Bahamian Law Firm Lex Justis Applauds New ‘Executive Entities’ Legislation As An Innovative Cutting Edge Product For The Country’s Financial Service Industry.

On the 12th of December, 2011 the Bahamas witnessed the first step in making the proposed Executive Entities Bill, 2010 as members of the House of Assembly approved a series of Bills that will benefit the nation’s financial service sector. The new law, once passed by the Senate, will establish the foundation for the incorporation and legal recognition of the ‘Executive Entity’ a new financial service product that demonstrates the nation’s innovation and commitment to maintaining its standard in corporate governance values, according to legal representatives of Lex Justis, a Bahamian based law firm.

Within the first quarter of 2012, legal representatives of Lex Justis are eager to provide the incorporation of ‘Executive Entities’ as part of its catalog of corporate services. The provision of this new financial service product will be made possible by the passage of the new Executive Entities Bill, 2010 into law.

As stated in the Executive Entities Bill, 2010 the overall objective of this new legislation is to provide the basis for the establishment of the Executive Entity as a vehicle to carry out executive functions in wealth preservation structures such as Purpose Trusts, Foundations, and Private Trust Companies. Executive Entities are defined by the Bill as legal entities established by a Charter to perform only executive functions set out in its Articles and has its registered office within the Bahamian jurisdiction. All Executive Entities will be required to be registered in order to become a recognized legal entity as demonstrated by the provision of Certificate of Registration.

The Executive Entities Bill, 2010 also calls for the name of the Executive Entity to end with the words “Executive Entity” or the abbreviation “EE” or “E.E” as the last two words of the name. The Bill restricted from including the names of traditional structures such as “Bank”, “Co-operative”, “Building Society”, “Insurance”, “Stock Exchange”, “Foundation”, or “Trust” or the abbreviation thereof.

“Just like any other corporate entity, Executive Entities will be able to sue be sued in their own names,” according to Attorney Mario McCartney, Principal of LEX JUSTIS, Counsel & Attorneys -at- Law. “Those individuals or entities who serve as officers or council members will be able to enjoy the benefits of limited liability while overseeing the activities of the wealth management structure.”

According to Attorney McCartney, Executive Entities may be utilized for a number of primary or supplementary purposes, ranging from serving as a protector or enforcement arm of a trust, a shareholder or investment advisor of a private trust company, or other functions that are executive, administrative, fiduciary, or office holding in nature. Although similar to a Bahamian Foundation, Attorney McCartney also confirmed that the Executive Entity differs substantially in that it is designed specifically to carry out executive functions and not to profit beneficiaries or for other wider purposes such as charities or educational scholarship program Executive Entities have no beneficiaries and only hold such assets reasonably required to carry out its executive functions.

“The key advantage of this new vehicle is the ability of the client to get a steady grip on the administration and security of his wealth by establishing an Executive Entity as its Founder and can appoint himself as an officer or council member or other individuals whom he can depend on to watch over his interests,” says Attorney McCartney. “Clients can now enjoy the benefit of having those he can rely on, administer his wealth even after death, without the fear of family bickering or other personal conflicts derailing his final bestowment. The Executive Entity vehicle is as close as you can get to engaging in the affairs a traditional Purpose Trust structure or other wealth management vehicle without breaching its legal and fundamental principles.”

Attorney McCartney further stated that similar to the formation of a Foundation, Executive Entity Charter will be required to state information about its Founder, Officers or Council Members, its registered office and its purpose, and may also include other provisions such as the Founder’s reserved rights or powers, the appointment and authority of its officers, council members and auditors, and the establishment of Articles for the Executive Entity. Similar to most incorporated entities according to the Executive Entities Bill, 2010 the Executive Entity will also be required to hold at least one meeting per year, keep proper accounting records at the registered office, and to ensure that all government fees paid.

The Bill also calls for members of the Executive Entity to appoint an Executive Entity Agent, which may also serve as an officer or as a council member. The main function of the Executive Entity Agents will be to formally accept service of all documents pertaining to legal proceedings involving the Executive Agent or to receive any formal notices and will also hold the same powers and obligations as an officer or a council member of the Executive Entity if it also holds those positions. According to Attorney McCartney only individuals or entities duly licensed as financial and corporate service providers or as licensed trust companies are qualified to be an Executive Entity Agent and must provide written consent to his appointment.

“The Bill also establishes a statutory based standard of care by the Executive Entity Agent in which it is required to act honestly and in the best interest of the Executive Entity. Ultimately the involvement of a licensed Financial & Corporate Service Provider supplements the overall attempt of the upcoming legislation to incorporate standard corporate governance principles into the framework of the Executive Entity by ensuring that at least one participant of the entity is entrenched in the standards established by Bahamian Law.”

Attorney McCartney further states that once the Executive Entity Bill is officially adapted into the Bahamian legislation all government and supplemental fees required for registering an Executive Entity will be published by the Bahamas Government and LEX JUSTIS will offer incorporation services for the Executive Entity. “Overall this new wealth management structure promises to boosts the island nation’s presence in the global financial service sector,” said Attorney McCartney.

About LEX JUSTIS

LEX JUSTIS is a boutique law practice and licensed Financial and Corporate Service Provider offering traditional legal services, corporate services and private client services in The Bahamas. We are committed to finding efficient legal solutions to the needs of our local and international clients. Visit our website at http://www.lexjustis.com or call us at   (242)676-4208 for more information on the incorporation of an Executive Entity or other aspects of Bahamian law.

	Mario L. McCartney is the Founder and Principal of LEX JUSTIS, 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 website @ www.lexjustis.com or email him at mmccartney@lexjustis.com, mario.l.mccartney@gmail.com.

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Only recently the Ministry of Public Works & Transport released this public notice reminding all builders of the need for the Ministry to inspect and approve of construction projects prior to receive an Occupancy Certificate. According to the notice, the provision of an engineer’s report is not considered a substitute or replacement of the mandatory inspections, only a mere aide of assurance and quality control.

For those who are not familiar with Bahamian construction regulations, contractors who have been hired to construct a building (or the owners of the building) are first required to apply for a permit from the Ministry of Public Works for its construction, and upon its completion the builder/ property owner is required to apply for an Occupier’s Certificate. In order to be approved for an Occupier’s Certificate however, the Buildings Control Officer is required to carry out a thorough inspection of the premises in order to ensure that the construction has met appropriate standards in accordance with the Bahamas Building Code.

Under the general rules of the Buildings Regulations Act, builders are required to give 48 hours notice in writing to the Buildings Control Officer before the works are at a stage where mandatory inspection is required to be carried out in accordance with the Building Code. Failing to do so could result in the Builder being required to cut into, lay open or pull down so much of the building, works or fittings as in the opinion of the Buildings Control Officer that will prevent a proper inspection from being carried out to ascertain whether or not the country’s Building Code and all approved plans have been complied with.

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MINISTRY OF PUBLIC WORKS & TRANSPORT BUILDING REGULATIONS ACT, 1971

NOTICE

INSPECTIONS OF BUILDING OPERATIONS

The general public is reminded that Occupancy Certificates shall only be issued where buildings have received the mandatory inspection approvals during the construction in accordance with Section 11 (1) of the Buildings Regulations Act, Chapter 200. All builders must show proof of having requested and received structural, plumbing, electrical and mechanical approvals where applicable for each building constructed. Failure to secure the required inspection approvals will require the builder to cut into or lay open portion or portions of the building to ascertain compliance with Section 10 (2) of the Building Regulations Act.

The general public is further advised that an engineer’s report submitted in lieu of the required stage inspections will not be accepted as having met the requirements for an Occupancy Certificate and therefore shall not be construed as a substitute or replacement for the mandatory inspections of Section 10 (1) of the Buildings Regulations Act.

Engineer’s reports shall only be considered as an aide of assurance and quality control of a building project to the owner, the architect and the Building Control Division.

Craig G. Delancy

Building Control Officer

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As the recession takes a toll on the Bahamian economy, the Bahamas Government is extending a helping hand to homeowners by extending the real property tax surcharge waiver up to the 30^th of June, 2010.

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GOVERNMENT NOTICE

MINISTRY OF FINANCE

PUBLIC NOTICE

Real Property Tax – Surcharge Waiver Extended

The Ministry of Finance advises the general public that effective immediately the Waiver of Surcharge against all properties is extended to 30^th June, 2010 as provided herein:

• 100 per cent waiver for owner occupied properties with a market value of up to Two hundred and fifty thousand dollars ($250,000.00).
• 100 per cent waiver for owner occupied properties that exceed Two hundred and Fifty Thousand dollars ($250,000.00).
• 50 per cent waiver for other properties.

Section 21B Revival of Surcharge

If after December 31^st, 2009 any other property tax remains outstanding in respect of;

(a)   Owner – Occupied Property with a market value of up to two hundred and fifty thousand dollars ($250,000.00)

(b)  Owner – Occupied property which exceeds two hundred and fifty thousand dollars ($250,000.00)

(c)   Other Property

The owner of such property shall be liable to pay a new surcharge of five percent (5%) of such tax per annum, reduced from TEN PERCENT of such tax per annum.

For additional information regarding this matter, kindly contact the Real Property Tax Office, Frederick House, Frederick Street, at telephone (242) 325-1171 or the Administrator’s office in any Family Island.

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The private ownership of firearms has always maintained its place within The Bahamian culture as both a privilege and as a protectorate. For the recreational hunters, a trip to the pine forest of the outer islands in search of wild boar, raccoons, and local gaming birds will require the use of a hunting rifle, while the pump action shotgun is a common favorite amongst local business owners in the major island cities of New Providence, Abaco, and Grand Bahama where burglary, assault, and other trespasses to property and person are a rising concern, and committed by individuals who are in illegal possession of an revolver, assault rifle or other firearms prohibited by The Firearms Act.

Applying for Gun License

Regardless of its use, Bahamian law does make provision for the ownership of certain types of firearms within the Firearms Act, which can be obtained by the grant of a gun license authorized by the Commissioner of Police. Firearm license application forms can be found here , the submission of which should include the following:

• Two color passport size photographs;
• Bill of sale for both firearm and gun safe purchased by the applicant;
• Applicant’s driver’s license, Passport, and National Insurance Card;
• Non – Bahamian applicants are required to produce proof of legal status in The Bahamas (i.e. certificate of permanent residency, work permit, etc.);
• In circumstances where proof of firearm purchase cannot be obtained, a letter must be written stating where the firearm was purchased and how long the firearm was in your possession;
• Application fee of $50.00 for shotguns and $100.00 for rifles.

Although the application provides for the submission of the bill of sale for the firearm and safe, do not expect to simply purchase your weapon from the local gun shop and cart your weapon home if you are not in possession of a Gun License. If it is your first application, the firearm dealer will ask for payment of a deposit on both the firearm and a safe in order to provide a bill of sale for your gun license application. Full payment for the firearm is expected once your application has been approved, upon which you should be able to possess your new firearm.

Discretionary Thresholds

As stipulated by the Firearms Act, the Commissioner may grant a gun license to an applicant if he is satisfied on good and sufficient evidence that the applicant is a ‘fit and proper’ person. Although the Firearms Act remains silent on the factors which constitute “good and sufficient evidence,” this legislation provides that individuals of intemperate habits, of unsound mind, or of any other unfitted reasons to be entrusted with a gun will not be granted a license by the Commissioner.

Notwithstanding the discretionary power held by the Commissioner, one may expect for persons who are mentally incapacitated or applicants holding previous criminal convictions involving violent acts will not be granted a firearm license. Reports lodged by members of the community (i.e. domestic violence, assault and battery against another) or current criminal investigations involving the applicant being involved in a violent act may also hinder the individual’s application, which may result in further provision of evidence to support the applicant’s character, or the implementation of conditions on the Gun License, Special License, or Firearm Certificate at the discretion of the Commissioner. Therefore it is advised that applicants knowingly under any form of criminal investigation, subjected to a lodged criminal complaint to the police, or previously diagnosed with a mental illness, should submit character references when submitting their application.

If the Commissioner refuses to grant or renew the provision of a Gun License, Special License or Firearm Certificate and the applicant may appeal the decision of the Commissioner to the Licensing Authority who may either confirm, vary, or revoke the decision made. The decision of the Licensing Authority is final, and in accordance with the Firearms Act, may not be called in question in any court.

A Note on Revolvers, other High-Capacity Firearms, and Ammunition

Generally, only members of the Royal Bahamas Police Force and the Royal Bahamas Defense Force are allowed to carry revolvers and other types of firearms (i.e. automatic rifles, assault rifles, canons, etc.) and ammunition associated with this form of weaponry. However the Licensing Authority holds the authority to permit the use of revolvers to Bahamian residents through the provision of a Special License (for revolvers) or a Firearm Certificate (for high powered weaponry). The Licensing Authority may also vest its powers to the Commissioner of Police to grant, reject, or revoke the provision of Special Licenses or Firearm Certificates. If you plan to submit an application for a Special License or Firearm Certificate, expect to present the same documentation as required for a Gun License application.

Similar to a Gun License the Commissioner does have the authority to implement conditions on the Special License or Firearm Certificate at his discretion, nevertheless it is casually suggested that the privilege of holding a Special License or Firearm Certificate are reserved for members of the professional and political elite.  As the roaring debate on whether business and home owners should be eligible to own a hand gun continues into the unknown, it seems as if Bahamian legislation has struck a balance allowing residents to own some form of firearm for recreational or as a means of protecting themselves.

	Mario L. McCartney is the Founder and Principal of LEX JUSTIS, 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 website @ www.lexjustis.com or email him at mmccartney@lexjustis.com, mario.l.mccartney@gmail.com.

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As we made final preparations to launch our commentary on the popular Planning and Subdivision Bill, 2009, our plans were postponed by the announcement that the Bahamas Government had postpone the passing of the Bill by legislators who had been barraged by the public outcry of the country’s professional elite. Only recently it was decided that the legislature would re introduce the Bill to parliament this year, revealing the amended version for review by the public by a reasonable date.

Without a doubt you should expect to see a substantially amended version of the original Bill to be re-introduced. Should you feel uninformed about this important debate we are happy to provide an outline of the origins and present day concerns within the development of this important legislative instrument, which we hope will provide clarity and an opportunity to ‘have a say’ on the upcoming amended version:

Creating the Planning and Subdivision Bill

Land transactions in The Bahamas have always held their fair share of disputes and complaints concerning the out of date methods of transferring ownership from the hands of one party to another. The plea for the establishment of a land registration system seems to have fallen on deaf ears while the current system shows its numerous legal deficiencies almost on a daily basis. One of the more prominent deficiencies within the real estate industry Bahamas stems from the planning and approval process of subdivisions, currently governed by the Private Roads and Subdivisions Act (Ch.256) and the Private Roads and Subdivisions Act (out islands) (ch.257) both which regulate the approval of the formation and sale of subdivision lots throughout the islands of the Bahamas.

Unfortunately both Acts have suffered from the lack of enforcement for decades as the disregard contents of its legislative authority had affected the legitimacy of land transactions, and have made a significant contribution to the long standing congestion of the Bahamian commercial courts. Evidence of such circumstances are found in the matter of Oceania Heights Limited and Willard Clarke Enterprises Limited et. al (Cl 548 of 2000) which involved the sale of property prior to the provision of ‘final’ subdivision approval by the Minister, the agreement for sale involved in the conveyance of the subject property to the Defendants were held to be ‘void ab initio as being illegal’; the presiding judge emphasizing the fact that:

“…The law must remain such that the obvious wishes of the parliament are to be upheld…To enable the Defendants to succeed in what really was a scheme (once the attorney got involved) would be to defeat the very legislation itself and to make a mockery of the well intentioned acts of the parliament…”

Section 5 of the Private Roads and Subdivision (Out Islands) Act (Ch.257) was made central to the judicial reasoning of the decision held in the Oceania Heights Limited case, which bans the sale of the property within unapproved subdivisions or subdivisions provided with ‘conditional’ approval by the Minister. Nevertheless, despite the stipulations of both Subdivision Acts, a number of cases involving the sale of property within unapproved subdivisions emerged as unscrupulous developers refused to adhere to the legislation. This, along with other planning and environmental problems associated with the land development has prompted the Bahamas Government to develop the Planning and Subdivisions Bill, 2009.

Objectives of the Planning and Subdivision Bill

The main objectives and purposes of the proposed Planning and Subdivision Bill had intended to supply badly needed upgrades to existing out of date legislation which regulated land development along with eradicating a number of concerns involving the acquisition, physical development, and sale of property throughout The Bahamas. In his contribution to the Parliamentary debate on the introduction of the Bill, Minister of the Environment, the Honorable Earl D. Deveaux outlined a number of problematic concerns surrounding the country’s land development policies which over time had become a target of exploitation and deliberate ignorance. Details surrounding the problems with land acquisition, development, and sale can be found on page 7 of the Minister’s contribution to the Parliamentary debate on the Planning and Subdivision Bill (click here), as outlined below:

• The sale of lots which lacked subdivision approval;
• The failure of fulfilling obligations of property developers upon receiving approval to sell lots in order to pay for property infrastructure;
• The provision of building permits for unapproved subdivisions;
• The provision of building permits for subdivisions developed without Installed Infrastructure;
• The lack of utility services in subdivisions after development
• Inadequate subdivision fees;
• Uncompleted subdivisions and the inability to complete the development of family island subdivisions;

In reviewing the objectives of the Planning and Subdivision Bill, one can establish the intention of the Bill to involve the proper administration of subdivision development by the Town Planning Committee and Department of Physical Planning along with the protection of its purchasers and present/future residents with Bahamian subdivisions. The Bill also requires land developers to conduct Environmental Impact Assessments (EIA) prior to obtaining subdivision approval along with higher penalty fees for developers who are in breach of the new legislation.

Identifying the Problems

Like the origins of most recent legislative instruments, the Planning and Subdivision Bill is no exception to criticism and amendment. Rather than being interpreted as a failed attempt to bring structure to a troubled land development initiative it should be considered a significant attempt to modernize the administration of land development within The Bahamas and a rare attempt by the Bahamian Government to involve the local public in the development of the Bill’s regulations. In reviewing the first version of the Planning and Subdivision Bill you may find the chief problems within the first draft of the Bill to include the following:

Larger risk borne by the Developer

The most popular opinion held by critics of the Planning and Subdivision Bill is the notion that the Bill itself holds the land developer at a disadvantage. Like a prize fighter entering a boxing match with his strong arm tied behind his back, the ‘bureaucratic red tape’ comprising of added application approval processes, town meetings, and other procedural regulations impede on the financial strategies used by land developers for the proper and efficient physical development required by the Town Planning Committee. In the course of obtaining financial support from local banking and financial institutions, lengthy delays in the provision of subdivision approval can lead to unprofitable land development projects and an almost impossible fulfillment of debt.

The sale of subdivision lots within a land development have always been the appropriate method used both in financing debt and for the placement of utilities and roads within the subdivision. In its present state, the Planning and Subdivision Bill will require land developers to install utilities and services for each lot along with constructing a main road prior to the construction of building structure on the subdivision lot. And with the prohibition of any compensation for financial loss resulting from the revocation of subdivision approval, passage of the Bill provides a significant risk held by land developers.

In addition, clause 56 of the Planning and Subdivision Bill, which prohibits the sale of lots within a subdivision without receiving approval from the Town Planning Committee, may cause substantial difficulties for most land developer to see any financial benefit stemming from subdivision development.

Risk held by Financial Institutions

Financiers of land development projects may also find themselves facing significant financial risk as the Planning and Subdivision Bill allows for the imposition of charges on a subdivision development by the Town Planning Committee which, subjected to subdivision approval, may potentially surpass other bonds a land developer may have lodged in order to guarantee the installation of infrastructure within the subdivision.

This imposition may affect lenders seeking priority in making claim for assets in the event that a land developer is unable satisfy its debt as this priority will likely be held by the Bahamas Government. The ability of the Town Planning Committee to impose this charge would not only affect the country’s mortgage industry, but also the marketability of the property as purchasers will refrain from buying land to which a charge has been lodged.

Further Risk Held by the Purchaser

Land developers are not the only ones seeing an increased risk in subdivision development. As it stands, clause 70 of the Planning and Subdivision Bill may be interpreted as having the effect of dispossessing a lot owner of legal ownership of a lot of land within a subdivision where subdivision approval has been revoked.

Although there exists legal recourse in obtaining compensation for Purchasers who have been wrongly guided in purchasing property within unapproved subdivisions (i.e. in taking legal action against their legal representative and/ or Vendor) the Planning and Subdivision Bill fails to properly establish a practical remedy for those involved in “hoodwinking” the Purchaser into purchasing lots within unapproved subdivisions, nor does it provide for a Purchaser to confirm the provision of approval of a subdivision by means of an appropriate and reliable method.

Lack of Zoning By-laws and Land Use Development Policies

In normal situations legislation is drafted to supplement existing regulations in order to bring into effect its legal function, not the other way around. As suggested by most critics, the very “meat” of the Bill was found to be lacking, due to the fact that the Bill required all applications for subdivision approval to be compliant with National Land Use Development Policies and Zoning By – laws. Therefore, in order for the Bill to fulfill its purpose, the Land Use Plan and other National Land Use Development Policies must be in place.

Although it seems critical that subdivision development should be used to supplement land development policies and regulations, the details of the Subdivision Bill should not focus on land use policies that have yet to be implemented within the laws of The Bahamas.

Imposition of Increased Expense in the Sale of Land

The position of some critics to the Planning and Subdivision Bill may cause an increase of at least 30% for the cost of land within The Bahamas if passed. Although we are unable to confirm the accuracy of this increase, it is certain that lots within approved subdivisions will increase due to the realized expense suffered by the land developer in the course of subdivision development. This may be due to the overall increased level of capital required by the land developer and more stringent conditions imposed by financial institutions wishing take on increased risk in its involvement in a land development project. Such circumstances may also cause an increase in overall construction costs.

Further constituting increased land prices is the added process and procedures involved in the subdivision approval process which will cause further delay in land sales. Such circumstances may cause a significant increase in the price of subdivision lots.

	Mario L. McCartney is the Founder and Principal of LEX JUSTIS, 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 website @ www.lexjustis.com or email him at mmccartney@lexjustis.com, mario.l.mccartney@gmail.com.

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Last week His Lordship, Justice Neville Adderely of the Supreme Court made a ruling which may make a substantial impact in the IBC incorporation practice in The Bahamas. As seen in the article below it was ordered that the Registrar General cannot, under existing legislation restore International Business Companies (IBCs) previously struck-off for non-payment of fees. It was a judgment order based on public interests, particularly within the financial service industry and general business community. According to His Lordship, “I find 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.”

Clearly the intention of Justice Adderely is to correct the absurdity in the IBC legislation as the present IBC Act allows for the Company, member, liquidator, or creditor of IBCs struck off for non – payment of fees to apply to the court for reinstatement, the provision of which depends on whether the court determines that the reinstatement is fair and reasonable for the name of the company to be restored to the register (S166 (2)).  However the IBC Act also allows applications to the Registrar for reinstatement of struck – off IBCs after the period of 5 years upon repayment of outstanding fees (S166(3)).

Perhaps these subsections give ground to the defectiveness within the legislation as it promotes mischief within a jurisdiction known for holding corporate vehicles used criminal malice. If the legislation provides for the judicial court to determine whether reinstatement of a corporate entity is fair and reasonable, certainly the authority of the court should stand for IBCs struck-off for 5 years.

We hope to have this ruling available as soon as we get our hands on the hard copy. In the meantime, enjoy…

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No restoration for non-paying IBCs

Published On: Friday, December 04, 2009

By NEIL HARTNELL

Tribune Business Editor

A Supreme Court judge has stayed for four months his ruling that the Registrar General cannot, under existing legislation restore International Business Companies (IBCs) previously struck-off for non-payment of fees, due to its impact on the financial services industry and business community.

Justice Neville Adderley explained that he was staying his ruling for four months to give the Government, and Parliament, time “to take such action” with respect to the Registrar’s ability to restore IBCs in such a position.

His ruling effectively means that all IBCs reinstated since the IBCs Act 2000 was passed, after being struck off for non-payment of fees, should not now be incorporated. Given that such restorations have been going on for nine years, Justice Adderley’s findings could cause potential chaos for the financial services industry and its clients.

He reached his decision in ruling that a writ and statement of claim filed against BDO Mann Judd, its senior partner and accountant Clifford Culmer, and Callender’s & Co attorney and partner, Michael Scott, be struck out. A $208,850 default judgment against Mr. Culmer and BDO Mann Judd was also set aside.

The action had been brought by the Tenesheles trust and the Hawthorne Sterling Family of Funds, the former having owned the latter, which was a group of 35 underlying mutual funds.

“The primary claim is that the defendants wrongfully induced the Securities Commission of the Bahamas to place the underlying 35 companies which comprise the Hawthorne Sterling Family of Funds into a ‘protective liquidation’,” Justice Adderley recalled.

“This liquidation, according to the plaintiffs, was carried out by the defendants in such a way that it stripped the Fund Companies of their monetary assets, which primarily went by way of payment fees to the defendants, their servants and agents.”

The Hawthorne Sterling group has a much more interesting history than Justice Neville Adderley recorded in his judgment, its mastermind, Ian Renert, having seen the Securities & Exchange Commission (SEC) obtain a 2004 default judgment against him.

The US regulator had accused Renert of using Hawthorne Sterling and its funds to conduct a “fraudulent” $22 million offering of shares in the fund entities.

Justice Adderley noted that the Hawthorne Sterling Family of Funds was struck off the IBCs register for non-payment of fees on August 31, 2002. The company commenced its action on April 7, 2004, three months before it was returned to the register on June 7, 2004.

“However, the IBC Act 2000 contained no express provision, nor does it contain one now, for the Registrar to restore a company to the register if struck-off for non-payment of fees,” Justice Adderley recalled.

Parliament

While agreeing that Parliament had amended several “absurdities” in the IBC Act 2000 over the years, Justice Adderley said there was nothing “implied” in that legislation that allowed the Registrar General, acting as the Registrar of Companies, to restore an IBC after it was struck-off for non-payment of fees.

The Supreme Court’s job, Justice Adderley added, was to ascertain Parliament’s intention in passing a law based on the words in the statute, “not substitute its will for that of the legislation”

As a result, Justice Adderley said Hawthorne Sterling’s restoration was “a nullity”, as the Registrar had no power to do so. This meant Hawthorne Sterling had no power to sue or bring the action.

“I find 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,” Justice Adderley ruled.

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Most individuals are familiar with unlocking cell phones: say you purchase the latest cell phone from any major city in the US, (U.K, or Canada), but of course it is purchased from one of those companies which restricts the use of their cell phone in other cell networks by “locking” the software component of the cell phone. Of course you reside in The Bahamas and have no intentions on using the company’s cell phone system, you only want the cell phone to take home and insert your favorite chip for immediate use.  So you take the phone to the fella’ that knows how to make the cell phone work in Nassau and after your purse of a couple of reddish-purple colored notes , your phone is ready for use.

The scenario is a common occurrence that has been going on in The Bahamas since the birth of the network chip which is now used in both prepaid and postpaid systems with the Bahamas’ government owned Bahamas Telecommunications Company (“BTC”) neglecting to curtail the high volume of cell phones being “unlocked” for use on the local network (although there was period in which a pre-paid network chip was issued upon proof of purchase of a BTC cell phone). Now as the privatization of the Bahamas Telecommunications Company snails its way to completion and as new phone companies strategize their entry into the Bahamian communications market thereafter, will the act of unlocking cell phones continue to relish in its innocence?

If there happens to be more than one cell phone company in the future Bahamian market you may expect to find the pay-as-you-go category to be very competitive, thus leading to many individuals jumping from one cell phone network to another by having the software on their cell phones unlocked, possibly by the competing cell phone companies. The continuing innocence of this act, whether conducted by competing cell phone companies or by the lone cell phone software hacker will be decided at the conclusion of the matter of MetroPCS Wireless, Inc. v. Virgin Mobile USA, L.P., 2009 WL 3075205.

In this matter, MetroPCS reconfigures cell phones from other providers to operate on its wireless network, a process called “reflashing” (we referred to the term ‘unlocking’ in the previous paragraphs). Virgin branded Mobile phones were “reflashed” by MetroPCS so that they could work on the MetroPCS cell network, despite Virgin Mobile phones being originally locked in the Virgin Mobile Network so that they could only function exclusively on the company’s cell network.  Customers use Virgin handsets that bear the VIRGIN MOBILE trademark on the face and show the logo on the electronic display, and there are also proprietary software that uses security measures to “control access” to its software and prevent alteration, the preservation of which is protected under the terms of service prohibiting alteration of the hardware or software and barring use of the handset on any other wireless network.

MetroPCS, on its part, reflashes cell phones only when a owner requests and buys service with the company, part of which is signed agreement to terms specifying that the handset will use a network other than that of the provider whose marks appear on the handset; that they’ll get only voice and text messaging; that they don’t have a contract with another service provider; and that the owner isn’t part of a scheme to get bulk quantities of handsets. Furthermore the agreement specifies that the owner won’t use the original provider’s trademarks in selling, distributing, or advertising his/her handset.

Virgin alleged direct and contributory trademark infringement, dilution, and tortious interference with contract by MetroPCS. The company’s argument hinges on the allegation that reflashing the phones to operate on a different network in effect creates new phones (thus satisfying the “use in commerce” requirement). The act results in trademark infringement due to the fact that the “new phones” still bear the Virgin Mobile trademark.

In applying for summary judgment the court examined on the various issues in dispute, the judicial rulings on each may act as persuasive legal standpoints in similar court actions involving the communications industry. In failing to provide summary judgment in favor of Virgin Mobile USA, the ruling judgment outlined several issues which led to the failure of Virgin’s application which can be found in this Memorandum Opinion and Order found at this link:  http://pub.bna.com/eclr/08cv1658_092509.pdf

A good summary of the case can be found on Rebecca Tushnet’s 43 (B)log: http://tushnet.blogspot.com/2009/10/flash-forward-cellphone-lawsuit.html

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IMPORTANT NOTICE TO OWNERS/OPERATORS OF RENTAL HOMES IN THE COMMONWEALTH OF THE BAHAMAS

EFFECTS OF AMENDMENTS TO THE HOTELS ACT, THE REAL PROPERTY TAX ACT AND THE INTERNATIONAL PERSONS LANDHOLDING ACT

Recent amendments to the Hotels Act, Ch. 288, effective July 13, 2009 and August 5, 2009, have introduced the new definition of “owner-occupied rental home” and, along with recent amendments to the Real Property Tax Act, Ch. 375 and the International Persons Landholding Act, Ch. 140, owners are being afforded a number of benefits and incentives.

Under the Hotels  Act and Real Property Tax Act and International Persons Landholding Act, respectively, owner-occupied rental home and owner-occupied property are defined as “property occupied by a person who being the owner in fee simple or a mortgagor in possession, occupies and resides in such property exclusively as a dwelling house on a permanent or seasonal basis”.

Owners wishing to benefit from these amendments must apply for a licence to operate their premises by completing an Application for Licence to Operate under the provisions of the Hotels Act.

BENEFITS OF THESE AMENDMENTS

(i)              Real Property Taxes on licensed owner-occupied rental homes will be calculated as follows:

(a)            the first $250,000 of the market value of the property shall be exempt;

(b)            properties exceeding $250,000 but are not in excess of $500,000 will be taxed at a rate of ¾% per annum of the market value, as compared to the commercial rate of 1%

(c)             properties exceeding $500,000 but are not in excess of $5 million will be taxed at a rate of 1% per annum of the market value, as compared to the commercial rate of 2%

(d)            properties exceeding $5 million will be taxed at a rate of ¼ % per annum of the market value, as compared to the commercial rate of 2%

(ii)            The Real Property Tax Act amendment also provides for the waiver of surcharges under certain circumstances in relation to licensed owner-occupied property:

(a)             any surcharge which has accumulated with respect to owner-occupied property of up to $250,000 shall be waived

(b)             the surcharge shall be waived in relation to owner-occupied property which exceeds $250,000, if the outstanding real property tax is paid on or before December 31, 2009.

Revival of Surcharge

The amendment provides for the revival of surcharge and, if after December 31, 2009 any real property tax remains outstanding in respect of:

(a)   owner -occupied property with a market value of up to $250,000

(b)   owner-occupied property which excess of $250,000

(c)    other property,

then the owner of such property, shall be liable to pay a new surcharge of 5%
of such tax per annum.

REQUIREMENTS TO ACCESS THESE BENEFITS

1. Owners of owner-occupied rental homes wishing to take advantage of the reduced real property taxes must provide the Chief Valuation Officer, Business Licence/Valuation Unit, Ministry of Finance, P. O. Box N-13, Frederick Street, Nassau, Bahamas, tel: 242-325-1171;   fax: 242-328-8003; e-mail:busrptadministration@bahamas.gov.bs with the Assessment Number of their property on or before October 15, 2009. Where the property is owned by a company, in order to be re-classified as residential, the beneficial owner shall submit to the Chief Valuation Officer an affirmation stating that such property is occupied by the beneficial owner exclusively as a dwelling house on a permanent or seasonal basis, which can be downloaded on-line atwww.tourismtoday.com/prelim/oorh. Real property tax billings issued in October 2009 will reflect any change in the status of owner-occupied rental homes provided the information is submitted on or before October 15, 2009 to the Valuation Department.
2. In addition, owner-occupied rental homes must operate under a licence obtained from the Chief Licensing Officer, Hotels Licensing Department, Ministry of Tourism,  Nassau, P. O. Box N-3701, Nassau, Bahamas, tel: 242-356-5216; fax: 242-356-5904; e-mail: mmosshepburn@bahamas.com, or, in the case of Grand Bahama Island and the Out/Family Islands, the Local Government Administrator’s Office in the relevant District.

Application forms, along with the Form 1C, may be downloaded on-line atwww.tourismtoday.com/ prelim/oorh, or collected from the Hotel Licensing Department, Ministry of Tourism, Nassau, or the relevant Local Government Administrator’s Office.

1. All licensed operators/owners of owner-occupied rental homes shall collect a hotel guest tax of six percent (6 %) of the total room rate for the period during which each guest is provided with sleeping accommodation at such owner-occupied home of one or more bedrooms.  Such tax shall take immediate effect and shall, by law, be paid by the 15^th of each month thereafter.
2. The hotel guest tax so collected by the operator (or designated property manager/ management company/caretaker) must be paid to the Chief Licensing Officer, Hotels Licensing Department, P. O. Box N-3701, Nassau Court, Nassau, Bahamas, or relevant Administrator’s Office on Grand Bahama or the Out/Family Islands, along with a completed Monthly Return of Hotel Guest Tax form (Form X), which may be downloaded on-line at www.tourismtoday.com/prelim/oorh, no later than the fifteenth of the month next following the month to which the return relates.  Payments are to be made payable to the Bahamas Public Treasury.Additionally, amendments to The International Persons Landholding Act:

i)      require that fees payable under the provisions of the Act by non-Bahamians, instead of being paid to the Secretary to the Board, be paid directly to the Public Treasury and the Secretary to the Board be provided evidence that payment was made to the Treasury.

ii)     has replaced “single family dwelling” with “owner-occupied property”.

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As an attorney operating within the rigid margins of a highly traditional legal system, I did not think that the day will come when popular social networking sites would be used as a legal means of service in an industry known to resist any form of change. Now, after a recent case in Australia where Facebook was used to serve a court order, the High Court of the United Kingdom has granted permission for an injunction to be served via Twitter.  You can find the report here: http://news.bbc.co.uk/2/hi/technology/8285954.stm .

In The Bahamas the legal system usually takes the legal precedent Commonwealth nations (including the UK) under consideration when making a decision, thus making the possibility for the use of social networking sites as mediums for service a possibility. Under current practice The Bahamas also allows the use of fax as a means of service, but traditionally service of documents is governed by the Ch.61 of the Rules of the Supreme Court which indicate that service of any document  is required to be served personally, may be effected-

• by leaving the document at the proper address of the person to be served; or
• by post; or
• in such other manner as the Court may direct.

Should the person have no proper address his address for the purposes aforesaid shall be-

• his post office box, if he has one;
• in any case, the business address of the attorney (if any) who is acting for him in the    proceedings in connection with which service of the document in question is to be effected; or
• in the case of an individual, his usual or last known address; or
• in the case of individuals who are suing or being sued in the name of a firm, the principal or last known place of business of the firm within the jurisdiction; or
• in the case of a body corporate, the registered or principal office of the body.

The use of social networking sites are quickly changing the way in which individuals interact, and not surprisingly a number of lurking legal situations may lead to the use of this precedent in situations where the real identity and address of the proposed defendant is unknown and uses the social networking sites as a means of communication.

Once we get further information on where to locate the actual precedent we will be sure to share…

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