In a time of drastic changes, it is the learners who inherit the future. The learned usually find themselves equipped to live in a world that no longer exists - Eric Hoffer
Barbados in the year 2014 has taken some notice of Hoffer's admonition and has sought to institute some fundamental changes to the ongoing structure of its international business architecture. It has given due recognition to the certainty which safely asserts that success is an ongoing state since the alternative is a sure cause for lack of competitiveness and eventual demise. Two particular changes stand out; the one structural and the other legislative.
In the first place, the new licensing regime for international business companies and societies with restricted liability has been ushered in to operation with resounding approval from service providers as well as users and managers of such entities. As a tax treaty jurisdiction, which makes full use of those treaties for the structuring international transactions, it is critical that an effective licensing regime exists for the certification of those entities enjoying preferential tax and other incentives. Furthermore, as a country, which has traditionally based, its international and domestic policy on trust and transparency, an updated and user-friendly licensing regime adds a greatly desired and enhanced level of certainty and reliability.
To give such certainty, The International Business (Miscellaneous Provisions) Act 2014 came in to effect on August 25 2014; making provision for an indefinite licence and also introducing a revised fee structure to all International Business Companies and all International Societies with Restricted Liability. The new fees and process may succinctly be summarised as follows:
- All currently valid and issued licences of International Business Companies and International Societies with Restricted Liability will be considered indefinite licences and remain valid unless cancelled.
- Licences are subject to cancellation by the Minister of International Business where, inter alia, a licensee fails to comply with a condition of its licence.
- It is a condition of a licence that in respect of any year, the licensee pays a prescribed annual fee (now $500) on or before December 31 of the preceding year.
- It is also condition of a licence that on or before December 31, the licensee submits to the Ministry, together with the annual fee, an annual form providing such information as is required by the Minister.
- On payment of the annual fee and submission of the annual form a receipt will be issued. No new renewal licence will be issued by the Ministry.
- As regards, late renewals and the risk of becoming unlicenced, the following clarity is established:
- If, on or before December 31, a licensee fails to pay the prescribed annual fee and submit the annual form, it must pay $1000 on or before January 31 of the licence year ($500 annual fee plus $500 pecuniary penalty for late payment).
- If, on or before January 31, the licensee fails to submit the annual form, make the payment of the annual fee and the late penalty, it will be considered unlicenced and a new application will he to be submitted for the issuance of a new licence.
- There is no longer any provision for the reinstatement of licences.
On May 16 2014, the eagerly awaited Private Trust Companies Act 2012 was duly proclaimed after a few technical hurdles of the intervening period had been settled. Although practitioners had for long been utilising well-designed structures in lieu of such legislation, yet this introduction has provided a welcome certainty and reliability.
The legislation provides a simple registration form, which after completion allows the applicant to receive a Certificate of Incorporation under the Companies Act. It allows for annual registration on payment of the appropriate fee, and calls for a Registered Agent with a Registered Office and also a Special Director. This director must be a resident of Barbados, of good character and with at least five years experience in a discipline related to the administration of trusts including one or more of the following: law, finance, accounting, investment management, or trust and estate planning. It must use the words "Private Trust Company" or the letters "PTC" in its name. There are strict prohibitions against disclosure of information in connection with the affairs of such an entity, as well as any prospective applicant. Not surprisingly, the Private Trust Company is essentially exempt from tax except in specific circumstances stated in the legislation. Finally, in the first schedule to the Act, a very carefully definition of "connected persons" is provided.
In view of the recent 2008 financial crisis and the revisions to Basel II together with the emergence of Basel III, the Central Bank of Barbados adjusted its approach to implementation of Basel II. The recent research on the financial crisis by the Basel Committee on Banking Supervision and by other entities had emphasised the need to improve risk management processes and techniques within the banking industry as well as to strengthen the regulatory framework. The importance of Pillar 2 of the framework has therefore taken on a special prominence for the Barbados regulators. Hence, the Bank in strengthening its own regulatory framework is requiring the management of Barbadian banking institutions to also improve and strengthen their risk management processes. It has therefore adopted a phased approach to the Basel implementation with an initial focus on the qualitative aspects of Pillar 2 and, inter alia, is working towards a better understanding of the risk profiles of licensees in Barbados.
Barbados is truly looking towards the future, building on a proud legacy which has skillfully adopted and adapted double tax treaty utilisation with the twin aims of national economic development while at the same time championing individual wealth management.
Partner
Chancery Chambers
Bridgetown
