By Michael Edwards
Michael Edwards started his career in the Estate Duty Office, London in 1968 and, after moving to private practice, was for some years a clerk to the Commissioners of the Inland Revenue in the UK. He is now head of Corporate Group at Edwin Coe at Lincoln’s Inn, London and has spent many years advising international clients on offshore trust and corporate structures and matters generally.
A great number of changes have occurred in the financial services industry in recent years, many of which have had, and will continue to have, a direct positive effect on the use of The Bahamas as an offshore jurisdiction. There is a real concern that Bermuda may be on the brink of a serious turning point following the election last year of the Socialist PLP. The Cayman Islands are wavering over independence and continue to be an expensive option. Closer to home, one of the most significant events in the last few months has been the British governmental threat to the financial services offered by the Channel Islands with the publication of the Edwards Report.
This report, written by Andrew Edwards, a former top official at the British Treasury, was released on 19th November, 1998. The Report was the culmination of a ten-month review over the regulations of the offshore finance industries in the Channel Islands, which have, traditionally, provided a long standing means for tax efficient prosperity. As a result of Mr. Edwards’ findings, he recommended a tightening up on the financial regulations. Specific recommendations include a call to make the Channel Islands private limited companies file audited accounts in accordance with EU standards.
Other recommendations call for a strengthening of the existing regulations for companies already established in the Islands, a substantial increase in the size of the regulatory departments on all of the Islands, the establishment of separate financial crime units, and the disclosure of the beneficial ownership of companies.
There is no question that the Islands will suffer as a result of this crack down, with businesses and wealthy individuals seeking an alternative, more efficient basis from which to organise their tax planning.
Within the last two years or so, exchanges of information memoranda have been agreed between the British Government and the Cayman Islands, which may have similar implications.
Clearly, The Bahamas with its long established complete independence and strong legislation is and continues to be in the position to offer an attractive alternative to the traditional offshore centres.
Within the last ten years, The Bahamas has done much to remodel itself as one of the premier international financial centres, based on principles of responsibility, stability and commitment. Various legislative measures relating to the finance and business sectors have been passed in the last ten years to ensure that the financial services industry remains at the fore-front of the Bahamian economy.
This legislation includes, amongst others, the International Business Companies (Amendment) Acts 1992 and 1994, which implemented the removal of requirements relating to agency registration and created a simplified regulatory climate. Other notable legislation includes the Money Laundering Act 1996, making The Bahamas a leader in the offshore centres to actively combat financial crime. The Trustee Act 1998 ensured increased powers for Trustees in terms of investment and established indemnity protection.
This financial services friendly legislation has ensured an extremely advantageous environment in which to conduct business whilst inspiring lawyers in other countries with the considered and responsible nature of the legislation. There is always room for improvement (every lawyer has his view!) but The Bahamas is ahead of the competition in this area. Another significant step forward has been the establishment of the Bahamas Financial Services Board in April 1998, dedicated to maintaining the development of the financial services industry in The Bahamas.
The traditional political stability in The Bahamas looks set to continue. With the major political parties having already indicated their commitment to maintaining the strong financial sector within the economy, The Bahamas is clearly guaranteeing itself a place in the premier financial centres into the next millennium. A turning point in the country will undoubtedly be the establishment of its own stock exchange later this year. This will provide The Bahamas with a multi-faceted environment in which to conduct business and strengthen its position as a leader at the cutting edge of the international financial services industry.
The commitment to maintaining this position is indicated by the strength of the workforce in this sector. Over 550 lawyers (in a population of 275,000) are on the rolls. There are a number of firms with proven international reputation and the major accounting firms are also represented. This enables legal and accounting work to be done to a very high standard and reflects well on The Bahamas compared with some other jurisdictions. Under the present government, there has been and continues to be a very consolidated but pro-active approach to the financial services sector which is well poised for growth with a burgeoning young educated work force.
There is a great deal of the "can-do" attitude in The Bahamas which is sadly lacking in other offshore jurisdictions. The Bahamas is looking forward to a prosperous new millennium as a challenge to build on its political stability, liberal investment policy and skilled workforce, and as an opportunity to broaden its economical base. There is an increased understanding among and co-operation between government, employers, and the work force. This in turn has led to optimism and confidence among investors and a feeling of hopefulness throughout the country for a bright future.
As a lawyer based in England but operating internationally, I am in effect a financial services industry consumer. My clients expect me to be able to advise them as to the best jurisdiction in which to effect their transactions.
After many years of operating in this field, I can only say that when you look at the experienced personnel and well-considered legislation, the fact that so many huge international Banks have long been established there, and the political stability, it is not simply a question of how I might recommend The Bahamas but, rather, dare I ignore them as a jurisdiction? The answer is clearly "no", and I believe The Commonwealth of The Bahamas will continue to offer an excellent and attractive jurisdiction in which to operate.
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.