Registering a Bahamas Foundation
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COMMON USES OF A BAHAMAS FOUNDATION
Bahamian Foundations are most commonly utilised under any one or number of the following circumstances:
1) the holding and management of assets;
2) estate and tax planning;
3) asset protection;
4) preserving family wealth;
5) segregation of assets; and
6) establishing charities.
There are many purposes where Trusts and Companies are utilised for which a Bahamian Foundation could also be used. Where a company is considered the most practical structure for a specific purpose, it is sometimes beneficial to set the company up as a subsidiary of a Bahamian Foundation.
A Bahamian Foundation must be registered with the Registrar of Foundations and a Certificate of Registration must be issued in order for the formation formalities to be completed.
Where a Bahamian Foundation is established by a will the Act provides procedures to ensure the proper registration and endowment of the Foundation.
HISTORY OF THE FOUNDATION
Foundations have been available in civil law countries since their origination in Liechtenstein in the late 1930s. As the outbreak of a Second World War loomed nearer, the Foundation was created for the express purpose of providing a confidential and secure structure for safeguarding family and business assets in a time of great uncertainty.
Following the end of the war, the use of Foundations quickly spread to other European civil law countries. More recently, the Foundation has become an established wealth management structure offered in Panama and the Netherlands Antilles. As a result of The Bahamas Foundations Act, 2004, the Foundation is now available in The Bahamas.
Foundations are now recognised and accepted in most civil law jurisdictions. They are widely used in Europe and Latin America where trusts are less well-known, frequently misunderstood and not always accepted.
COMPARISON BETWEEN A BAHAMAS FOUNDATION AND A COMPANY OR TRUST
Essentially, a Bahamian Foundation is a hybrid between a company and a trust having several aspects in common with one or the other.
For example:-
1) Like a company but unlike a trust, a Bahamian Foundation may enjoy unlimited duration.
2) Like a trust but unlike a company, a Bahamian Foundation has beneficiaries and can also have a protector.
3) Like a company but unlike a trust, a Bahamian Foundation must be registered and have a registered office.
4) Like a trust but unlike a company, a Bahamian Foundation can be established by will.
5) A Bahamian Foundation must have initial assets of a value of not less than US$10,000, whereas there is no such minimum prescribed for trusts or companies, although, in practice, all three entities would probably have assets well in excess of US$10,000, if not initially, then most likely when activated.
6) A Bahamian Foundation would normally have a foundation council, some of whose duties would be similar to those of a trustee or the directors of a company. Instead of a council, a Bahamian Foundation may have some other governing body or supervisory person, such as a protector. A Bahamian Foundation must have a secretary and may also have other officers which a company would also normally have.
7) While a company must have articles of association, a Bahamian Foundation is not required to have articles, although it may do so. In the absence of articles all provisions concerning the conduct and operation of a Bahamian Foundation would normally be included in its charter or, where appropriate, a Bahamian Foundation would simply rely upon the provisions contained in The Bahamas Foundations Act, 2004.
8) Like a trust or an international business company (“IBC”), a Bahamian Foundation may redomicile in another jurisdiction and a foundation established in another jurisdiction may redomicile in the Bahamas. The statutory provisions are similar to those for a Bahamian International Business Company.
9) Like a trust, which may include in terrorem provisions in its trust instrument, a Bahamian Foundation may include such provisions in its charter.
10) Like a trust, a Bahamian Foundation may include a restriction against alienation in any instrument of disposition to a beneficiary.
11) Like a trust, a Bahamian Foundation may be used to avoid forced heirship in other jurisdictions.
12) Like a trust, a Bahamian Foundation may be used for asset protection purposes, being able to qualify in the same way as a trust under the Fraudulent Dispositions Act.
13) The reservation of extensive powers by the founder of a Foundation would be less likely than the
reservation of extensive powers by the settlor of a trust to result in same being considered by a court to be a sham.
14) Like a trust or a company, a Bahamian Foundation would be subject to the provisions of the Financial Transactions Reporting Act, so it will be important to conduct careful know-your-customer (KYC) due diligence to ensure only desirable clients use Foundations for satisfactory purposes.
REGISTERING A BAHAMAS FOUNDATION
Foundations are registered with the Registrar General under a process very similar to that of registering a company in The Bahamas.
An available name must be confirmed with the Registrar General who will reserve it for a 90-day period within which time the necessary documentation and registration fee will need to be submitted.
The following restrictions apply when selecting the name for a Bahamian Foundation:
i) the words “limited”, “company”, “partnership” or the abbreviation of any translation (or its
abbreviation) of these words;
ii) the name of an existing Bahamas offshore company, partnership or Foundation unless it is in the process of being liquidated or it has given its consent to the Registrar for the name to be used;
iii) the name of a registered business in The Bahamas, registered under the Registration of Business Name;
iv) a name that the Registrar finds constitutes a criminal offence or is offensive to the public; or
v) the words “Chamber of Commerce”, “Bank”, “Co-operative”, “Building Society”, “Insurance”, “Stock Exchange” or “Trust”.
In addition, the words “Royal”, “Imperial”, “Windsor”, “Crown”, “Bahamas”, “Municipal”, “Chartered” and similar words will need special approval from the Registrar.
Following the acceptance of the required documentation by the Registrar and the payment of the required registration fee, a Certificate of Registration will be issued specifying the name and number of the Bahamian Foundation and stating that the Foundation has been registered in accordance with the provision of The Bahamas Foundations Act, 2004.
Upon registration the Foundation is a registered entity and may carry on its business as outlined by its charter.
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