BAHAMAS: An Introduction to Offshore: Trusts
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Bahamas: Offshore Trusts
The Bahamas is a well-established trust jurisdiction with an experienced body of practitioners and judges. It has a responsive Government concerned to develop The Bahamas as a reputable financial centre with an extensive range of trusts (whether fixed and/or discretionary trusts or for charitable or non-charitable purposes), international business companies, foundations and executive entities (under the Executive Entities Act 2011). There is a very flexible array of possibly linked options involving underlying companies or foundations or private trust companies or executive entities. These are available to serve all the needs of high-net-worth individuals and allow them significant input into the operation of their structures.
The Government, assisted by a group of trust lawyers, has always been keen to have its trust and related law responsive to the latest international developments. It quickly dealt with the COVID-19 pandemic by allowing banks and trust companies to operate normally during lockdown, while ensuring that its emergency proclamations did not incidentally cause “flee” clauses to export trusts to other jurisdictions.
Over the last ten years the Government has been very active in enacting the following legislation: the Rule against Perpetuities (Abolition) Act 2011, the Rule against Perpetuities (Abolition) (Amendment) Act 2020, the Purpose Trust (Amendment) Act 2011, Trustee (Amendment) Acts 2011, 2013 and 2016, the Trusts (Choice of Governing Law) (Amendment) Act 2016; the International Business Companies (Amendment) Acts 2011, 2013, 2020; the Property (Execution of Deeds and Documents ) Act 2020; the Bank and Trust Companies Regulation Act 2020, the Financial and Corporate Providers Act 2020; the Central Bank of Bahamas Act 2020 and the Penal Code (Amendment) Act 2020. The global Financial Action Task Force has, indeed, removed The Bahamas from the list of jurisdictions under increased monitoring for money-laundering risks.
In 2020 the Central Bank created the Sand Dollar, which is a digital representation of the Bahamian dollar, but not a cryptocurrency. It is a centralised, regulated, stable, private and secure unit of account and means of exchange – and is a direct liability of the Central Bank, backed by its foreign reserves. By the introduction of this retail Central Bank Digital Currency, the Bank will promote more inclusive access to regulated payments and other financial services, while reducing service delivery costs and increasing transactional efficiency for financial services across the Bahamian islands.
The Trustee (Amendment) Act 2011 made it possible for trust instruments to provide for arbitration of trust disputes so as to bind minor, unborn or other unascertained beneficiaries. Useful case law is now coming through. The Supreme Court, a first instance court, has already given one judgment clarifying the use of arbitration in trust disputes and has been hearing a further case in the same matter. The judge is considering the crucial extent to which any appeal is possible from the decision of the arbitral tribunal and, if some appeal is possible, what is the outcome of such appeal. This will involve determining whether or not the trust in question was an authorised purpose trust of a hybrid nature benefiting individuals and purposes, so that for locus standi to bring a case an individual needs to be declared an interested authorised applicant by the court.
Trust litigation among wealthy squabbling family members appears to be constant, with Zoom video conferencing being used for court hearings. Moreover, COVID-19 intimations of mortality are leading wealthy persons to take legal advice to create lifetime and testamentary structures to avoid the need for probate of all their assets and to maintain dynastic wealth for generations of their families.
For the future, when the pandemic is over, it seems that more use will be made of Zoom or similar videoconferencing facilities for court hearings, now that these are so prevalent – and useful except where there are many witnesses. After the pandemic, lawyers, having become used to working from home, and communicating with colleagues or clients or other firms by telephone or by Zoom, are likely to be spending some days a week working from home.