14 Mar, 2012

Pioneering legislation has become law in the Bahamas creating an executive entity for use in offshore wealth preservations structures.  This entity, which is the first of its kind, has already attracted considerable interest from families and their advisers looking to strengthen, but at the same time simplify, their structures.


International law firm, Lawrence Graham (LG), proposed the concept to the Bahamas Financial Services Board as a solution to its clients’ concerns regarding who should occupy key ownership, management, supervisory and investment advisory positions within their wealth preservation structures.


Rose Chamberlayne (pictured), a senior associate at LG who was involved in developing the executive entity, said: “This is an incredibly innovative and timely piece of legislation.  It’s targeted at protecting the confidentiality of wealth preservation structures whilst at the same time giving the founder greater certainty and security that the right decisions will be made by the right people at the right time and for the right reasons.  It also has the benefits of removing unnecessary layers of ownership and administration within these structures, as well as facilitating the application of best practice family and corporate governance principles to protect against internal and external conflict.  Its very existence showcases the Bahamas’ visionary approach to meeting private client needs”.


The legislation creates a perpetual entity designed specifically and solely to carry out executive functions. Executive functions are any powers and duties of an executive, administrative, supervisory, fiduciary and office holding nature. The Bahamas Executive Entity (BEE) is, therefore, perfectly suited to act as shareholder of a private trustee company (PTC), or as a protector, enforcer, advisory board, corporate director or reserved powers holder, or even to carry out family office style administrative functions. Previously, no individual or vehicle was best suited to this purpose, resulting in a potentially weak link in structures from a succession, control and governance perspective.


In terms of a BEE’s key features, it has no shareholders, beneficiaries or enforcers – these are not necessary given its limited purpose. Further, it is not a wealth holding vehicle – its assets are limited to what it reasonably needs to carry out its executive functions and it can only hold shares in another entity which also carries out executive functions (e.g. a PTC or protector / enforcer / investment advisory company, but not a trading company).


In terms of the management of the BEE, its officers can comprise the founder’s chosen family members and trusted advisers who benefit from limited liability as if they were directors of an international business company. These people previously may have been reluctant to take on a fiduciary role, such as an enforcer or protector of a trust, in their personal capacity due to the potential risk that they could personally be liable for a loss to the trust fund if in breach of their fiduciary duty. There is the added comfort that officers’ details are not publically available in the Bahamas and there is no requirement for a Bahamian resident officer to sit on the board. A BEE will naturally require a Bahamian licensed financial and corporate services provider to act as its agent.


The hallmark of the BEE is its ability to control and protect decision making at the top level of a structure within a confidential, straightforward and best practice framework.

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