In exploring the uses and advantages of the Bahamian Executive Entity (the "BEE"), it is important to have an understanding of what the BEE is. The BEE has often been compared to trusts, foundations and companies. While the BEE may have common and similar traits to any one of those vehicles, it should not be mistaken for or confused with any of them. In very simple terms, the BEE is an administratively and structurally simplified vehicle created to perform an executive, administrative, fiduciary or shareholder function; either as a stand-alone vehicle or as part of a structure.
The concept of the BEE arose out of a search by a legal advisor to an international family for the ideal vehicle to hold the shares of a private trust company and/or to act as protector of a trust. After much discussion with Lawrence Graham LLP and a working group of the Bahamas Financial Services Board, it was decided that rather than amending legislation relating to existing vehicles an additional structure was necessary for The Bahamas' wealth planning toolkit; hence the enactment of the Executive Entities Act, which came into force on 1st February, 2012, and the accompanying Regulations, which came into force on 2nd February, 2012.
The defining or key characteristics of the BEE are:
- it has no shareholders;
- it is a legal and registered entity – so it is capable of suing and being sued in its own name;
- it is created to act in a specific executive, administrative, fiduciary or shareholding role; and
- it is only permitted to hold assets allowing it to carry out the function for which it has been established or trust assets.
The BEE has limited liability, no share capital, no beneficiaries, no minimum asset requirement, and no annual filing requirements. It affords continuity since it can be established for a definite or indefinite period. Confidentiality is also provided as the names of the Founder and the Executive Entity Council are not publicly filed. The BEE also has simplicity of management and flexibility.
Key Positions of the BEE
The key positions of the BEE are:
- founder (the person signing the Charter which establishes the BEE);
- executive entity agent (must be a Bahamas based service provider, which would also provide the registered office of the BEE – this is the only Bahamian requirement);
- executive entity officer (who would perform the day-to-day administrative tasks of the BEE);
- executive entity council (this is the Governing Body of the BEE); and
- executive entity secretary.
While the Act speaks about the BEE having Officers and Council Members, it is not mandatory for the BEE to have both. If the BEE has only Officers or only Council Members, whichever office is appointed will perform the duties of both. Where a BEE has appointed both Officers and Council Members, it should be noted that an Officer cannot be appointed to serve as a Council Member or perform those duties simultaneously.
Documentation for a BEE
The Charter is the main governing document of the BEE which can be as simple or complex as needed. The Act specifies what information the Charter must or may contain. The mandatory items are:
- the name of the BEE;
- the name along with an address of the Founder and, if a legal person, the number and place of registration of such legal person and an address in The Bahamas for service of documents on the Founder;
- the purpose of the BEE;
- that the BEE is an executive entity;
- the number and description of Officers and where no Officer is appointed, the Charter must include provisions for the appointment of an Executive Entity Council;
- whether the BEE has been established for an indefinite or definite period and if definite, that period;
- the event or happening upon which the BEE will be revoked or wound up; and " the name and address in The Bahamas of the Executive Entity Agent and the address of the registered office in The Bahamas of the BEE.
The Articles are designed to work along with the Charter and would typically include additional governance provisions. In some circumstances, it might be desirable for the Charter to be filed with the Registrar General, making it a public document. In that circumstance it might be useful to have Articles which would contain the more substantial governing provisions of the BEE and any other information which the Founder would prefer to be kept confidential.
Registration of the BEE
The following three items must be provided upon registration of a BEE:
- a registration statement of the BEE – this provides a summary of the BEE and only lists the name, purpose, officers and the name and address of the Executive Entity Agent;
- a statutory declaration of compliance; and
- the prescribed fee – which is $550 per annum charged on a quarterly pro-rata basis depending on the date of registration. The annual fee for the BEE is $500 provided that the same is paid before 30th April.
The registration statement and the statutory declaration can be signed by either the Executive Entity Agent or the attorney engaged in the formation of the BEE. There is no statutory requirement to list the names of the Founder or Executive Entity Council, thereby preserving confidentiality.
Advantages of the BEE
The BEE fills the gap which was previously identified in the Bahamas' wealth planning toolkit. It has limited liability which is attractive to office holders. It also offers considerable privacy and provides a perpetual existence.
Practical Uses of the BEE
The BEE as Protector/Protector Committee
It has become the norm for a settlor, when establishing his trust, to name a close friend or family member as protector of the trust and to give such person a great deal of power in relation to the trust and its assets. An alternative is to establish a BEE. This will afford the protector limited liability since he would be acting not in his personal capacity but rather in the name of the Executive Entity.
Similarly, if the trust calls for a protector committee, it may be possible for the intended committee members to constitute the Executive Entity Council of the BEE. The use of a BEE would not only afford the protector committee limited liability but issues of continuity in membership of the protector committee would also be avoided. The Charter could speak to appointments of new Executive Entity Council members to replace those who might be disabled, deceased or who wish to retire for some other reason. Additionally, for the purposes of the trust instrument, while the composition of the Executive Entity Council will change, the BEE itself will always be the named protector committee.
Shareholder of a Company
By using a BEE as the shareholder of a Company, issues of continuity would be addressed since there would be no need to transfer shares to beneficiaries upon the death of the original holder of such shares. The Charter would stipulate the treatment of dividends. In essence, the BEE would act as a conduit between the Company and the ultimate beneficial owner.
In summary, the BEE has been designed as an administratively and structurally simplified vehicle aimed at performing a specific function and should be embraced as a welcome addition to the Bahamas' wealth planning tool kit.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.