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DISCLAIMER

The information provided below is intended to be only an aid to understanding the legislation reviewed in this section.  The contents do not in any way constitute legal advice to any person for payment or otherwise and Lennox Paton Corporate Services Limited and the Partners of the firm of Lennox Paton do not and will not in any way accept responsibility or liability for any loss or damage caused by or arising from reliance on the information contained herein.

Persons reading this publication are reminded that where a decision is to be made which depends for its correctness on the effect of the legislative regime discussed herein or on any other legislation or Common Law rules, professional advice should be sought from the firm of Lennox Paton or any other firm of qualified legal professionals.

FOREWORD

The following information is not intended to provide a technical legal analysis of the provisions of the Bahamas Foundations Act, 2004 and the Bahamas Foundations (Amendment) Act, 2005 (together, "the Bahamas Foundation Act")

We have focused only on the main provisions of the The Bahamas Foundation Act and have intentionally omitted explanations of various sections of the legislation which we believe are not of primary concern to the financial services industry of The Bahamas. All references to ?$? are to Bahamian dollars. One Bahamian dollar equals one US dollar. The law is stated as at 1st July 2007.

OVERVIEW

A Bahamas Foundation is a legal entity, resident and domiciled in The Bahamas.  Any assets properly transferred to a Bahamas Foundation shall be the legal and beneficial property of the Foundation and shall cease to be the property of the transferor.  The property of a Bahamas Foundation shall not become the property of a beneficiary unless and until it is properly distributed to such beneficiary by the Foundation.

The purpose of a Bahamas Foundation may be any purpose or purposes which are not unlawful, immoral or contrary to public policy in The Bahamas.  A Bahamas Foundation may be established for private, commercial or charitable purposes.  A purpose of a Bahamas Foundation may be the management of the Foundation?s assets. 

There is no requirement to expressly set out in the governing instrument the specific purpose of the Bahamas Foundation, a general clause will suffice.

A Bahamas Foundation may be established by a Charter or by a Will.

A Bahamas Foundation may have perpetual duration.

The Bahamas Foundations Act, 2004 came into force 22nd October, 2004.

ESTABLISHMENT OF A BAHAMAS FOUNDATION

A Bahamas Foundation may be established by a Charter or by a Will.

A Bahamas 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 Bahamas Foundation is established by a Will the Act provides procedures to ensure the proper registration and endowment of the Foundation.

A Bahamas Foundation Charter must contain prescribed details including:

i. the name and address of the Founder (a nominee founder may be used);
ii. the address in The Bahamas for service of documents on the Founder;
iii. the name and address of the Secretary or Foundation Agent of the Foundation;
iv. the purpose and objects of the Foundation;
v. the designation of the beneficiary(ies) or the identification of the person or body empowered to ascertain or identify the beneficiary(ies);
vi. the duration period of the Foundation;
vii. requirement for minimum assets of S10,000 or foreign currency equivalent; and viii. the endownment of the Foundation?s initial assets.

The Bahamas Foundation Charter may contain such other provisions that are desired to govern the operation of the Foundation including by way of example provisions covering:

i. reservation of powers to the Founder; ii. appointment, removal and representative authority of a Foundation Council or other supervisory persons;
iii. appointment of auditors;
iv. appointment removal and representative authority of Officers;
v. meetings;
vi. amendments or revocation of the Charter;
vii. use of a seal; and
viii. beneficiaries

In the absence from the Bahamas Foundation Charter of a provision covering a particular matter referred to in i. ? viii. above the provisions of the Act in respect of such matter shall apply.

The Bahamas Foundation Charter may provide for Articles.  If Articles are not adopted or a matter is not regulated in the Charter or Articles then the provisions of the Act in respect of any such matter shall apply.

REGISTRATION OF A BAHAMAS FOUNDATION

A Bahamas Foundation must be registered with the Registrar of Foundations.

The following documents must be submitted to the Registrar of Foundations for registration:

(a) statement signed by either the Secretary or Foundation Agent of the Foundation or the attorney engaged in the formation of the Bahamas Foundation which contains the following information extracted from the Charter-
i. the name of the Foundation;
ii. the date of the Charter;
iii. the purpose(s) and object(s) of the Foundation;
iv. the date of the Articles (if any);
v. the name of the Founder and address of the Founder in The Bahamas for service of documents;
vi. the name and address of the Secretary or Foundation Agent;
vii. if appointed, the name and address of the Foundation Council or other governing body or supervisory person;
viii. the address of the Registered Office;
ix. the period for which the Foundation is established;
x. value of the initial assets and the minimum value requirement as stated in the Charter; and
xi. such other particulars as the secretary or the attorney wish to include.

(b) a list of the names and addresses of the Foundation?s first Officers; and
(c) a statutory declaration by the Secretary, Foundation Agent or attorney engaged in the formation of the Foundation of compliance with all relevant requirements of the Act.

There is no legal requirement to register the Charter or Articles (if any) but a Bahamas Foundation may elect to do so.

Upon the registration of the documents and the payment of the prescribed fee the Registrar shall issue a certificate of registration. The certificate of registration shall be conclusive evidence that the Bahamas Foundation is a foundation capable of being registered and is duly registered under the Act.

A Bahamas Foundation may ratify all pre-registration acts carried out in the name of the Foundation and purportedly by or on behalf of the Foundation.

POWERS AND OBLIGATIONS OF A FOUNDER

Where there is more than one Founder they must exercise their powers jointly unless the Charter otherwise provides.

The rights of a Founder in respect of a Foundation may be assigned by the Founder to any person. Such assignment may be made in the Charter or subsequently by written instrument. Notice of such assignment must be given to the Secretary or Foundation Agent of the Foundation.

A person who endows assets to a Bahamas Foundation after its registration does not acquire the powers of a Founder.

Where a Founder has undertaken or covenanted in the Charter to endow assets to the Bahamas Foundation, the Foundation may enforce the undertaking or covenant against the Founder and is required to do so in respect of the initial assets of the Foundation if they have not been endowed within twelve (12) months from either the date of registration of the Foundation or the specified date the Founder was supposed to endow the initial assets.

FOUNDATION OFFICERS

A Bahamas Foundation may appoint Officers other than the Secretary or Foundation Agent. 

An Officer may be a legal person.

An Officer may not be related to any member of the Foundation Council (if one is appointed).

An Officer may not assign his position.

The name and address of all Officers must be delivered to the Registrar of Foundations.

If an Officer wishes to resign, a minimum seven (7) days notice must be given to the Bahamas Foundation and a declaration that such notice has been given must be lodged with the Registrar of Foundations at least seven (7) days before the resignation date.

The initial Officers are appointed by the Founder.   Subsequent Officers may be appointed by the Founder or the existing Officers.

DUTIES AND POWERS OF OFFICERS

The Bahamas Foundation Act expressly provides that the duties and responsibilities of an Officer are administrative, rather than fiduciary, in nature.

An Officer shall take all such steps and do or cause to be done all such things as may be necessary to properly administer the Bahamas Foundation to achieve the purposes or objects of the Foundation.

An Officer is required to exercise reasonable care and skill in the conduct of the affairs of the Bahamas Foundation.

An Officer shall act in accordance with the Charter and Articles (if any). In the absence of a Foundation Council or other supervisory body, the Officers, acting jointly (if more than one), shall be the governing body of the Bahamas Foundation.

N.B. WHERE THERE IS A FOUNDATION COUNCIL OR OTHER SUPERVISORY BODY THE DUTIES AND POWERS OF THE OFFICERS SHALL NOT INCLUDE THOSE RESERVED TO THE FOUNDATION COUNCIL OR SUPERVISORY BODY (AS THE CASE MAY BE).

SECRETARY/FOUNDATION AGENT

A Bahamas Foundation must appoint either a Secretary or a Foundation Agent.  The Secretary or Foundation Agent is an Officer of the Foundation.

The Secretary or Foundation Agent must be either licensed under the Bahamas Financial and Corporate Services Providers Act, 2000, or licensed as a trust company under the Bank and Trust Companies Regulation Act. 

A Bahamas Foundation shall be subject to the regulatory oversight by the regulator that licensed the Secretary or Foundation Agent.

The Secretary or Foundation Agent may not assign its position. 

The name and address of the Secretary or Foundation Agent must be lodged with the Registrar of Foundations.

Where the Secretary or Foundation Agent wishes to resign it must give a minimum seven (7) days written notice to the Bahamas Foundation and a declaration that such notice has been given must be lodged with the Registrar of Foundations at least seven (7) days before the resignation date.

The Secretary or Foundation Agent shall accept service of legal process on behalf of the Bahamas Foundation.

REGISTERED OFFICE

The Registered Office of a Bahamas Foundation shall be the address of the Foundation Agent (if appointed) or the Secretary.

Any changes in the address of the Registered Office shall be notified to the Registrar of Foundations within twenty-eight (28) days.

A Bahamas Foundation must keep at its Registered Office a file containing accurate copies of all documents filed at the Registry as well as accurate copies of its Charter and Articles (if any). 

These documents shall be open for inspection by the Founder, Officer,  Foundation Council member, or other supervisory person.

FOUNDATION COUNCIL

If no Officers (other than a Secretary or Foundation Agent) are appointed the Bahamas Foundation Charter should provide for a Foundation Council.

Where provision is made in the Bahamas Foundation Charter for a Foundation Council, such council may consist of (i) two or more natural persons, or (ii) a legal person and one or more natural persons, or (iii) a legal person by itself.

Persons who are Officers, or the auditor (or a member of the auditor firm) or their relatives may not be members of a Foundation?s Council.  Where an Officer is a legal person, no natural person who is a shareholder, director, secretary, manager, partner or controller of that Officer or their relatives may be a member of a Foundation?s Council.

A member of a Foundation Council may not assign his position.

A member of a Foundation Council who wishes to retire must give at least seven (7) days written notice to the Foundation.

DUTIES AND POWERS OF FOUNDATION COUNCIL

The Bahamas Foundation Charter or the Articles (if any) may specify the duties and powers of the Foundation Council and provide for duties and powers in addition to those provided under the Act.

The Bahamas Foundation Council has the following statutory duties and powers:

i. to take such action as it may deem necessary to ensure compliance by the Foundation and the Officers with the provisions of the Charter and Articles (if any) and the Act;
ii. supervise generally the management and conduct of the Foundation;
iii. the right to be informed of all meetings of the Officers and the right to attend but not vote at such meetings; and
iv. to be included in the circulation of all documents to the Officers.

A member of a Foundation Council must exercise reasonable care and skill in performing his duties and exercising his powers.

LIABILITY AND INDEMNIFICATION OF OFFICERS, FOUNDATION COUNCIL MEMBERS, SUPERVISORY PERSONS AND PROTECTOR

Officers, Foundation Council members, supervisory persons and the Protector enjoy statutory exculpation from personal liability unless such liability shall have been incurred as a result of own gross negligence, wilful default or misconduct, fraud or dishonesty. In the case of the Foundation Agent it shall be liable for fraud only.

No Officer, Foundation Council member, the supervisory person or Protector shall be personally liable for the acts, receipts, neglects or defaults of any other Officer, Foundation Council member, other supervisory person or Protector, or for joining in any receipt or other act for conformity, or for any loss or expense incurred by the Foundation as a result of insufficiency or deficiency of title to any property for or on behalf of the Bahamas Foundation, or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Foundation shall be advanced or invested or for any loss or damage arising out of the bankruptcy, insolvency, or tortious or criminal act or omission of any person with whom any money, securities, or effects shall be deposited, or for any loss occasioned by an error of judgement, omission, default or oversight on his part, or for any other loss, damage or misfortune whatever which shall happen in the execution of his office or in relation thereto, except where the same shall happen through his own gross negligence, wilful default or misconduct, fraud or dishonestly.

A Bahamas Foundation may indemnify Officers, Foundation Council members, supervisory persons and the Protector for liability incurred in defending any proceedings whether civil or criminal in which judgement is given in favour of the indemnitee or in which he is acquitted or where the court grants relief.

Every Officer, Foundation Council member, other supervisory person and Protector who acted honestly and in good faith shall be indemnified by the Foundation against all costs, charges, losses, expenses, and liabilities incurred by him in the execution and discharge of his duties or in relation thereto, and the amount for which such indemnity is provided shall immediately attach as a lien on the property of the Bahamas Foundation, and have priority over any claims of the Foundation.

EXECUTION OF CONTRACTS, DEEDS ETC.

Contracts, deeds, instruments or other documents on behalf of a Bahamas Foundation may be made as follows:

(a) a contract which, if made between natural persons, would by law be required to be writing and under seal may be made on behalf of the Foundation in writing :-
i. if the Foundation has a seal for use in The Bahamas, under that seal; or
ii. signed by the authorised signatories of the Foundation, each signing or under the seal of the signatory, as the case may be;
(b) a contract, instrument or other document which, if made between natural persons would by law be required to be in writing signed by the parties to be charged therewith, may be made on behalf of the Foundation in writing signed by the authorised signatories;
(c) a contract which, if made between natural persons would be valid if oral only may be made orally on behalf of the Foundation by any person acting under its express authority.

Where a Foundation executes a deed, instrument or other document, whether or not the Foundation has a seal, it shall be sufficient and the Foundation and any other party to the deed, instrument, or other document shall be bound if it is signed by the authorised signatories of the Foundation intending it to be executed by way of a deed.

A Bahamas Foundation may, in writing :-

(a) if the Foundation has a seal for use in The Bahamas, under that seal; or
(b) signed by the authorised signatories of the Foundation, each signing or  under the seal of the signatory, as the case may be,

empower any person as its attorney to execute deeds, instruments or other documents on its behalf in any place outside The Bahamas.

A Bahamas Foundation may, but is not required to, have a seal for use in The Bahamas.

A Bahamas Foundation may have a seal for use in any place outside The Bahamas.

PUBLICATION OF NAME BY A BAHAMAS FOUNDATION

A Bahamas Foundation must have its name in legible characters in all notices, advertisements and other official publications of the Foundation and in all bills of exchange, promissory notes, endorsements, cheques, orders for money or goods, invoices, bills, receipts and letters of credit of the Foundation.  Failure to do so will make the person who issued such document personally liable in the event the Bahamas Foundation does not satisfy the liability.

A Bahamas Foundation must disclose its name, place of registration, registration number and the address of its Registered Office on all letterhead, forms and receipts.

MEETINGS OF OFFICERS

The Bahamas Foundation Charter or Articles (if any) may contain provisions governing the conduct of meetings failing which the provisions of the Act shall apply. 

Meetings can be held anywhere.

Subject to the Charter or Articles (if any) seven (7) days written notice of a meeting must be given.  Subject to the Charter or Articles (if any) written resolutions may be consented to in writing by a simple majority of those persons entitled to vote.

Notice must be given in respect of any resolution intended to be passed at a meeting of Officers. 

Unless the Bahamas Foundation Charter or Articles otherwise provide Officers must be present in person to be in attendance.

Minutes of all meetings of the Officers must be kept and such minutes must be kept at the Registered Office of the Foundation.  The minutes shall be open to inspection by any Founder, Officer, member of the Foundation Council, Protector  or other supervisory person.

MEETINGS OF MEMBERS OF FOUNDATION COUNCIL

The Bahamas Foundation Charter or Articles (if any) may contain provisions governing the conduct of meetings failing which the provisions of the Act shall apply.

Subject to the Charter or Articles (if any) seven (7) days written notice of a meeting must be given.

Minutes of all meetings of the Foundation Council must be kept and maintained at the Registered Office of the Bahamas Foundation.  The minutes shall be open to inspection by any Founder, Officer, member of the Foundation Council, or other supervisory person.

ANNUAL GENERAL MEETING

A Bahamas Foundation must hold at least one meeting of the Officers or Foundation Council as its Annual General Meeting.

RIGHTS OF A BENEFICIARY TO INFORMATION

A beneficiary who has a vested interest in all or some of a Bahamas Foundation?s assets shall be notified in writing of his interest and shall be entitled:

(a) to receive or request information from the Bahamas Foundation in respect of the fulfilment of the objects of the Foundation; and
(b) on request inspect and copy the Charter, Articles (if any), financial statements, book of account and any audit report, and any minutes of Meetings of Officers, Foundation Council or other supervisory body.

A beneficiary may apply to the Court for an order to enforce the production of the information.

FINANCIAL MATTERS

A Bahamas Foundation must keep such financial statements, accounts and records as the Officers or Foundation Council consider necessary or desirable in order to reflect the financial position of the Foundation.

The financial statements, accounts and records of a Bahamas Foundation shall be kept at either the Registered Office or at such other place as shall be determined.

The financial statements, accounts and records shall at all times be open to inspection by the Officers, Foundation Council, Protector or any other supervisory body and the auditor (if appointed).

AUDITOR

There is no legal requirement to appoint an auditor but a Bahamas Foundation may elect to do so.

REVOCATION OF BAHAMAS FOUNDATION CHARTER

Where the Bahamas Foundation Charter so permits the Founder, or the Foundation Council if so empowered, may revoke the Charter.

AMENDMENT OF BAHAMAS FOUNDATION CHARTER

Where the Bahamas Foundation Charter so permits the Charter may be amended as follows:-

i. the Founder, or the Officers, shall convene a meeting of the Founder, Officers and the Foundation Council or other supervisory body (if any);
ii. the resolution for amendment of the Charter shall be adopted only if unanimously agreed to by all those referred to in (i) above.If the amendment impacts the Registration Statement filed with the Registrar of Foundations the notice of such amendment must be filed with the Registrar.

POWER OF A BAHAMAS FOUNDATION TO RE-DOMICILE

A Bahamas Foundation established in a foreign country may re-domicile to The Bahamas provided the laws of the foreign country allow it to re-domicile.

A Bahamas Foundation registered under the Act may, subject to any limitations of its Charter or Articles (if any), may re-domicile and register under the laws of another country in the manner provided under those laws and the Act.

WINDING UP OF A BAHAMAS FOUNDATION

A Bahamas Foundation may be wound up voluntarily or by petition to the court made by the Foundation or its creditors. The Act and regulations provide the requisite winding up rules.

REMOVAL OF A BAHAMAS FOUNDATION FROM THE REGISTER

The Bahamian Registrar of Foundations has the authority to remove a Bahamas Foundation from the Register if he is satisfied that the Foundation is carrying on an activity which is prohibited in or from within The Bahamas or is carrying on in or from within The Bahamas an activity which requires a license or authorisation and no such license or authorisation has been obtained. A Bahamas Foundation so removed may apply to the court for restoration.

The Bahamian Registrar of Foundations is under a duty to remove from the Register any Foundation that fails to pay any fees due under the Act.

A Bahamas Foundation removed from the Register for non-payment of fees may apply for restoration within five (5) years of the date of removal.  Upon restoration, the Bahamas Foundation shall be deemed never to have been removed from the Register.

A Bahamas Foundation that has been removed from the Register remains liable for all claims, debts and liabilities of the Foundation.

CERTIFICATE OF GOOD STANDING

Any person may, upon payment of the prescribed fee, request a Certificate of Goodstanding in respect of a Bahamas Foundation.

CONFIDENTIALITY

It is a criminal offence punishable by a fine not exceeding $50,000 or to imprisonment for a term not exceeding three (3) years for any person who has acquired information in his capacity as:

i. an Officer;
ii. a Protector;
iii. a member of Foundation Council;
iv. a member of a Supervisory Body;
v. a Counsel and Attorney for a Foundation; or
vi. an auditor of a Foundation,

to disclose any information relating to the identity of a beneficiary(ies) of the Bahamas Foundation or its assets, liabilities, transactions or accounts without the express or implied consent of the Founder and beneficiary(ies) except:

i. when lawfully required or permitted to do so by the Bahamian Court; or
ii. under the provisions of Bahamian law.

IN TERROREM PROVISIONS

The Bahamas Foundation Charter may provide for a beneficiary to forfeit their benefits or rights in the event they should challenge the establishment of the Foundation, the endowment of any assets, the Charter or the Articles (if any) or any provision thereof, or any decision of the Foundation Council or other supervisory persons that does not damage or seek to damage their benefits or rights and such forfeiture shall be valid and enforceable when there is no discretion with regard to such enforcement.

RESTRICTION AGAINST ALIENATION

A Bahamas Foundation may provide in an instrument of disposition of property to a beneficiary that such property shall not be alienated or pass by bankruptcy, insolvency or liquidation or be liable to be seized, sold, attached or taken in execution by process of law.

Neither the Founder nor any other person donating property to a Foundation may benefit from this provision of the Act.

FORCED HEIRSHIP

The forced heirship laws of a foreign jurisdiction will not  be recognized in The Bahamas in respect of property properly endowed to a Bahamas Foundation.

A foreign judgement shall not be recognized or enforced insofar as it is inconsistent with the forced heirship provisions of the Bahamas Foundations Act.

FISCAL EXEMPTIONS

A Bahamas Foundation is statutorily exempt from business license fees, income tax, capital gains tax or any other tax on income or distributions accruing to or derived from the Foundation or in connection with any transaction to which the Foundation is a party.

No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by a Founder or beneficiary with respect to any interest given to or received from a Bahamas Foundation.

All instruments to which a Bahamas Foundation is a party relating to transactions in respect of the assets of a Foundation and other transactions concerning the business of the Foundation shall be exempt from stamp duty except where Bahamian realty or personalty is involved.

REGULATIONS

The fees payable to the Registrar in respect of Foundations for the matters hereinafter specified shall be:

(a) for the registration of Foundation under section 21(2) of the Bahamas Foundations Act during:
i. the first quarter of a calendar year $  500.00
ii. the second quarter of a calendar year       $  375.00
iii. the third quarter of a calendar year       $  250.00
iv. the fourth quarter of a calendar year       $  125.00
(b) a Bahamas Foundation whose name is on the Register on December 31st in any year shall:
i. before April 30th of the following year pay to the Registry an annual fee of         $  500.00
ii. before October 31st of such year pay an increased annual fee of                     $  550.00
iii.after October 31st of such year pay a further increased annual fee of                       $  750.00
(c)  for a Certificate of Good Standing under Section 64 of the Act         $  50.00

For more information please contact: adavies@lennoxpaton.com