The Bahamas has introduced a comprehensive approach to Private Trust Companies (PTC) that fully and appropriately incorporates PTCs into the country’s robust financial system. PTC legislation has passed both houses of Parliament in The Bahamas and is on its way to being brought into force before year end.
Under the legislation, a Bahamian PTC – like other structures such as foundations – will not require regulatory approval. The PTC need only arrange its affairs with a regulated Bahamian service provider or registered representative. A Registered Representative, as defined in the legislation, is a bank or trust company or a licensed financial and corporate services provider approved by the Central Bank of the Bahamas for the provision of these services.
This feature distinguishes the Bahamian PTC from those that are available in other jurisdictions and allows for exclusive interaction between the client and its Registered Representative without additional regulatory involvement. As a result, client information need only be delivered to the offices of the client’s service provider. Further, the legislation clearly sets out the role and responsibility of the Registered Representative.
At the beginning of 2005, a working group consisting of The Bahamas Financial Services Board (BFSB), the Association of International Trust Companies in the Bahamas (AIBT) and The Society of Trust and Estate Practitioners (STEP) Bahamas was established to develop a framework for PTCs. The group engaged in extensive dialogue with the Central Bank of The Bahamas and the Bahamian government in developing the current legislation.
Wendy Warren, CEO and Executive Director of BFSB, notes that the PTC legislation was designed with a long term view and approach. She further states, *“As much as possible we wanted to establish PTC legislation that could stand the test of time, and provide a stable platform for decision-making. In other words, we did not take any short cuts. We carefully considered a number of factors such as what the PTC legislation intends to accomplish, our clients’ needs and the regulatory themes that may emerge in the future. In summary, the legislation provides clarity for clients and their advisors and a light regulatory touch”.*
Jan Mezulanik, AIBT’s Chairman, said the legislation makes The Bahamas a highly attractive jurisdiction for PTCs. *“Private Trust Companies have become a preferred tool in the structuring of the estate and inheritance planning needs of the very high and ultra high net worth families, and can provide the families with a greater level of involvement over the investment of the trust assets. The legislation enables service providers in The Bahamas to offer this estate planning option to clients”* he said.
Providing specific legislation addressing the manner in which private trust companies may be established and operated in The Bahamas rounds out a series of steps undertaken in recent years to respond, in a comprehensive and competitive manner, to the needs of the family. These legislative initiatives have included the Foundations Act, Purpose Trust Act, Smart Funds and the amendment to the Perpetuities Act; all of which in combination with Private Trust Companies have solidified the country’s wealth management services.
In addition to its light regulatory touch and providing access to a broad range of service providers, The Bahamas’ PTC legislation has a number of other distinguishing features:
* There may be more than one designated person; they must be related by consanguinity or other family relationship to each other.
* The PTC may be established during or after the life of the designated person(s).
* The PTC may act as trustee to trusts settled by persons related by consanguinity or other family relationship to the designated person or one of the designated persons.
* The PTC may act as trustee to existing trusts that meet the above mentioned criteria.
* The beneficiaries of a trust administered by a PTC are not restricted to family members of the designated person or designated persons.
* Directors of the PTC are not required to be resident in The Bahamas.
* The PTC in selecting its Registered Representative in The Bahamas may also determine in discussion with the Registered Representative whether it is best that the Registered Representative serves as Director, Secretary or Bahamas Agent to the PTC.
* There is no requirement for a Special Director where the Registered Representative is a Bahamian bank or trust company. Otherwise, a director of good reputation and who possesses at least five years’ experience in a discipline relevant to the administration of trusts is required. Relevant disciplines include one or more of law, finance, commerce, investment management or accountancy.
* While the growth of PTCs may spur the establishment of family offices in The Bahamas, there is no requirement for a PTC to establish a physical presence in the jurisdiction.
From the family with operating companies and charitable foundations, to the wealthy client from a civil law country, the PTC may be the ideal solution on a number of different levels, including providing control, influence, privacy, continuity, flexibility, education and empowerment of beneficiaries, and cost efficiency.