THE BEE ALL AND END ALL

The Executive Entities Act, 2011 (the "Act") came into force in The Bahamas on 1st February 2012. Given the plethora of wealth structuring vehicles available worldwide, the question of whether there is a need for yet another entity in the field is quite understandable.

Practitioners in The Bahamas, working under the auspices of the Bahamas Financial Services Board, examined a proposal from London law firm, Lawrence Graham LLP ("LG"), in the context of several structures already in place and came to the conclusion that the BEE would serve a useful purpose. LG set about designing the BEE as a unique solution for carrying out "executive functions" with input from the working group.

WHAT IS A BEE?

In order to explain what the BEE is; we need to examine the Act. Section 3 (1) of the Act defines the BEE as follows:

  • "An Executive Entity is a legal person established by Charter to perform only executive functions.............."

Executive Functions

Section 2 "Interpretation" defines what is meant by "executive functions" as follows:-

  • any powers and duties of an executive, administrative, supervisory, fiduciary and office holding nature...........
  • the ownership, management and holding of:-

(i) executive entity assets; and

(ii) trust assets.

In essence therefore, the Executive Entity can act in either an executive / administrative position; or (b)a shareholder capacity .

Types of Functions

The definition of "executive functions" further establishes the "functions" that can be performed for example :

  • "enforcer; protector; trustee; investment advisor; the holder of any other office of any trust (family / advisory council) or legal person (corporate director, officer of a foundation); shareholder."

Assets

Section (4)(1) clearly shows the assets the EE can hold are to be limited to those that allow it to meet its objectives in ".....carrying out its executive functions."

Section 5(1) states that ".....the purpose of the executive entity shall be limited to the carrying out of such of the executive functions as are set out in its Charter".

It should be noted also that the purpose and executive functions must comply with any relevant regulatory law.

Some Characteristics of a BEE

  • Legal Entity (Section 3)
  • Limited Liability (Section 20)
  • No Capital Requirements
  • No Minimum Level of Assets required
  • No shareholders
  • Can be established for a definite or indefinite period
  • Can only perform Executive Functions
  • Not designed to hold assets
  • No beneficiaries
  • No enforcer
  • Can only provide Executive Functions to structures established in countries which are listed in the First Schedule to the Financial Transactions Reporting Act, 2000.
  • Requires an Executive Entity Agent which is a bank or trust company or a financial and corporate service provider duly licensed in The Bahamas.
  • Has a governing body which is comprised of officers or a council or both

ESTABLISHING THE BEE

The first step in creating a BEE is the drafting and execution of a Charter by the Founder which must be in English and contain certain specified language. (Section 7) The second step will be the submission of following information to the Registrar (Section 28):-

  • Registration Statement which provides a synopsis of certain information contained in the Charter but not the name of the Founder or Executive Entity Council;
  • A Statutory Declaration of Compliance;
  • The Prescribed Fee; and
  • The Charter and Articles may, but need not be, delivered to the Registrar.

Once registered, a "Certificate of Registration" will be issued evidencing the formation of the BEE.

USE OF THE BEE

The BEE is a vehicle which can be used to perform "executive functions" or act in a "shareholding capacity". It should be particularly useful for holding the shares of a private trust company. Individuals performing executive fiduciary functions e.g. protectors or directors can benefit from its limited liability. Further the BEE can act as an effective governance tool for family trust and private trust company structures. The fact that the BEE has no shareholders offers clients both privacy and continuity of ownership. The BEE is designed to be very flexible and no doubt practitioners will think of many more uses as they become accustomed to the vehicle.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.