Beneficial Ownership

Bahamas Legislation used as a tool to capture information on beneficial owners to help curb global tax crimes, money laundering and other bad acts… how does it affect you?

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If you are the beneficiary of a legal entity (see definition below), you may be required by law to provide certain information of a personal nature about yourself for entry into a secured database.

Why is this the case?

The Bahamas continues its efforts to meet the ever-changing requirements imposed on its financial sector by global financial bodies such as the Financial Action Task Force (FAFT) and the Organization for Economic Development (OECD).   One recent attempt at meeting obligations imposed on it, is the enactment of the Register of Beneficial Ownership Act, 2018 (the Act).

This Act establishes an e-register which is intended to be a secured repository of information concerning the ultimate beneficial owners of legal entities or arrangements and is maintained by Registered Agents, but accessible only by “designated persons”.

As stated earlier, the Act applies to legal entities, which are defined under the Act as an entity incorporated, registered, continued or otherwise established in accordance with the Companies Act (Ch. 308); or International Business Companies Act (Ch. 309).

Under the Act a registered agent is one of the following:

  1. Counsel or Attorney as defined under the Legal Profession Act (Ch.64), who provides incorporation, maintenance of registered office or other company management services;
  2. A licensee under the Financial and Corporate Service Providers Act (Ch. 369);
  3. A company licensed under the Bank and Trust Companies Regulation Act (Ch. 36).

Beneficial Owners Defined

The Act defines “beneficial owners” as follows:

  1. A natural person who ultimately owns or controls a legal entity;
  2. In the case of a legal person, a natural person, (except for those entities listed on a securities exchange), who ultimately owns or controls, whether directly or indirectly, ten or more percent of the shares or voting rights of the legal entity;
  3. In the case of a legal person a natural person who otherwise exercises control over the management of the legal person other than solely in the capacity of a director, advisor or professional manager;
  4. In the case of an insolvent liquidation, administration or receivership of a legal entity the liquidator, administrator or receiver;
  5. In a receivership, a creditor who appoints a receiver over 25% or more of the shares or voting rights in a legal entity;
  6.  In the case where a deceased was a shareholder in a legal entity, the natural person who acts as executor or personal representative over the estate.

The above makes its clear that the Act is seeking to go beyond legal ownership and control to capture the notion of actual ownership and control.  It focuses on the natural person who actually enjoys the benefit of the capital or assets of the legal person, as well as those who exercise effective control over the legal person whether formally or not.

What type of information is being captured?

Some view corporate vehicles including companies, trusts, foundations, partnerships and the like as being vulnerable to misuse by criminals for nefarious acts such as money laundering, bribery and corruption, insider dealings, tax fraud, terrorist financing and more.  It is believed that these vehicles, while they are an essential part of society and commerce, are used by criminals to circumvent anti-money laundering and counter-terrorist financing measures and disguise and convert the proceeds of crime before introducing them into the financial system.

In this regard FATF established standards on transparency to deter and prevent the misuse of these corporate vehicles.  Countries like The Bahamas in an effort to keep its financial sector viable on the world stage, have had to introduce local legislation that would ensure the standards for transparency set by FATF are being adhered to.

The Act therefore has brought into local law the requirement that the following information be entered into a data base by the Registered Agent of a legal entity, accessible only by a secured search system – this information is retained for 5 years after the dissolution of the legal entity:

  1. With respect to the legal entity:
  2. Full legal name including any alternative names;
  3. The incorporation number or its equivalent;
  4. The date of incorporation;
  5. Status;
  6. The registered address; and
  7. Any other particulars as the Minister may by Order specify.
  8. With respect to beneficial owner of the legal entity are:
  9. The full legal name;
  10. Residential address and if different an address for service of Notices under the Act;
  11. The country of ordinary residence or domicile;
  12. The date of birth; and
  13. The nationality information identifying the person from their passport, driver’s licence, or other government-issued document including – the identifying number, the country of issue, and the date of issue and expiry.
  14. With respect to each registrable legal entity of the legal entity are –
  15. All of the items at a. above for the registrable legal entity;
  16. The jurisdiction of formation;
  17. The basis upon which the legal entity is designated as a registrable legal entity;
  18. Where the registrable legal entity is a foreign regulated person, the name of the jurisdiction of regulation and the name of the foreign regulator; or
  19. Where the registrable legal entity is a foreign state or wholly owned subsidiary of a foreign state, the name of the foreign state and, if applicable, wholly owned subsidiary;
  20. With respect to an exempt person are –
  21. Details of the exempt person as in a. above; and
  22. The basis upon which the exempt person is identified as such.

The registered agent commits an offence if it does not comply with the above details.

A registrable legal entity is defined by the Act as a legal person, its affiliates, or wholly owned subsidiaries which would be a beneficial owner of the legal entity if it were a natural person; and which is either a legal entity which is an exempt person, a legal entity – the securities of which are listed on a regulated securities exchange, a licensee or a foreign regulated person; or a foreign state or a wholly owned subsidiary of a foreign state.

Exempt Person

Exempt persons are exempted from certain requirements under the Act such as duty to identify and verify beneficial owners, duty to maintain database with respect to each beneficial owner of a legal entity and registrable legal entity of the legal entity.

An exempt person is a person who meets one or more of the following conditions:

  1. A legal entity, the securities of which are listed on a regulated securities exchange;
  2. A licensee as defined under the Act;
  3. A legal entity which is a wholly owned subsidiary of a legal entity that falls under ii., aforesaid; or
  4. Any other legal entity that the Minister may exempt by regulations.

The requirement to maintain current records that trace the chain of beneficial ownership and centre of control of legal entities and arrangements all the way to the natural person will prove costly to maintain as well as it will require considerable initial outlay on the parts of both the Registered Agents and the legal entities charged with the responsibility to provide the necessary data.  Registered Agents, while it is not practical to absorb the entire cost of meeting the stipulations under the Act, must assist their clients in meeting these very arduous standards with minimum increase in costs to the client and while still maintaining optimum customer care and service as a hallmark of their profession.   The hope is that business can continue to strive amidst all the flurry of change.

Our Articles are written to provide you the reader with general information pertaining to the law. We provide digests that are intended to provide very broad information on legal topics that affect businesses. Please be sure to obtain legal advice concerning all areas of the law before applying any information provided herein to your particular circumstance. Please note that there may be aspects of your business or transactions that makes the information you review here inapplicable, we therefore notify you that this is not to be regarded as legal advice and should you require advice in any legal matter you are invited to contact our Chambers at (242) 677-5265 or 6 and speak with one of our Attorneys who will be more than happy to assist you. You may also email our offices at [email protected]