The
Turks and Caicos Islands emergence as
a major corporate domicile dates from
the enactment of the Companies Ordinance
1981.The legislation is regarded as highly
innovative and has been duplicated by
other jurisdictions. The Ordinance continues
to be amended to meet the changing demands
of the international business community.
This
section of the 
site describes the most important types
of offshore business activity carried
out from the Turks & Caicos Islands.
In
common with many other offshore jurisdictions,
the Turks and Caicos Islands are responding
to pressure from the OECD by tightening
up regulation. Specifically, the Turks
and Caicos are responding to the recommendations
of the November 2000 KPMG Independent
Review of Financial Sectors in the Caribbean
Overseas Territories.
Turks and Caicos Banking
In recent years in line with international
banking guidelines the Turks and Caicos
Islands have adopted a policy of accepting
only established banks or the treasury
operations of listed corporations. In
1998 Belize Bank selected the Turks and
Caicos Islands as the venue for its first
venture outside Belize making Belize Bank
only the 4th bank ever to be licensed
in the Turks and Caicos Island for domestic
purposes. The introduction of mutual funds
legislation was expected to attract further
applications for banking licences. There
are seven licensed banks in the jurisdiction
(2007), most of which are licensed to
carry out domestic and international services
from within the islands.
Two
types of banking licence can be granted:
-
National Banking Licence: This licence
is granted for banking activities
to be carried out locally with islanders
and other residents and will only
be granted to the branches or subsidiaries
of banks which have an established
track record and which are subject
to effective consolidated supervision
by their home supervisory authority.
Exceptionally a national banking licence
may also be granted where the bank
is predominantly locally owned.
-
Overseas Banking Licence: This licence
is granted for banking activities
which are to be carried on outside
the Turks and Caicos Islands. The
holder of such a licence cannot accept
deposits from or lend to residents
of the Islands. An application for
such a licence will only be considered
from:
-
The branches or subsidiaries of
banks with an established track
record and which are subject to
effective consolidated supervision
by the overseas banks home supervisory
authority
- Banks
which although not subsidiaries
are closely associated with an
overseas bank and which by agreement
will be included within the consolidated
supervision exercised over the
overseas bank by the overseas
banks home supervisory authority
- Wholly
owned subsidiaries of major corporations
where the objective of the subsidiary
is to undertake in house treasury
operations which are fully consolidated
within the published financial
statements of the parent company.
All
banking licences are subject to continual
detailed review. Whilst there are no published
guidelines as to the minimum capital, two
of the main requirements are the submission
of a detailed business plan and the written
consent of the home supervisory banking
authority. A national banking licensee holder
must file monthly and quarterly statements.
An overseas banking licensee holder is required
to file less detailed returns on a quarterly
basis. All banks must submit annual audited
accounts. See Law
of Offshore for further details of the
application process and the supervisory
regime; see Offshore
Legal and Tax Regimes for details of
fees payable.
BACK
TO TOP
Turks
and Caicos Insurance
See Offshore Business
Review – Insurance for a more
general treatment of captive insurance
companies.
The Turks and Caicos Islands is a significant
centre for offshore insurance services.
By 2004 more than 2,800 licences had been
issued to Insurance companies and intermediaries
under the Insurance Ordinance 1989. The
insurance legislation in the Islands has
been described as both flexible enough
to accommodate the needs of the client
and to keep operating costs low but yet
backed up by a regulatory regime which
is strictly enforced.
The
Islands are said to be a domicile of choice
for captive and restricted licence insurers.
While
several dozen
captive insurers have been set up, but
the Turks and Caicos' main insurance success
story is the 'credit life' or "producer
owned reinsurance companies" (PORCS)
many of which are owned by US automobile
dealers who reinsure credit related risks
arising from their dealerships which have
been placed initially with rated primary
insurers. More than 2,000 such companies
have been set up. Credit life reinsurance
companies are known as section 7(11) companies.
They are restricted to offering reinsurance
only to named and acceptable insurance
carriers already regulated in an approved
jurisdiction and are exempted from certain
reporting requirements and licensing fees.
There
has also been burgeoning interest in the
formation of mortgage guarantee reinsurance
companies.
The
insurance industry is governed by the
Insurance Ordinance 1989 and the Insurance
Regulations 1990. These Ordinances together
with the 1995 Guidelines on the Issuance
of Insurance Licences establish the licensing
process: see Law
of Offshore for further details of
the licensing and supervisory regimes.
BACK
TO TOP
Turks
and Caicos Investment Fund Management
Collective investment schemes may be created
either by incorporating a mutual fund
company or by establishing a unit trust.
Although historically mutual funds and
open ended investment companies have been
governed by the Companies Ordinance 1981,
in December 1998 new Mutual Funds legislation
was approved and implemented.
Application for registration must be made
to the Financial Services Commission.
Unless the fund falls within an exempted
category it must be licensed and registered.
In granting a licence emphasis is placed
on the credentials of the promoters and
their expertise in the proposed investment
area. All funds are subject to ongoing
monitoring of their activities. The new
legislation provides for the appointment
of licensed administrators who will oversee
the conduct of the fund in the interests
of the investors.
The
Islands' mutual funds regime provides
for four types of fund:
-
Registered
mutual funds constituted under TCI law
which are authorized to issue equity interests
only to investors who meet prescribed
qualifications or in which equity interests
are listed on a stock exchange recognized
by the TCI authorities for this purpose.
- Recognized
mutual funds constituted outside the TCI
whose equity interest are listed on an
approved exchange.
- Licensed
mutual funds, a category for funds which
fall outside the registered and recognized
headings, but are otherwise approved.
- Exempt
mutual funds in which the equity interests
are held by not more than fifteen investors
the majority of whom are capable of appointing
or removing the operator of the fund,
or funds that are authorized to issue
equity interests only to professional
investors (as defined).
A
TCI fund can be structured as a company,
a partnership (limited or otherwise) or
as a unit trust.
The
Investment Dealers Licensing Ordinance came
into effect in 2003 and provides for the
regulation, licensing and supervision of
securities brokers, asset managers and investment
advisors. It includes a requirement that
a licensee must maintain minimum capital
in liquid assets within the TCI, which at
the time of implementation, amounted to
the higher of USD250,000 or 2.5% of funds
under management.
BACK
TO TOP
Turks and Caicos Ship Management and Maritime
Operations
See Offshore Business
Review – Shipping for a more
general treatment of offshore shipping
registries.
The Financial Services Commission is responsible
for the registration of ships. The Islands
have an active shipping registry in which
vessels of up to 150 Gross Registered
Tonnage can be registered. By way of exception,
registration is allowed of vessels of
more than 150 Gross Registered Tonnage
where such registration is deemed to be
of unusual economic benefit to the Islands.
Registration
is confined to vessels owned by British
subjects or entities or corporate bodies
established under and subject to the laws
of the Turks and Caicos Islands, the United
Kingdom and other British dependent territories.
A non-British subject can register his
boat in the Islands by transferring ownership
to a company incorporated in the Islands.
Registration of ship mortgages and transfers
from other shipping registries can also
be carried out.
There
are no requirements as to crew nationality.
Registration in the Turks and Caicos Islands
entitles a vessel to fly the red ensign
and to any rights of passage which might
accrue thereto as well as other incidental
privileges arising within the British
Commonwealth.
Vessel registration in the Turks and Caicos
Islands is conducted in accordance with
the provisions of the United Kingdom Merchant
Shipping Acts of 1884-1967. The Merchant
Shipping (Categorisation of Registries
of Overseas Territories) Order 1992 restricted
the category of ships which could be registered
in the Islands to vessels of 150 Gross
Registered Tonnage and expressly prohibited
the registration of passenger ships and
ships used on international voyages.
In most jurisdictions, and the Turks and
Caicos Islands is no exception to the
rule, an extended visit can be treated
by Customs as a declaration of intention
to permanently import the vessel. A vessel
imported into the Islands attracts import
duty and a surcharge representing 11%
of the value of the ship. On 15th March
1996 the Islands' Director of Customs
issued the Customs (Pleasure Craft) Direction
1996 with a view to removing the uncertain
tax situation which arises when a vessel
is on an extended visit. In order to avail
oneself of the benefits of this directive
the vessel's captain must fly the yellow
quarantine flag from the time of entry
to the time of departure, must not drop
anchor, must not load or unload in the
absence or authorisation of a customs
officer, must file the necessary reports
which Customs requires and upon departure
must apply for clearance on the prescribed
form obtained from the Customs officer
attending the vessel at the time of its
entry into the Islands.
Alternatively
the captain of a vessel can apply for
a Temporary Cruising Permit which allows
the yacht to stay on the Islands for up
to 3 months without being subject to duty.
A vessel can only apply for 2 Temporary
Cruising Permits in any one year which
effectively means that if a vessel is
moored for more than 6 months in the Turks
and Caicos Islands it will be deemed to
have been permanently imported and will
be required to pay import duty amounting
to 11% of its value.
BACK
TO TOP
Turks
and Caicos Trust Management
More than 20 licensed companies offer
professional trustee services making trusts
one of the most active areas of the Turks
and Caicos Islands offshore centre. Most
functions relating to the licensing, review
and regulation of trusts are carried out
by the Superintendent of Trustees based
at the Financial Services Commission.
The
Trustees (Licensing) Ordinance 1992 provides
for the licensing and regulation of trust
companies and other professional trustees.
The Trustees (Licensing) Regulations 1992
set out the form of the application for
obtaining a trustee licence, the categories
of trust licences, the details required
in an application for a trustee licence,
reporting requirements and the rules governing
the conduct of licensed trustees. Licensed
trustees are required to submit financial
returns, appoint auditors and maintain
professional indemnity insurance.
The
Trust Ordinance (1990) defines a professional
trustee as someone who receives remuneration
for his services as a trustee, sets out
the general requirements for licensing
professional trustees, the powers and
duties of the Superintendent of Trustees,
and miscellaneous provisions regarding
liability, confidentiality and the non-
application of the Recording of Deeds
Ordinance.
Licenses
can be restricted or unrestricted:
- A
restricted Trustee Licence is issued on
the basis of an undertaking by the trustee
that it will act as a professional trustee
only in respect of a named trust or trusts.
An annual fee of $750 is payable for this
licence. Restricted Trustee Licences are
normally used in connection with family
trusts.
- An
unrestricted Trustee Licence is issued
without any restriction on which trust
or trusts the trustee can act for. An
annual fee of $3000 is payable to the
Financial Services Commission.An important
requirement in the licensing process is
the submission of a Business plan together
with full financial disclosure and business
references on both the principals and
managers of the proposed licensee .The
minimum capital requirement is $250,000.
Many professional firms consider a trustee
licence to be an appropriate and cost
effective alternative to a banking licence.
The
Trustees Licensing Exemption Order 1992
exempts the following entities from licensing:
- A
company which is the trustee of a single
trust and the issued share capital of
which company is entirely beneficially
owned by one or more of the beneficiaries,
the settlor or by a combination of the
beneficiaries and settlor. Family trust
companies sometimes fall under this category;
- A
company which is the trustee of a single
trust and which has its registered office
in an approved jurisdiction;
- A
company which acts as a bare trustee with
no interest in or duty to the trust property
except to convey it when directed by the
beneficial owner.
