The Turks and Caicos Islands ("TCI") is a British Overseas Territory whose legal system is a combination of ordinances, English statutes, and common law. The judiciary replicates that of England as the highest court with the Supreme Court, replicating the High Court. TCI has its own body of case law however the majority case law cited are English.
The TCI legislative framework is rapidly developing to meet the expectations of market participants. As the TCI is in close proximity to North America and uses the US dollar, this attracts and facilitates high-impact and transformative private investments, both local and foreign, and a robust services infrastructure. The domestic economy enjoys one of the fastest growth rates in the Caribbean with a stable and strong Government.
Businesses operating in the TCI are regulated by the Financial Services Commission ("FSC"), which is the government body responsible for the policies and procedures as it relates to companies. The FSC oversees all regulatory aspects of the TCI financial services industry. There is also Invest Turks and Caicos Islands Agency ("Invest TCI"), which is a statutory body that facilitates investment enquiries and provides a framework for encouraging, prioritising and incentivising domestic investments and foreign direct investments ("FDI"). Invest TCI is wholly funded by the Government of the TCI but is governed by a Board of Directors made up of representatives from public and private sectors.
During the Covid-19 pandemic FDI worldwide decreased dramatically. This decline had a drastic impact on developing countries such as TCI. Notwithstanding a global decline in FDI, over the past two years the TCI has made a rebound in the FDI market, having one of the fastest growth rates in the Caribbean. The TCI is a tax-neutral jurisdiction that allows for investors to the global tax transparency standards.
How is it beneficial for direct and foreign investors?
The majority of the investments in the TCI are completed through Invest TCI, which undertakes to develop the TCI by attracting FDI, encouraging trade and investment, supporting, and promoting domestic investment and facilitating public and private partnerships. The TCI offers many opportunities for investors, foreign and domestic, including the opportunity to leave a footprint and impact, ranging from different business ventures, real estate opportunities and lasting relationships within the community.
The Micro Small and Medium Enterprise ("MSME") Grant Programme is funded by the TCI Government, which makes provision for the TCI Government to provide concession orders to qualifying locally owned businesses operating in identified priority business sectors. The concession orders allow the company or start-up access to specific benefits, namely: cash grants, customs duty reduction and/or technical assistance, depending on the size of the business. As recent as 12th September 2022, Invest TCI offered six Islanders small business assistance from the MSME Programme. The MSME Programme managed by Invest TCI has made commendable strides and has awarded over $3.1 Million in grants, technical assistance, and duty concession since its inception in 2016.
Direct and foreign investors can invest in the TCI by growing areas such as tourism and development, convention centre development, financial services, agriculture and fisheries, and manufacturing. There are endless opportunities to invest in the TCI. Foreign investors are privy to many incentives, such as concessions on the purchase of land (see __ below), status in the TCI, and development agreements with the TCI government.
Corporate Governance Framework
The TCI has a corporate regime that is up-to-date, malleable, business-friendly, and easy to use for company formation, administration, upkeep, and operation.
It is possible to modify the governing papers to meet the needs of a given transaction and/or market, however, only to the extent necessitated by those factors. The administration and management of a TCI business are highly effective. The corporate governance regime at the TCI is founded on law and the company's Articles of Incorporation. TCI company law provides a great deal of flexibility for parties to negotiate the governance and shareholder arrangements they desire and to memorialise those terms in the company's Articles of Incorporation.
The following entities are available in the TCI:
- a company limited by shares.
- a company limited by guarantee (that is either authorised to issue shares or not).
- an unlimited company (that is either authorised to issue shares or not), but these are relatively rare.
- a limited partnership.
- a protected cell company; or a non-profit.
Relationship between companies and minority investors
In accordance with TCI company law, unless otherwise specified in the company's Articles of Incorporation, shareholders possessing shares bearing 90% or more of the voting rights in a TCI company may issue the company written instructions ordering it to redeem the shares of the minority shareholders. A minority shareholder can't stop the majority shareholders from exercising their squeeze-out rights if the Articles of Incorporation don't disapply the mandatory redemption clauses. On the other hand, if the minority shareholder thinks the redemption price is too low, he or she might demand that the corporation acquire the shares at a higher price.
A general meeting can be called by the directors at the request of minority shareholders holding at least 30% of the voting rights (or such a lesser number as is provided otherwise in the Articles of Incorporation). If the board of directors doesn't call a meeting, the shareholders can do so on their own.
Protections for minority owners are typically negotiated into separate shareholders' agreements with the relevant firm or written into the Articles of Incorporation.
Disclosure and Reporting Obligations
In order to invest in FDI projects with TCI Invest, investors must first fill out a personal history form and have their ownership stake of the business be at least 10%. During the process of opening a bank account and forming the company, additional disclosure obligations would be necessary for FDI, both for the investor and for the company.
Investors who are in possession of a development agreement with the Government are obligated to present annual audited financial accounts in addition to providing evidence that the company (or any corporate entity) is in good standing. When it comes to FDI, a developer has an obligation to report any sale to the Government. It is usual for the development agreement to contain a clause that forbids the developer from transferring any shares that could be interpreted as a change in the control or ownership of the developer without first providing notification to the Government.
The filing of an annual return that contains specific facts regarding a TCI entity's shareholders, directors, other officers, and capital structure is the primary reporting obligation that must be satisfied.
There is generally no restriction on foreign investors in a real estate transaction. All transfers of title are governed by the Registered Land Ordinance. There is no limitation on the amount of investment on undeveloped land or purchasing a developed property in the TCI. However, actual title to land must be held by an individual outright (regardless of the investor's nationality) or by a TCI incorporated limited liability company.
Real estate development attracts stamp duty (tax), payable depending on the cost of the property and where it falls within the relevant threshold and location. Stamp Duty is payable whether the property is owned by a foreign investor or by a company. Government may however allow import duty concessions to foreign investor developers, ranging from 50%-75%, mainly on the import of materials to be used in connection with construction projects. The concession will depend on the location of the development, whether on Providenciales or any of the other inhabited islands. Incentives are not restricted to TCI-owned enterprises.
There are many undeveloped and/or underdeveloped businesses in the TCI. A company conducting business in the TCI must hold a business licence and pay an annual business licence fee, depending on the type of business. Whilst there are restricted categories of businesses that are reserved for Islanders, this does not prohibit a foreign investor from investing in the business as a minority shareholder. Work permits are necessary for all non-nationals working in the TCI (see 10.1).
Immigration & Residency
Investing in the TCI allows a foreign investor to apply for legal status and residency. A Permanent Residence Certificate ("PRC") can be applied for by an investor who has invested at least (i) US$1,000,000 in the construction of a new home or renovation of distressed property in the island of Providenciales and is not seeking to engage in employment, or (ii) US$1,500,000 in a business which employs not less than 60% non-work permit holders in the island of Providenciales and is not seeking to engage in employment. The investment must be retained for at least five years but can be swapped within a 12-month window (same or greater value). There is a quota restricting the number of PRCs issued on the grounds of investment.
Detailed application forms and background information must be provided. Decisions are made on the basis of the applicant's personal and occupational attributes and the applicant's potential value to the community. A PRC, unless revoked, is valid for the duration of the lifetime of its holder.
There is currently a strategic plan that Invest TCI, along with the TCI government, developed for 2022-2027 to further develop the TCI with direct and foreign investment.
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.