The IPG’s Andrew Law explains how the Bahamas Executive Entity eases complexities in wealth management structures
Andrew Law, CEO of The Bahamas-based International Protector Group, discusses the importance of the Bahamas Executive Entity Act in the global private wealth planning industry. He highlights some complex governance issues in managing fiduciary and wealth management structures, and looks at how the Act can be used to resolve these issues, offer flexibility and reduce personal liability.
The Bahamas has a long history of providing financial services, carving out a specialised niche as a leading offshore financial centre.
This historic legacy has created a jurisdiction that is well-established, progressive and welcoming for financial services.
Regulation in The Bahamas has served the industry well and is structured to protect the interests of those who do business with financial institutions based in the Bahamas, and to ensure the Bahamas’ business environment continues to meet the highest international standards.
In 2011, The Bahamas implemented a series of new legislation aimed at bolstering the competitiveness of its financial services industry and strengthening its legal and regulatory framework. This was done in a bid to cater to the rapid growth of UHNWIs to enable them to secure greater control over the administration and security of their wealth.
The new Bahamas Executive Entities Act was a key part of this new legislation. It is a unique and ground breaking piece of legislation that has been designed specifically to resolve complex governance issues in fiduciary and wealth management structures.
Features of the Bahamas Executive Entity
The BEE encapsulates the powers currently evident in existing wealth management and estate planning structures within a new form of legal entity, enabling it to own and conduct transactions independently. It is an incorporated power holder of perpetual duration that is administered by its officers. It does not have share capital and it has no shareholders. It is unlike a foundation in that it does not have beneficiaries. It may own assets, basically a sufficient amount to enable the BEE to fulfil its functions.
The BEE is equipped with various functions, including the ability to act as a protector, settlor, founder or investment advisor of any trust or foundation. It can also act as shareholder of a private trust company, making it very versatile and comprehensive. Taking a look at these, firstly:
1. As the Shareholder of a Private Trust Company (PTC): PTCs have grown in popularity recently as they enable the settlor of a trust to establish greater control – particularly over who will act as directors of the trust company – rather than retaining the services of a trust provider.
However, they must have a shareholder, usually either a purpose trust or a foundation. This poses a problem as most offshore financial centres with purpose trust legislation have imposed restrictions on who can act as trustee.
In addition, they have introduced the concept of an “authorised applicant,” or enforcer whose duty is to see to the proper administration of the trust by the trustees.