Flexible, private-wealth management

By Michael F. L. Allen, partner, McKinney Bancroft & Hughes

More than fifteen years since the introduction of the initial International Business Companies Act, the product it created, commonly referred to as an ‘IBC’, has emerged as a centrepiece for a myriad of wealth-management solutions and is widely used within the Bahamian offshore financial-services industry. Financial planners who are aware of the significant breadth of services available from within The Bahamas will appreciate the degree of responsibility, creativity and innovation that characterises the Bahamian brand of services.

Whether standing alone or operating within the context of a carefully crafted and customised wealth-management programme, the IBC brings integrity, diversity and flexibility to the wealth-management arena.

Integrity

The Bahamian IBC is internationally accepted as a credible corporate vehicle for international business, having achieved this status through a series of adjustments directly affecting the original Act and the influences of a compendium of legislation enacted during 2000. The legislation was designed to ensure that The Bahamas observed best international practices. The legitimacy of the IBC as a tool for wealth management comes as a result of the participation by The Bahamas in a global effort to combat illegal activity, including money laundering. All IBCs are required to be serviced by a regulated corporate service provider, whose statutory obligation is to comply with internationally recognised ‘Know Your Customer’ standards. Information on instructing clients and beneficial owners is retained by the service provider in confidence and is available for inspection only by the statutorily appointed inspector. The IBC must have a registered agent and office in The Bahamas and must maintain a current register of directors and officers on the public registry.

The directors and officers are under a statutory duty to perform their functions honestly and in good faith to the best interest of the company, as well as exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. All shares issued by an IBC must be registered shares. Registered shareholders, however, are not disclosed on the public record.

Diversity

The IBC may be employed in a number of ways by practitioners. It may function as a holding company, retaining a variety of assets including ships, real property situated anywhere in the world, securities or other personal luxury items. It may also exist as a vehicle through which a plethora of investment activity may be conducted. The IBC can be customised for use as a captive insurance company and is often used as the underlining structure for investment funds (including hedge funds), private trust companies and segregated accounts companies. Its shares often form the corpus of traditional charitable and purpose trusts and may be held as assets of a Bahamian foundation. An IBC may apply to be registered as a limited duration company (LDC) with a life limitation of 30 years or less. The LDC will typically exist for a specific purpose and like an IBC, in addition to its capacity to freely conduct business in the international market, will be able to do business in the Bahamian domestic market with the appropriate approvals. IBCs and LDCs will be exempt from income tax, inheritance or succession taxes, capital gains and estate taxes for a period of 20 years from the date of incorporation.

Flexibility

The Bahamian IBC is understood to be among the most user-friendly, investor-oriented corporate vehicles available to the international investor. The provisions of the International Business Companies Act, in effect, create a flexible tool second to none available in other international offshore centres. The IBC may be used to engage in any act or activity that is not prohibited under the laws of The Bahamas. It need only have one shareholder and one director.

Its shares may have no par value and its authorised share capital may be designated in any currency. There is no statutory filing of accounts and it need not be obligated to having an annual general meeting. The incorporation process may be effected exclusively by the Bahamian corporate-service provider without client signatures on incorporation documents. Once incorporated, the IBC may continue its existence into other acceptable jurisdictions.

When the international investor’s concerns are addressed the IBC will inevitably be positioned as a critical component to solutions ranging from the simplest to the decidedly sophisticated, which contributes to an enviable array of possibilities.