Bahamian IBC: In Compliance With International Best Practices, And A Legitimate Vehicle For International Business

The Bahamas introduced a new International Business Companies Act, 2000 on December 29, 2000. This Act was introduced as the Government sought to address legitimate concerns raised by the FSF and FATF, as well as the OECD’s “harmful tax initiative”. In this regard, the new IBC Act prohibited the issuance of bearer shares. This was an essential step in strengthening the “Know Your Customer” regime in the Bahamas, and towards full compliance with FATF recommendations.

From a practical perspective, the use of bearer shares in The Bahamas varied by service provider. Some service providers as a matter of policy avoided the facility of bearer shares, while others issued such shares, but insisted that they maintain control over the shares. Other providers delivered the bearer shares. The new law requires that all bearer shares that were in issue at December 29 be cancelled, with registered shares issued in their stead.

One of the overriding goals of the new IBC Act, and the 10 additional bills passed as part of a new international financial compliance regime, was to maintain the reputation of The Bahamas as a responsible jurisdiction. The Act therefore requires that the IBC must maintain a register of Directors and Officers at its Registered Office. The Act further requires an IBC to file with the Registrar General (a public records office) a copy of the Register of Directors and Officers. Contrary to a recent report in the international media, the IBC Act, in fact, does not require that the register of shareholders or ownership of the company be made public. Such information remains confidential.

Further to dialogue with industry, Government has clarified that the new IBC Act was not intended to require a minimum of two shareholders. Additionally, certain requirements such as the need for maintaining at least two directors are to be reviewed. The Bahamas is intent on having a legislative, regulatory and supervisory financial regime that meets international standards of best practice. The anticipated changes still maintain compliance with the FATF recommendations and the OECD requirement for transparency.

With the 11 bills passed in 2000 and implementation procedures commenced early in the year, The Bahamas is now in full compliance with both the FATF and FSF guidelines. It has for several years engaged in constructive dialogue with the OECD regarding that organisation’s harmful tax initiative. This dialogue is ongoing but, in fact, with the introduction of the IBC Act The Bahamas has eliminated the only OECD-deemed “ring-fencing” issue by permitting IBCs to purchase an interest in real property and undertake other domestic business, and allowing Bahamians to own shares in an IBC. However, Government has reaffirmed that the Bahamas will not impose income, capital gains or inheritance tax on its residents or companies, be they domestic or international business companies, as these taxes have never suited the Bahamian fiscal environment.