A. There have been no major changes in legislation in the diction over the last 18 months. While it is sometimes viewed as being "cutting edge" to be constantly introducing and amending legislation, I do not think that too many changes are necessarily good for a jurisdiction. They tend to foster uncertainty and instability and these are not attributes that are conducive to a successful offshore jurisdiction.
What we have been doing in TCI recently is to strengthen its image by introducing legislation on Regulatory Co-operation and to improve public awareness of TCI by several promotional activities, such as production with the private sector of a quarterly financial newsletter.
Q. TCI has distinguished itself in the arena of offshore insurance (captives and life) and reinsurance. What benefits does TCI offer in this regard - that makes it an attractive jurisdiction for insurance purposes?
A. Though TCI has some 57 captives and a number of General and Life Insurers holding TCI licences, it has been particularly successful in attracting Credit Life Producer owned Reinsurance Companies. Section 7(1 1) of TCI's Insurance Ordinance specifically caters for such entities by minimising annual statutory submissions and relaxing annual fees for business ceded by A.M. Best rated primary writers regulated in their own domiciles. Less onerous yet practical capitalisation requirements and prompt processing of applications also make TCI an attractive domicile for insurers seeking to use a credible offshore zero-tax haven.
Q. Both the Bahamas and Cayman have recently adapted their mutual fund legislation and are in the process of forming mutual fund listing changes. What new legislation is TCI considering that may relate to either mutual fund management, collectively investment schemes or investment management.
A. Mutual fund legislation is currently covered partly in the Companies Ordinance 1981 (Issuing of Prospectuses) and partly in The Trusts Ordinance 1990 (Unit Trusts). We recognise however that our legislation in this regard is really incomplete and that there is certainly a need for stand-alone legislation on the setting up, administration and regulation of mutual funds. Remember that both Bahamas and Cayman, which you mention, have large banking infrastructures into which mutual fund legislation would readily fit. TCI is still at an early stage in putting together legislation on mutual funds, but we have already had offers of assistance from two major US law firms.
Q. TCI has been successful in building up a strong relationship with the Canadian legal and trust planning community. Could yu please comment on the various benefits and related activities that Canadians have found so attractive in TCI.
A. Let me comment on this in general terms. The economic ties between TCI and Canada at the private sector level are quite close. There are currently a large Canadian bank and a large Canadian brokerage house operating in TCI. Several of the local attorneys and other firms have very strong Canadian ties and connections and this allows them to specialise in Canadian tax and legal matters for Canadian clients who may wish to use an offshore jurisdiction such as TCI. Furthermore, many Canadians, both English and French speaking, have chosen to come and live in the Islands. Generally TCI is well known in Canada for its offshore financial services as well as tourism. My office, together with the private sector, recently did a full one-day conference in Toronto and another one is planned for the West Coast of Canada shortly.
Q. What is the current policy of TCI as it relates to Asset Protection Trust legislation? Perhaps you could comment on the proposed Voidable Disposition Act.
A. Asset Protection Trust legislation is currently covered under Section 61 of The Trusts Ordinance 1990. This focuses on the solvency of the individual when a trust disposition can become voidable. We are now considering a more detailed piece of legislation too replace the existing Section 61 to cover the whole subject of Voidable Dispositions. One of the main points under discussion is the limitation period which allows creditors to seek to put a disposition aside.
Q. TCI offers both Limited Life Companies. Could you please explain the basic differences and advantages of both legal entities. Which groups of users would such structures most appeal to?
A.
LIMITED PARTNERSHIPS
Tax Rate Zero
Constitution Partnership Agreement
Control Entity may be managed, controlled and administered from within
TCI or elsewhere
Structure Nil Tax LP - registration fee $500, Annual fee of $300 plus
initial fee of $500.Receives undertaking from the Governor
against future taxation for 50 years.
Minimum None - unlimited capital. Capital may be denomininated in any Capital currency (including EUC's) and in fractions of a currency.
Capital Duty Government registration fee of $500
Number of At least 1 General Partner with unlimited liability. At least
Members 1 General Partner must be resident in TCI. Must have at least 1
Limited Partner whose liability is limited to his capital
contribution. Maximum partners - 100.
Capital May return capital contributions to a limited Partner provided Dealings firm is solvent.
Advantages Privacy/flexibility of partnership agreement. No annual
government fee. May have unlimited duration.
LIMITED LIFE COMPANIES
Tax Rate Zero
Constitution Memorandum and Articles of Association
Control Both sets of entities may be managed, controlled and
administered from within TCI or elsewhere.
Structure Nil Tax Exempted LP - may not undertake business in TCI, but no
annual fees. Must operate primarily outside TCI. Registration
fee depends on Capital plus additional LLC fee of $100. Annual
Fee of $300. Must limit life to initial period of 50 years. Life
may be extended for another 150 years. Automatic undertaking by
Governor against future taxation for 20 years. Entity will
usually qualify for favourable treatment as a partnership in
taxing jurisdictions.
Minimum LLC capital up to $5,000 qualifies for minimum registration fee.
Capital Capital may be denominated in any currency (including ECU's) and
in fractions of a currency.
Capital Duty $100, plus LLC fee of $100. With share capital over $5,000.
incurs additional 1.0% on next $45,000; 0.5% on next $50,000
thereafter; and 0.1% on next $90,000. With share capital of $1mn
or more incurs flat fee of %1,800. Shares may be issued at a
premium without attracting additional fees.
Number of At least 2 members at all times. No maximum number of members
members Members' liability usually limited to the amount (if any) unpaid
on their shares. Liability may be alternatively limited by
guarantee or unlimited, if desired.
Capital May issue Bearer shares (except for LLC's engaged in banking,
Dealings insurance or trustee business). May issue shares of no par
value. May also issue fractional shares. May redeem, buy, hold
and deal in its own shares. However, redemptions and transfers
of shares in LLC's may need to be restricted for US tax
purposes.
Advantages Limited liability available for all Members. Non- disclosure of
Members. Central management if desired. Extended duration. May
convert to regular company. Low annual government fee. No stamp
duty on LLC transactions. Partnership vehicle with company
benefits.
Q. What has been the recorded growth of the financial sector over the past five years as measured by:
- the number of new incorporations (IBC's and insurance companies);
- and the level of bank deposits, if possible.
A.
NEW COMPANY INCORPORATIONS:
1991 1,225
1992 1,538
1993 1,916
1994 2,605
1995 2,858
1996 1,801 (1ST 6 MONTHS)
BANK DEPOSITS & ASSETS (US$ millions)
Deposits Assets
End 1993 206 299
End 1994 213 331
End 1995 230 350
Mid 1996 273 440
Q. Thank you very much for your time. In conclusion, what other important pieces of legislation are being considered in order to make TCI even more competitive as an established offshore finance centre?
A. There is basically two types of legislation being considered. The first can be regarded as being regulatory of nature so that we keep up the "image" factor which I mentioned earlier. Under this category is the proposed All Crimes Money Laundering Bill which will join our existing Drug (Trafficking) legislation and the Licensing of Company Agents, ensuring that they do their job professionally. The second is of course placing TCI at a competitive advantage. Under this category os the proposed Voidable Dispositions Bill and the introduction of Mutual Funds. Optional registering of company charges and the ability to register trade mark services.
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.
