Forming a New Corporation in the Bahamas: It’s Easier Then You Think (If You Have a Good Lawyer)
Editor’s Note: This information is valid as of 2002 and needs to be updated.
The New Companies Act became law on 1 August 1992, repealing the Companies Act of 1866 and the Foreign Companies Act of 1891. Companies incorporated under the new act may carry on in, or from within, the Bahamas the business of banking or trust companies, and insurance and reinsurance. An enterprise can conduct business in the Bahamas through incorporation or through branch operation.
The modified Companies Act provides investors with a number of advantages.
- The doctrine of ‘ultra vires’ has been abandoned and, consequently, gives companies virtually the same range of powers enjoyed by human persons without any further need to set out the extensive litany of ‘objects’ once required under previous company law.
- The minimum number of persons that may now incorporate a company has been reduced from five persons to two persons.
- The paper requirements of company formation have been reduced with the inclusion of a standard form of Articles of Association, which can be adopted by mere reference.
- Company members’ meetings may be held outside the Bahamas and participation in meetings may be effected by telephone and other electronic means.
- In an effort to better safeguard investments in public companies made by members of the public, shareholders in public companies are imposed with a substantially higher burden of accountability.
- If a company wishes to be restored after being “struck-off,” it will no longer be required to apply to the Supreme Court of the Bahamas.
In order to incorporate a company in the Bahamas, a Memorandum of Association must be filed with the Registrar General. Articles of Association may be filed with the Memorandum of Association or within six months thereafter, and must be signed and witnessed by one other person. Other provisions include:
– The memorandum to be signed by at least two subscribers in the presence of at least one witness.
– Each subscriber must subscribe for at least one share.
– A non-resident subscriber is required in order to obtain exchange control permission.
– The capacity of persons incorporating is to be submitted with the Memorandum in the form of a declaration signed by counsel and attorney.
– The extent to which the liability of the shareholders or members is limited.
A company merging or consolidating with another company or companies must submit articles of merger or consolidation to the Registrar General. The Companies Act does allow a company to merge with a subsidiary. In this type of merger, the parent company is required to file articles of merger with the Registrar General. Under this act, a company intending to reorganize or reconstruct itself must submit articles of arrangement with the Registrar General.
Private and Public Companies
All companies already registered as private companies in the register of the Registrar General’s Office continue to exist as private companies, unless they wish to continue as public companies. A public company is considered a company whose shares or any class of whose shares are intended for distribution to the public. Following incorporation, the public company may start business or seek to secure credit after:
– shares have been allotted to at least the minimum subscription
– every director has paid the company for his share a proportion equal to that payable on application and allotment of the shares offered for public subscription or payable in cash
– the secretary or one of the directors has signed a statutory declaration that the requirements with respect to the first allotment of shares have been satisfied.
A foreign company is any incorporated or unincorporated body formed under the laws of a country outside the Bahamas. In order to be incorporated in the Bahamas, the foreign company must file a statement in the approved form, setting out the following:
– the name of the company, the jurisdiction in which it was incorporated, and the date of its incorporation;
– the manner in which it was incorporated, the particulars of its corporate instruments and period, if any, fixed by those documents for the duration of the company;
– the extent to which the liability of the shareholders or members is limited;
– the undertaking the company will carry on in the Bahamas;
– the date the company intends to commence any of its undertakings in the Bahamas;
– the authorized, subscribed, and paid up or stated capital of the company, the shares that the company is authorized to issue, and the nominal par value of those shares, if any;
– the full addresses of the principal offices of the company in and outside the Bahamas;
– the full names, addresses, and occupations of the directors of the company.
This statement must be accompanied by the following documents:
– a statutory declaration by at least one director of the company, verifying the particulars in the statement;
– a certified copy of the corporate instruments;
– a power of attorney.
A non-profit company is defined as one involved in activities that are religious, charitable, educational, scientific, historical, fraternal, literary, sporting, artistic and athletic. Non-profit companies are required to file a memorandum stating the following:
– that the company has no authorized capital;
– that it is carried on without pecuniary gain to its members;
– that profits and other accretions to the company are used in furthering its undertakings;
– the restrictions on the undertaking that the company is to carry on;
– the address of the clubhouse or other building maintained by the company;
– that each first director becomes a member of the company upon its incorporation.
General Requirements for all Companies
All companies are required to file names of officers, directors and managers; location of the registered officer; and an annual return stating whether or not 60% of the shares are beneficially owned by Bahamians. Banks must publish annual statements showing their true financial position.
Every company having its capital divided by shares is required to file with the Registrar General an annual return with the following information:
– a list of members, stating the names, addresses and occupations of all members mentioned, the number of shares held by each, and those who have ceased to be members;
– the amount of the company’s capital and the number of shares into which it is divided;
– the number of shares taken from the formation of the company up to the date of the summary;
– the amount of calls made on each share, the total amount of calls received, the total number of calls unpaid, and the total number of shares fortified;
– the registered number of the company.
Foreign Company: $1,000
A company must be managed by at least 2 directors and, in the case of the public company, three directors. Persons consenting to be directors may hold office until the first meeting of the members of the company at which time election of directors takes place. Directors’ meetings may occur at any place and upon such notice as the directors determine, unless otherwise provided for by the articles of association. Meetings may be held by telephone or other communications which allow voice recognition of each of the directors. The directors are required to submit financial statements and the report of the auditor at the annual general meeting. Directors hold office until they are disqualified, removed by resolution at an extraordinary meeting or until their death or resignation.
In order to reserve a name for the company, application may be made on the approved form, which can be obtained from the Registrar General’s Office. The Registry provides a 24-hour company name reservation service. Under Bahamas Company Law, the word “Limited” must be the last word in the name of each company.
Business License & Fees
Every business must have a license to operate in the Bahamas. Each licensed business is also required to pay an annual fee, based on the gross profit as a percentage of turnover. Fees are based, in the case of most businesses, on the annual gross receipts, less the “cost incurred in producing that turnover.” They range from nothing for a petty business to $500,000 for “a very large business with a very high profit” per year. The Business License Act defines business to include all types of manufacturing and commercial undertakings and covers professions such as law, accounting, and medicine.
The business license fee must be paid by April 30th each year.
In addition, proof of payment of real property tax must be produced before a license will be issued.
Deductions may be taken for each additional full-time employee hired in any given year, up to a maximum of ten. For medium-sized businesses, 5% of the fee may be deducted per employee. For large and very large businesses, 3% per employee. The National Insurance Board will certify that additional staff has been hired and issue a certificate upon application.
Companies designated “non-resident” under the Exchange Control Regulations Act pay an annual fee of $100. The Business License Act also provides for automatic annual renewal for Bahamian businesses (if other statutory requirements have been met).