its own segregated account. The registration of a Segregated Account Company is a streamlined process which involves filing a request with the Registrar to be registered as a SAC, containing both the prescribed information and evidence of consent by the Securities Commission. Where the company has conducted business prior to submitting an application, the entity must also file to the SCB a statutory declaration containing the required information along with evidence of consent of at least 75% of the intended account holders and 75% of the entity’s creditors. On completion of the application a Certificate of Registration will be provided by the Registrar.

Mario L. McCartney is the Founder and Principal of Lex Justis Chambers, a boutique law firm providing Corporate, Private Client, and Traditional legal services in the Commonwealth of The Bahamas. Mr. McCartney is also the present editor and main contributor of firm’s blog site and welcomes all opinions and comments to his articles.
For further information on all legal services provided by Mr. McCartney please visit the Lex Justis Chambers website @ www.lexjustis.com or email him at mmccartney@lexjustis.com, mario.l.mccartney@gmail.com.

ISLAND LEGAL – A LEX JUSTIS PRODUCTION

http://www.lexjustis.com/2013/08/island-legal-a-lex-justis-production/

YEARS AGO prior to the launch of our website we feverously spent our efforts in the planning and preparation of a magazine dedicated not only to the legal perspective of the Bahamas but also the social, economic, and cultural aspects of our island paradise. Our hard work, though not done in vain, failed to come to fruition for many reasons, and the droves of magazine cover sketches, mind maps, balance sheets, and proposal outlines were soon nicknamed ‘dream papers’ as it made their way to the storage shelves and to the conundrums of our thoughts.

Soon thereafter a local well known publishing company started a magazine catering to the same ideas we provided during those group meetings. That publication is, if not the most popular, a very well known magazine and is distributed worldwide to those engaged in legal, business, and financial services free of charge. Ultimately the efforts of our small chambers were only a dream compared to the financial war chest and intellect power of the island’s version of the “Mega Corporation”, one who has been in the publishing business for many years.

Fast forward to the information technology age where all cell phones are equipped with cameras, long distance telephones are made for little or no charge, and a mere ‘tweet’ holds the ability to ensemble protestors to overthrow governments. Stuffed bank accounts, intellectual think tanks, and a century old existence are leveled by the pc tablets and smart phones that are linked to thousands of creative software programs dedicated to making life a little bit more interesting, providing solutions to the everyday dreamer, journeyman, and thinker. Years later we are now blowing off the dust from the coffee stained papers and turning dreams into reality.

We would like to introduce our readers to ISLAND LEGAL, our digital platform dedicated to demonstrating both the legal, social and commercial aspects of our Bahamian culture and around the world. We hope that you enjoy our efforts.  You may access our first three additions on your pc tablet or smart phone by looking for us on the Flibboard App or directly access our previous editions here , here  , and here .

Mario L. McCartney is the Founder and Principal of Lex Justis Chambers, a boutique law firm providing Corporate, Private Client, and Traditional legal services in the Commonwealth of The Bahamas. Mr. McCartney is also the present editor and main contributor of firm’s blog site and welcomes all opinions and comments to his articles.
For further information on all legal services provided by Mr. McCartney please visit the Lex Justis Chambers website @ www.lexjustis.com or email him at mmccartney@lexjustis.com, mario.l.mccartney@gmail.com.

PERSEVERANCE…

http://www.lexjustis.com/2013/07/perseverance/

 

 

Voted Family Office Formation Firm of the Year for The Bahamas.

 Thank you to all of our readers and clients worldwide.

Please find a digital copy of the winner’s list here.

PART V: WHY THE BAHAMIAN CHURCH SHOULD CARE ABOUT POLICE BRUTALITY: How to Shine Light Into the Dark Lair

http://www.lexjustis.com/2013/06/part-v-why-the-bahamian-church-should-care-about-police-brutality-how-to-shine-light-into-the-dark-lair/

Written Good Friday, 29th March, 2013

Copyright 2013 Melissa K. Sweeting-Percentie

ALL THE REASONS WHY WE SHOULD BE AFRAID

Last week I had a surprise invitation to speak on the Jeffrey Lloyd show on Police Brutality and to elaborate on some of the items in my series.  It was with mixed feelings that I spoke to the host.  Why?  Because it sometimes seems that matters are getting worse and not better. We have had two mysterious deaths in police custody over the period since January 2013.  This is only what is reported.  One mother was interviewed on television with a dazed, confused appearance as she described how her son was taken by the police and returned from custody dead.  Amnesty International has been alerted. The radio lines are buzzing.

But where is the Bahamian church?  They are silent, as a group they are silent on this.  There is no excuse for their silence.  They should be chomping at the bit as their very own congregants are affected by this everyday reality especially among the disenfranchised and poor.

I commend the courage of a clergyman who spoke to me after he had heard me on the radio and how he shared his heart.

“We are afraid,” he admitted, “…Everyone knows we are living in a police state.”  He explained how people feel that not only they, but also their family and friends will be targeted by the police if any noise is made by anyone in particular.  His fear is warranted as police powers are widened here in The Bahamas via technology and military apparatus just as in most countries.  The state is towering over the individual.  When small factions react (such as the family of the deceased in conjunction with their attorney) they are met with virtual silence on the part of the authorities; although lately we are hearing some concerns in Parliament, especially from the Hon. Bernard J. Nottage who said that the ‘chips will fall where they may’ at the end of investigations.  When local communities attempt to stand together, the state’s representatives can use divide and conquer methodologies, usually to squeeze them out through intimidation and economic persecution.  The Bahamas power players use economic persecution first and foremost as the cash flow and payroll operate similar to a feudal system with a handful of large families or well-to-do expatriates employing most people or sending work to small businesses.  It is very easy to squeeze people out who are standing up against tyranny.

Even if a political party comes in or goes out, the apparatus of the state remains and those with the most cash flow can move the apparatus of the state through a bribe system just like in any communistic nation where the bulk of the citizenry are cash-starved and dependent on the few who provide jobs.  Right now in The Bahamas, the largest employers are The Government of The Bahamas and Atlantis.  Following on a close second would be the second-in-line resorts and the merchant class who are small in number, carefully intermarrying amongst themselves and retaining close control of local movements.  It is no surprise that in the last five years, a number of media commentators and members of small political parties have suffered from wrongful arrest and surprise intimidations on technicalities, usually via the police, but always understood to be punishment for going against the grain, against the status quo.

This is why I argue that the Bahamian church must unite forces and address police brutality at the very least because there is a small window of time before global forces impose their way of life upon this small archipelagic nation and we lose a quality of life that we have enjoyed for hundreds of years.  All of the reasons why we should be afraid are the very representation of the courage needed to topple tyranny.  Silence of the people give power to the perpetrators who sit in their ivory towers and control us like puppets while we fight amongst ourselves in the two-party system.  The subtleties in defending due process, decency, and diligence to enforce a lawful society remain the role of the church in reform.  However, if the hands of the church are dirty with greed, fornication, materialism, secret societies and misogyny, then you can bet your bottom dollar we are going nowhere fast – except to hell in a hand-basket!  The following four excerpts are taken from The Nassau Guardian:

Four officers from the Central Detective Unit who had contact with [Jamie] Smith prior to his death have been placed on administrative leave.” Artesia Davis 25th March 2013

Constables 2648 Carl Smith and 2126 Akiel Smith, who claimed they used force to thwart an escape attempt by [Aaron] Rolle, are on administrative leave.” Artesia Davis 26th March 2013

The inquest is not a trial. It is not the function of the coroner to determine any question of criminal or civil liability or to apportion guilt or attribute blame.” Artesia Davis 27th March 2013

Bahamas Petroleum Company CEO Simon Potter said yesterday BPC remains focused on its oil drilling plans and opted not to focus on scathing criticisms made recently by the Bahamas Christian Council (BCC).” Travis Cartwright-Carroll 26th March 2013

TEXTBOOK EFFICIENCY IN DEFINING THE EXECUTIVE

The executive may be defined as that branch of the state which formulates policy and is responsible for its execution.  In formal terms, the sovereign is the head of the executive.  The Prime Minister, Cabinet and other ministers, for the most part are elected Members of Parliament.  In addition, the Civil Service, local authorities, police and armed forces, constitute the executive in practical terms.”  Hilaire Barnett, Constitutional & Administrative Law, 5th Edition, Cavendish Publishing Limited, London, UK Ó2004, pg 99

“This form of power could also be invoked to suspend the order of law and rights in the event of war or emergency.  Executive power thus ultimately manifests itself in the state’s monopoly on violence.” Ó 2009 Gearey, Morrison, Jago, The Politics of the Common Law, pg.10, Routledge-Cavendish, UK, USA, CANADA

This is the rule of law, not rule by the executive or the police or the military or the exigencies of the moment. It stands for the fundamental principle that every state actor must conform to certain basic requirements of acceptable behaviour set down not by the actor himself but by some body independent of him or her.”  Baroness Helena Kennedy, http://socialsciences.exeter.ac.uk/media/universityofexeter/schoolofhumanitiesandsocialsciences/law/pdfs/Legal_Conundrums_in_our_Brave_new_World

Even in the huge body of European law, analysis of the Human Rights Act (1998) jurisprudence around Article 6 (fair trial rights) contemplates that there is so much modern law that the individual is likely to be accused somewhere!  Will the individual be treated fairly and humanely under the law of the modern state?

On page 59 of the booklet released by The Bahamas Constitutional Commission in 2003, we find the list of Questions for Consideration relating to Chapter VIII of The Bahamas Constitution:  The Public Service under which The Police Service Commission is Part 5.  Question 3 reads: “The provisions relating to the Police Service Commissions, which provide for the removal of the Commissioner and Deputy Commissioner do not specify the grounds on which such persons may be removed.  Should such grounds be specified?”  (The Bahamas Constitution:  Options for Change Ó Government of the Bahamas 2003)  This question may be important because “the Commission only has general control over the appointment of officers of or above the rank of Inspector and below that of Assistant Commissioner.” (Ibid pg. 56)  It is also important because when the Hon. Tommy Turnquest spoke publicly to the nation introducing a compendium of Anti-Crime Bills back in 2011, he cited the following issues of interest in upgrading the Royal Bahamas Police Force, not one of them addressing police brutality.

“We placed emphasis on merit and leadership, increased welfare of Police Officers, the acquisition of assets and equipment, extensive training, funding, forensics, technology, including communication technology, the Police Cadet Programme, the upgrading of the Police College and Neighbourhood Policing.” (http://www.bahamaslocal.com/newsitem/33611/Crime_Bills_Debate_Contribution__Minister_Tommy_Turnquest)

A lot was going on within the upgrading.  The new Bill’s title cited the Police “Force” rather than Police “Service” and this supposedly because in the absence of a military, border protection, the police required “might.”  Positive promises were a limit to the Police Commissioner’s term and acknowledgement that police needed to be vetted before they were qualified to serve.  Householders would also be “marshalled” in special circumstances to serve with the police.  Turnquest said the CDR International report by UK Consultants called for “a leaner, fitter command chain.”    Sections 63-64 of the New act would give the Commissioner the same powers as a Magistrate in disciplinary measures of the police force.  In April 2007 just before General Elections there were 449 promotions. (http://www.bahamaislandsinfo.com/images/stories/2009/wk-02-13-09/police-bill-turnquest0210)

It seems that even when the Government of The Bahamas at the time was reforming the Police Force, the grim realities of certain aspects were not even up for discussion.  The Constitutional Commission on Options for Change also noted that even if there were irregularities in the Police Force sufficient to result in the Commissioner of Police or the Deputy being removed, it would only be “on the advice of a tribunal consisting of persons with high judicial training appointed to investigate the matter by the Governor-General.” (pg. 57 of Options for Change).  The requirement for elaborate judicial training makes sense when we see that in the Westminster system, police powers sit squarely in the Executive sphere while in our Bahamian constitution the powers are hovering in the sphere of The Public Service.  This must bring difficulties in sorting out solutions because the vast body of case law throughout the Westminster system would primarily treat police powers as an extension of the Executive.  Also, elaborate contortions required to enable Articles 119, 120 and 121 of our Constitution as held in Section 7 of the Police Force Act 2009 would be further complicated by the political pressure of living in a fishbowl.

“Such a procedure can only be initiated by the Prime Minister, who also advises the Governor General to suspend the person from office (subject to reinstatement) during the investigation.” (pg. 57 of Options for Change).  This is why Amnesty International is probably suggesting an independent body be established to investigate and probe police brutality in The Bahamas.

The Police Force Act of 2009 clearly states in Section 59(d) that officers using unnecessary violence or mistreating prisoners can get up to 3 years in prison.  Imagine what they should deserve for killing a prisoner in custody.  The fact of repeated torture of suspects in custody with officers only getting administrative leave or a slap on the wrist after a coroner’s verdict would be a damning indictment on Bahamian society.

Section 125 of the Police Force Act 2009 says that the Minister “may make Regulations for the carrying out of the objects of this Act and, without limiting the generality of the foregoing, may make regulations” regarding these issues, among others:-

1.)  to get the views of the public – s.1(a)

2.)  to examine places where police detain people – s.1(b)

3.)  relating to the handling of police detainees (treatment/questioning) – s.1(d)

4.)  relating to qualifications of persons seeking enlistment – s.1(h)

5.)  relating to the taking of fingerprints of people in lawful custody – s.1(l)

6.)  relating to storing arms deposited by the public/ammunition/abandoned firearms – s.1(p)

All the laws are in place for the recognition of abuses by the police, just as in any other civilized country.  What matters in The Bahamas is that for any top-down effect to really purge the Force of brutality and torture, that would take some political nerves of steel because the police have been used as a political force to clean up the messes of the rich, the politically connected and to enforce the agenda of corrupt politicians.  Any attempt to clean up the force in a real way would be tough in this little society.

FUNKY NASSAU

Years ago when I had to climb out of my bed to check our family business when the alarm went off, I was always amazed at the amount of cars speeding through the streets with bright lights and loud speakers.  2 a.m. and 3 a.m. had the streets like the Wild West!  It seems that even the Police Force Act 2009 speaks to the witching hours between 8 p.m. and 5 a.m. when in Section 31 power and authority is given over to police officers during that time when no warrant is necessary under certain circumstances to make an arrest.

When questioned by Christina Galanos, the lawyer for [Aaron] Rolle’s estate, officers McKenzie and McClure said they had no idea that force was used against Rolle during the 4 p.m. to 12 a.m. shift.” Artesia Davis 26th March, 2013.

Many nights I am amazed at the amount of gunshots that I hear and the sound of wheels spinning and cars screeching through the tiny streets nearby where I live.  I often think that when we go to bed, the underbelly of this island gets up.  The underbelly is probably composed of those in and out of uniform.  Wouldn’t the evidence suggest that?

The problem is that the underbelly is growing under the weight of gluttonous corruption.  And the divide between what kind of justice we mete out to the poor versus what the rich families enjoy with their fancy lawyer money just cannot be spoken without grave consequences.   We can look to other jurisdictions for clues on how to avoid chaos, though.

I kept a newspaper clipping from last year.  It was in the Caribbean News section of the Nassau Guardian.  Headline:  “Rights Groups Blast Haiti Judge on Duvalier Case.”

“Mario Joseph, a lawyer whose Haitian-run firm is representing some of the Duvalier regime’s victims, said the judge ‘made so many errors’ that they compromised his pre-trial investigation.  He said the judge disregarded testimony from eight people who wanted to file complaints alleging torture and false imprisonment.” (Trenton Daniel, AP, 31st January 2012)

The entire article explains how a local Haitian judge, Magistrate Carves Jean, “ignored critical evidence that would have given weight” to the prosecution of Duvalier.  “Jean said the statute of limitations has run out on any human rights crimes committed during Duvalier’s 1971-86 regime but not on accusations of misappropriation of public funds.” (Ibid, Daniel)

I am giving this crucial example of where The Bahamas is headed if we do not apply the spirit of the law to effect the letter of the law in matters of the gravest concern to us as a people.  Too many of our prominent families and our politicians are nervous over short-term loss of power while the edifice of democracy in a stable parliamentary system we have enjoyed for hundreds of years is crumbling around us at a rapid rate.

We know that some studies have shown that the predominant body of Haitians that have emigrated to The Bahamas have been Baptist Christians who find the superstition, voodoo and systematic chaos of Haiti too much to bear.  We call them political refugees, yet it is historically known that we share the same faith them, those of whom have risked their lives to come here. What faces the Bahamian church is the prospect of a crumbling relic of our parliamentary democracy:  eaten away by our own materialism, corruption, cruelty, and the inevitable drive of the illegal immigrant to survive and morph into a new society at any cost.

I give the story of my Haitian friend, a mother, whose teenage daughter was abducted by her Haitian father, who reserved a seat bought for a treacherous, illegal voyage to the shores of Florida. She is unable to see her own daughter in Florida because her own status and paperwork will be forever be flawed by her family’s history of flight into The Bahamas.  I give the story of a local Justice of the Peace who, when was asked to assist in filling out a form to our Immigration Department, laughed when I suggested a Haitian mother should fill out the slot where it asks that she list the names and addresses of her children.  To him, that was stark naiveté on my part.  She should expect him to circumvent due process on her behalf.  She should never expect that a mother could fill out that form in The Bahamas of today with facts regarding her offspring.

All of these depravities in our system point to one solution where police brutality is concerned:  the Bahamian church must form a united front to help our society get back on track.  The church is the only body that can bring to the table intractable data on neighbourhoods, subtleties within the families, history of neighbourhoods from the older pastors, real-time realities of shifting ethnic and social make-up of the areas around the church.  The church knows firsthand from its practitioners where process is falling down, where politicians intrude, where people circumvent the system to survive and where progress is most needed to stabilize a sinking boat we call Bahamian society.

I would also like to close by speaking on behalf of the downtrodden, and yes, even on behalf of the violent young men in this country and to implore the Bahamian church to get involved because these men come from families within the church and any fear of retaliation from police who are corrupt would be partially mitigated by the matriarchal lines running strongly within the Bahamian church.   The reality of increasing numbers of illegals in our society is having grave effects on our ability to govern ourselves.  Most people were surprised that with such huge numbers of Bahamians gambling, there was such a strong vote against the legalization of numbers.  What we fail to face is the obvious:  the numbers houses were the banks for the underbelly of our society.  Many of them could not or would not vote for the obvious reasons.  However, they were able to function on a certain level to get monies and bank accounts to their family members and friends on the islands.  The increase in web shops nationwide should be a wake-up call as to the enormous amounts of illegals living here.  And if anyone thinks that an ostracised, ever-growing body of people are not going to react with fear and violence, they have another think coming.

A recent news story tells of how a well-known artist in Haiti is being called upon to paint the slum tenements bright colours, so as to give the elitists in Haiti a better view of the slums.  I suggest we read the writing on the wall and get some sense here in The Bahamas.

We cannot put a Band-AidÒ on Police Brutality.  There is only one thing to do:  the church must get out of the four walls and out of the cool air conditioned pews and face the music.

  Melissa K. Sweeting – Perecentie studied Humanities at the Grant McEwan Community College in Edmonton, Alberta, Canada. Melissa has a long history with the Church and a passion for Creative Art, Social Justice, and business. She is the mother of two daughters, Hannah and Omega.
For further information on all articles provided by Melissa Sweeting – Percentie, you may contact her via email at mellaw1970@hotmail.com or visit www.lexjustis.com