Anti-Money Laundering (AML) and
Countering the Financing of Terrorism (CFT):
THE FINANCIAL SERVICES SECTOR
By: Samantha Knowles-Pratt
The Nassau Conference 2014
The Bahamas’ Investment Condominium (“ICON”)
Samantha Knowles-Pratt
Partner, Delaney Partners
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ESTABLISHMENT & REGISTRATION
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Name must be reserved with the Registrar General (“Registrar”).
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Initial Participants agree and sign the Governing Regulations – this
establishes the condominium.
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Initial Participants appoint the governing administrator and the
general administrator.
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Certificate of Establishment is issued by the Administrator and
submitted to Registrar along with fee within 7 days of date of
establishment for stamping by the Registrar.
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A Registrar stamped certificate is evidence of compliance with
registration requirements. Governing Regulations may but need
not be filed.
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ICON must be licensed as an investment fund within 90 days of date
of establishment.
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CERTIFICATE OF ESTABLISHMENT
Must contain the following:
• The NAME OF THE ICON (must include “ICON,” “IC” or
“Investment Condominium”);
• STATEMENT that it shall be LICENCED as an INVESTMENT
FUND;
• The ADDRESS IN THE BAHAMAS FOR SERVICE OF PROCESS;
• The NAME AND ADDRESS OF THE ADMINISTRATOR;
• The DATE OF ESTABLISHMENT.
Note well: publicly filed with RGD
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CONTENT OF GOVERNING REGULATIONS
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Name;
Statement that it is formed exclusively to operate as an investment
fund (statement of purposes);
Name and address of Administrator (governing and general);
Address in The Bahamas for service of process;
Provisions relating to audit (note SFM waiver exceptions preserved);
Duration of the ICON;
Provisions for the dissolution of the ICON;
Number and currency of participation interests to be issued;
Rights, powers (voting/non-voting) of the participation interests;
The manner in which material agreements and Governing
Regulations are to be amended;
Liability of participants ;
Valuation procedures;
Duties of the governing administrator and general administrator;
Such other items as are required by the Investment Funds Act and
Regulations, 2003;
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RIGHTS OF PARTICIPANTS
 Entitled to participation interests and to redemption.
 Participation interests can be issued as voting or non-voting.
 Voting participation interests may remove and replace the
Administrator.
 Disclosure and other rights as investors as required by the
Investment Funds Act, 2003 (“IFA”).
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GOVERNANCE & MEETINGS
Administrator is required to call at least 1 meeting a year of
participants – this annual meeting may be held in The Bahamas
or anywhere in the world as the Administrator determines.
 Participants may require that other meetings be held on
their requisition to the Administrator.
 Provisions as to meetings are as per the Governing
Regulations but if silent, default provisions as per Investment
Condominium Act, 2014 (“Act”).
 Quorum as per the Regulations or if silent:
For meetings at which an extraordinary resolution is to be
considered: participants holding twenty-five percent of the
issued and outstanding voting participation interests.
For meetings at which an ordinary resolution is to be
considered: participants holding ten percent of the issued
and outstanding voting participation interests.
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ADMINISTRATION
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The initial Participants appoint an Administrator.
Voting Participants have power to remove or replace Administrator.
Single institution performing governance and general administrative
roles possible.
Separate institutions splitting those roles – the governing administrator
and general administrator.
1. General Administrator must be a financial institution licensed by
the Securities Commission of The Bahamas (“SCB”) as a restricted
or unrestricted fund administrator.
2. Governing Administrator must be:
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Restricted or unrestricted investment fund administrator
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A financial and corporate service provider
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Licenced dealer in securities
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Bank or trust company licensed by the Central Bank of The
Bahamas (“CBB”)
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Entity in foreign jurisdiction licensed by a regulator having
authority equivalent to the CBB or SCB
Governing administrator is the “operator” of the fund.
General administrator acts in the same way as administrator of other
funds with the same roles and responsibilities.
Delegation permitted.
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POWERS AND DUTIES OF ADMINISTRATOR
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Administrator or governing administrator may engage service
providers in the name of the ICON.
Administrator or governing administrator has power to bind the
ICON and generally transact in the name of the ICON.
Administrator or governing administrator has duties of an
“operator” under the IFA, with duty to act honestly, in good faith
and exercising the care, diligence and skill of a reasonably
prudent person.
Duties of an administrator under the IFA (see reg. 17 of the IFA
Regulations).
If separate administrator appointed, it is the governing
administrator who has the authority to bind the fund and to
engage service providers.
May be indemnified up to willful default. Indemnity first priority
lien on assets of ICON with priority over secured and unsecured
claims.
Debt/obligations assumed by administrator on behalf of ICON is
debt/obligation of the ICON.
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OBJECTIVE OF CONVERSION & APPLICATION
• To accommodate re-domiciliation of investment funds to The
Bahamas.
• To allow for conversion of different structures already in The
Bahamas.
• To allow for unbroken continuity of the fund, while changing
the character of the underlying legal structure that
comprises it.
• Applies to Bahamian IBC, exempted limited partnerships or
unit trust.
• Similar entities (companies and unit trusts) in other
jurisdictions would have to take advantage of existing
continuation procedures in the IBC Act or utilize any power
to change governing law contained in the trust instrument.
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CONVERTING A COMPANY TO AN ICON
• A majority of voting shareholders and all directors agree and
adopt the articles of conversion.
• Certificate of conversion is signed by the Administrator under
seal and filed with the Registrar within 7 days of date of
certificate along with prescribed fee.
• Registrar stamps certificate of conversion - stamped
certificate of conversion is prima facie evidence of compliance
with all requirements in respect of conversion.
• ICON applies to be licenced as a fund.
• Administrator issues confirmation to each participant (former
shareholders) stating:
1. Number of shares converted and the number of
participation interests held by such participant; and
2. Conversion has not affected value of capital contribution.
Note: Conversion that takes place while company is not in good
standing is void and of no effect.
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CONVERTING AN EXEMPTED LIMITED
PARTNERSHP TO AN ICON
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A majority of limited partners having the right to vote and all
general partners agree and adopt the articles of conversion.
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Certificate of conversion is signed by the Administrator under
seal and filed with the Registrar within 7 days of date of
certificate along with prescribed fee.
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Registrar stamps certificate of conversion – stamped certificate
of conversion is prima facie evidence of compliance with all
requirements in respect of conversion.
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ICON applies to be licenced as a fund.
Administrator issues confirmation to each participant (former
general and limited partners) stating:
1.
2.
Number of participation interests converted and the
number of participation interests held by each participant;
and
Conversion has not affected value of capital contribution.
Note: Conversion that occurs while exempted limited partnership is
not in good standing is void and of no effect.
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CONVERTING A UNIT TRUST TO AN ICON
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Articles of conversion approved by the trustee or such other
person as required by the terms of the trust instrument and by
the majority of the unit holders having voting rights.
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Certificate of conversion is signed by the Administrator under
seal and filed with the Registrar within 7 days of date of
certificate along with prescribed fee.
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Registrar stamps certificate of conversion - stamped certificate
of conversion is prima facie evidence of compliance with all
requirements in respect of conversion.
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ICON applies to be licenced as a fund.
Administrator issues confirmation to each participant (former
unit holders) stating:
1.
2.
Number of trust units converted and the number of
participation interests held by each participant; and
Conversion has not affected value of capital contribution.
Note: Any conversion of a unit trust that occurs on a date when
such unit trust is in the process of being wound up or dissolved is
void and of no effect.
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CONTENT OF ARTICLES OF CONVERSION
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Name;
Provisions detailing the basis upon which shares of a
company, limited partnership interests of an exempted
limited partnership or units of a unit trust, as
applicable, shall be converted to participation interest
in the condominium along with details of any rights;
Provisions for valuation and accounting treatment of
the assets and liabilities of the company, exempted
limited partnership or unit trust, as applicable and in all
cases, any retained earnings upon conversion;
In the case of a company, the date on which the
company was incorporated or continued and the date
on which it intends to covert to an ICON;
In the case of an exempted limited partnership, the
date on which the partnership was registered and the
date it intends to convert to an ICON;
In the case of a unit trust, the date on which the unit
trust was established and the date on which it intends
to convert to an ICON;
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CONTENT OF ARTICLES OF CONVERSION cont.
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In all cases, annex to the articles of conversion, the
Governing Regulations of the ICON containing the
information prescribed by the First Schedule of the Act;
In case of a company, the Governing Regulations are to be
approved by the shareholders of the company;
In the case of an exempted limited partnership, the
Governing Regulations are to be approved by the general
partner and the limited partners;
In the case of a unit trust, the Governing Regulations are to
be adopted by the trustee and such other persons as
required by the trust instrument;
In all cases, the name and address of the Administrator;
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GENERAL PROVISIONS
• The standard 20 year exemptions apply.
• Dissolution – may be compulsorily wound up by the Court or
voluntarily.
• Standard provision relating to keeping reliable accounting
records.
• Transfer of participation interests permitted.
• Removal from Registry and restoration.
• Minister has power to make ICON Regulations – no
regulations to date.
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UNIQUE FEATURES
• ICON is not a legal entity but a contractual relationship.
• Cannot declare dividends or make distributions.
• Separate administrators or same entity can perform both
functions.
• Can only be used as a Fund.
• Not required to file Governing Regulations (except in case of
conversion).
• Closed-end ICON must be licensed.
• 1 annual general meeting of participants with voting rights
required at any location.
• Participant Interests enforceable as a chose in action (similar
to a share).
• Conversion.
• Method of liability of Participants.
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FEES
(1) Registration fees of an investment condominium will be
billed in a reduced sliding scale:
(2)
(3)
(4)
(5)
(6)
a) First quarter of a calendar year
b) Second quarter of a calendar year
c) Third quarter of a calendar year
d) Fourth quarter of a calendar year
Filing of certificate of conversion:
Certificate of Good Standing:
Annual fees:
(penalties for late payment applicable)
Filing Notice of Dissolution:
Restoration fees:
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$350.00
$250.00
$150.00
$100.00
$150.00
$50.00
$350.00
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$150.00
$750.00
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THE END
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