ST. VINCENT’S TRADITION AS AN OFFSHORE CENTRE
Offshore laws were first passed in Saint Vincent and the Grenadines (SVG) in 1976. Swiss lawyers drew up the first legislation together with the SVG Government. Together they formed the St. Vincent Trust Service in Europe to market SVG as an offshore centre. The appointment of a new President of the St. Vincent Trust Service during 1993, a new management and the ensuing tripling of the business volume, showed that the 1976 legislation required a comprehensive revision.
The resulting new legislation launched during December, 1996, was one of the most comprehensive packages of offshore legislation ever passed and heralds a new era for St. Vincent as a modern technology based international finance centre.
The 1996 Legislation Included:
Confidential Relationships Preservation (International Finance) Act, 1996.
This law, one of three "general confidentiality" laws in the world, controls and sanctions unauthorised disclosures of information relating to offshore clients. The new law states that "confidential information may not be released under any circumstances where the disclosure would further a tax oriented investigation or prosecution by a foreign government".
THE INTERNATIONAL BUSINESS COMPANIES ACT
Modern principles are included in this self contained code to allow a maximum of flexibility in the management and operation of a Vincentian IBC, by the Shareholders and Board of Directors alike.
THE INTERNATIONAL BANKS ACT, 1996
The new Bank Act for banks not undertaking business within the territory of St. Vincent, allows basically, two types of banks.
Class I banks are those institutions who may do business with non-residents provided the paid in capital is higher than US$ 500’000.-- i.e. a classic bank institution.
Class II banks are those banks limited to only doing business with an identified group of depositors, provided the paid in capital equals or exceeds US$ 100’000.-- i.e. the classical private bank institution.
THE INTERNATIONAL TRUSTS ACT, 1996
The new Trusts Act combines the best features of international trust law in force at the time of drafting and is designed to appeal to potential clients from common-law jurisdictions and civil law countries alike. There are many definitions covered in the new Trusts Act, that have not been included in existing laws, as well as reflecting all previous accepted trust law principles.
THE 1998 LEGISLATION
During 1998, further new modern legislation was passed.
Mutual Funds (Amendments) Act, 1998.
The new Act reflects all the best of its precursors in other jurisdictions, but benefits from experience gained in this field to date by ensuring that accredited funds of various types, from genuine public funds to family funds, are regulated properly. The Mutual Funds (Amendments) Act, 1998, amends the seminal law passed in 1997. Over one hundred pages of statutory rules and orders, application forms and schedules accompany the amending legislation. The key elements of the amending Act include statutory recognition of a new class of private "Accredited Fund" for professional and sophisticated investors and exemptions for family funds and certain small offerings.
Other special features include:
Statutory 45 day turnaround time on all applications for recognition and registration
Special procedure for preliminary approval of public funds prior to formation or capitalisation of offering vehicle
The most comprehensive tax exemption provisions with every regulated fund receiving a special certificate of tax exemption
Low fees for registration and annual renewals
No requirement for private or accredited funds to engage a local fund manager or to prepare audited reports
Family funds and small offerings (under 15 investors) exempt from filing requirements
Provisions to facilitate registration of foreign licensed fund managers as "recognised managers"
Clear exemption from local registration requirements for lawyers, accountants, auditors and underwriters
Accredited funds receive automatic 2 week grace period to apply for recognition
Protection of the most restrictive confidentiality law in the world - the Confidential Relationships Preservation ( International Finance) Act, 1996.
International Insurance (Amendment and Consolidation) Act, 1998
This completed Act, which is designed as a comprehensive code to govern all administrative and regulatory aspects of the new Vincentian offshore insurance scheme, contains a number of innovations.
These include detailed provisions for Protected Premium Accounts, an asset preservation feature for premiums paid under life insurance and annuity policies to all Classes of companies formed under the new law. The Protected Premium Account Part of the new act amplifies similar provisions found in external insurance law in Bermuda and the Cayman Islands and is coupled with key aspects of protected cell company legislation as found in Guernsey.
Uniquely, the act prescribes five classes of international insurance companies, which allows applicants to more precisely choose the appropriate vehicle based on cost and regulatory exemptions.
I - Unrestricted
II - General
III - Association
IV - Group
V - Single
These distinct Classes accommodate the largest and the smallest offshore insurance enterprises. The application process, regulatory requirements and fees for each Class vary according to the size and captive qualities of the insurer. In Classes IV and V, trusts registered under the International Trusts Act, 1996, can act as the Group or Single license holder.
The new Insurance Act, like the Mutual Funds Act, is accompanied by comprehensive forms and regulations which facilitate the application process and lead to more predictable results and regulation.
NEW DEVELOPMENTS 1999
Comprehensive Regulations for the implementation of both new Acts were completed during March 1999 and the first funds and insurance companies have been formed.
2nd Passports:
The St. Vincent Government is in the process of drafting new regulations for administration of a new programme for economic citizenship in Saint Vincent. An Honorary Non Resident Citizenship will be offered by the St. Vincent Migration Services Limited in close association with the St. Vincent Trust Service and will be modelled after successful programs in the US, Canada and the Caribbean.
Hybrid Structures
The St. Vincent Trust Service launched during March 1999, the Pegasus Plan ®. This will allow US based clients to structure their estate planning without infringing on current US legislation. Timothy Scrantom and Dennis Kleinfeld have applied their comprehensive experience in this new structure of a St. Vincent Hybrid Company so that legal tax deferral and reduction to US investors is achieved. A hybrid company will be viewed as a corporation, but since its ordinary members will not be "shareholders", income and gain may be accumulated in the company without being subject to current US income tax. Due to the contractual nature of the relationship’s between investors and the company, their agreements interest in the company will not be typically reportable to the US Government.
SUMMARY
The manifold new developments in the financial services sector in St. Vincent & the Grenadines underlines the consequent efforts of the St. Vincent Government to be a main player in this market and establishes their position as an innovative jurisdiction. The St. Vincent Trust Service combines decades of experience with modern information technology to guarantee a quality service of continuity and innovation. In the face of European tax harmonisation threats and the Edwards Report, a worthy target for a truly independent country.
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.
This article also appears in the 'International Offshore and Financial Centres Handbook 1999/2000'. For further information about this highly informative guide to offshore centres, or to order your copy, please phone +44 (0) 207 820 7733 or send an email to iofch@mondaq.com
