Bahamas: Offshore Business Sectors
Trust Management has been a major activity in the Bahamas for 50 years or more. Originally the trust was used primarily by wealthy individuals from the major common law countries, but it is now accepted as a major technique of asset protection in all parts of the world. In the last 10 years the Bahamas have extended and adapted their trust laws, most recently with a new Trustee Act 1998, to accommodate this wider market, which is not necessarily interested so much just in tax avoidance, but also in the efficient management of wealth in a more general sense. See Law of Offshore for a fuller treatment of trust law in the Bahamas.
There is a large and sophisticated community of professional advisers on trust matters in the Bahamas. Individuals can provide trust services without registration, but companies offering trust services must be licensed under the Banks and Trust Companies Act 1965. Foreign or Bahamian companies may obtain licenses. These are issued by the Central Bank of the Bahamas, following a stringent application procedure.
A licensed trust company may be 'public' or 'restricted'. 'Restricted' companies require less capital, but are more strictly controlled. See Law of Offshore and Offshore Legal and Tax Regimes for further details of the licensing regime for trusts, and fees payable.
Bahamian trusts (other than those holding Bahamian property) do not have to be registered, and the 1998 Act disapplies Exchange Control Regulations to non-resident settlors, donors, beneficiaries and trustees - therefore it is no longer necessary for trusts to be registered with the Central Bank as non-resident. This applies to existing trusts as well as to new ones.
The 1998 Act provides for the appointment of a 'protector of trust', effectively a supervisor of the trustee(s), and also managing and custodian trustees.
Bahamian Attorney-General Alfred Sears called in 2004 for the jurisdiction to catch up with many of its peers by enacting the Purpose Trust Bill. Addressing the House of Assembly, Mr Sears explained that these types of purpose trusts have become an increasingly popular way to hold shares in a special purpose vehicle often utilised in off-balance sheet transactions and securitisations.
"This type of trust can be utilised as an appropriate vehicle through which to promote the interests of an association or a club or a similar unincorporated body," stated the Attorney General. He added that around twenty jurisdictions have similar legislation, including Bermuda, Barbados and the British Virgin Islands. Legislation was indeed passed later in the year.
In December, 2005, Bahamian Minister of Financial Services and Investments, Allyson Maynard-Gibson announced that the government is in the final stages of developing additional financial services legislation to launch the country's private trust companies product.
According to Minister Maynard-Gibson, the Government has been 'meticulous' in its approach to defining the new legislation to ensure that it will stand up to international scrutiny of the highest order.
"It's very important to roll out, when we roll it out, in a way that is effective and so the time has been taken to ensure that whatever product we launch does not open the door for any re-listing or any questions about how we do business in The Bahamas," stated the Minister.
"The Government, together with the private sector and the regulators, has been very careful and meticulous about our approach to this and I am (very) happy that we took the time necessary to do it properly," she added.
Comprehensive new Private Trust Companies legislation passed both houses of parliament in the Bahamas in December 2006. Under the legislation, a Bahamian PTC, like other structures such as foundations, does not require regulatory approval. The PTC need only arrange its affairs with a regulated Bahamian service provider or Registered Representative.
The legislation which allows for the formation of Private Trust Companies (PTCs) is the Banks and Trust Companies Regulation (Amendment) Act, 2006, and the Banks and Trust Companies (Private Trust Companies) Regulations, 2007.
Under the legislation this class of trust is defined by reference to the Designated Person(s). The Designated Person(s) is an individual(s) who is identified at the establishment of the PTC and with whom all other settlors of trusts, for whom the PTC acts as trustee, must be related. With the requirement that the Designated Persons must be related, and that all other settlors of trusts, for whom the PTC acts as trustee, must be related, the PTC can act as Trustee for an unlimited number of trusts and can benefit anyone (subject to due diligence requirements) from the assets of the trusts.