INTRODUCTION TO THE INVESTMENT CONDOMINIUM ("the ICON")

The primary objective of the ICON Act is to facilitate the formation of an investment condominium in The Bahamas between participants for the purpose of collective investments and for connected purposes and to provide an alternative vehicle that may be used when structuring investment funds.

The ICON must be licensed as an investment fund under the Investment Funds Act, 2003 (as amended).

Under the ICON Act an "Investment Condominium" is defined as:

"the contractual relationship subsisting between one or more participants pooling assets for the purpose of operating as an investment fund as defined under the Investment Funds Act."

The ICON is a contractual relationship subsisting between one or more participants pooling assets for the purpose of operating as an investment fund as defined under the Investment Funds Act.

The ICON possesses no legal personality.

The ICON is established upon the terms and conditions, and with the rights and powers, subject to any limitations, empowered to borrow and lend money and give security over its assets as provided under the ICON's governing regulations, the ICON Act and the Investment Funds Act.

The ICON has the ability, when represented by an administrator to:

a) Hold its assets in its own name;

b) Enter into agreements in its own name; and

c) Sue or be sued in its own name.

ESTABLISHMENT OF AN ICON

A name must first be selected for the ICON which must include "ICON", "IC" or "investment condominium".

An ICON is established upon the execution of the Governing Regulations by the initial participants.

The Initial participants will also appoint the administrator.

The establishment of the ICON is evidenced by a certificate of establishment signed by the administrator which must be submitted to the Registrar with the prescribed fee within seven (7) days of the date the ICON is established.

All ICON's must be licensed by a licensor as an investment fund pursuant to the Investment Funds Act within ninety (90) days of the date of establishment or such longer period as approved by the Securities Commission.

The Registrar may issue a Certificate of Good Standing in respect of an ICON.

GOVERNANCE OF AN ICON

The ICON is governed by its Governing Regulations which must contain the following:

i. The name of the investment condominium;

ii. A statement that it is formed exclusively for the purpose of operation as an investment fund under the Investment Funds Act;

iii. The name and address of the administrator of the investment condominium, which address shall be the registered address of the investment condominium;

iv. The address in The Bahamas for service of process on the investment condominium;

v. Subject to the Investment Funds Act, provision's relating to audit;

vi. Provisions for the dissolution of the investment condominium;

vii. A statement of the number of participation interests that the investment condominium is authorized to issue and the currency in which the participation interests are to be issued;

viii. A statement as to whether the investment condominium is authorized to issue classes and series of participation interests and whether the administrator is authorized to fix the number of classes and series thereof;

ix. A statement of the designations, powers, preferences and rights, and the qualifications, limitation or restrictions of each class and series of participation interests that the investment condominium is authorized to issue, or a statement that the administrator is to be authorized to fix any such designations, powers, preferences, rights, qualifications as approved by the participants entitled to vote thereon;

x. The manner in which the material agreements and the governing regulations may be amended;

xi. A provision addressing the liability of each participant in the investment condominium which specifies:-

a) How such liability is limited; or

b) That the participants are liable for the negative net equity of the investment condominium;

xii. Provisions outlining the policies and procedures for valuation of the assets and liabilities of the investment condominium;

xiii. Provisions if applicable addressing the division of the duties of the governing administrator and general administrator; and

xiv. Such other provisions as are deemed necessary as are required under the provisions of the investment Funds Act.

PARTICIPANTS

Participants are entitled to a participation interest in the ICON.

A Participation interest is a unit of ownership in the ICON. It is personal property and is enforceable by participants as a chose in action.

In each year the administrator must call at least one meeting of the participants holding voting participation interests as the annual meeting.

THE ADMINISTRATOR

The administrator is appointed by the initial participants of the ICON and the role may be filled by a single administrator who performs both the roles of general administrator and governing administrator, or separate entities where the role is split between the general administrator and the governing administrator.

Where the role is separated between two entities:

Governing Administrator

The Governing Administrator is deemed to be the operator of the ICON for purposes of the Investment Funds Act and has the powers and duties of an operator as provided under the Investment Funds Act.  The governing administrator must be:

i. A financial institution;

ii. An institution licensed as a corporate services provider under the Financial and Corporate Services Providers Act;

iii. A bank or trust company licensed by the Central Bank of The Bahamas under the Banks and Trust Companies Regulation Act; or

iv. Any entity registered with or licensed by a regulatory authority in a foreign jurisdiction, which regulatory authority exercise functions that correspond to regulatory functions exercised by the Central Bank of The Bahamas or the Securities Commission of The Bahamas.

General Administrator

The General Administrator has the powers and duties of an administrator as set out within the provisions of the Investment Funds Act. The general administrator must be a financial institution.

Powers of Administrator

The Administrator of the ICON has the power to:

i. Bind the ICON;

ii. Engage service providers and contract generally in the name of the ICON;

iii. Execute all letters, contracts, deeds, instruments or documents including but not limited to, contacts of insurance to which the ICON is party;

iv. Perform all acts and engage in all activities necessary or conducive to the conduct, promotion or attainment of the objects or purposes of the ICON

At all times in the performance of its duties, the administrator shall act honestly and in good faith and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.  Given the significant responsibilities assigned to the administrator and the risk in occupying such a critical role, the administrator has a right of indemnification under the ICON Act, except in circumstances where the administrator has acted in wilful default of its duties.

CONVERSION

The following may be converted to an ICON:

i. A company;

ii. An exempted limited partnership registered under the Exempted Limited Partnership Act of the Bahamas; or

iii. A unit trust established under the laws of the Bahamas.

The procedure to convert is as follows:

The Articles of conversion, which must be written in English or accompanied by a certified translation into English, must be approved by:

If a company converting:

i. all of the directors or persons charged with exercising the powers of the company; and

ii. a majority of the shareholders or other persons holding shares and having the right to vote in respect of such shares;

If an exempted limited partnership converting:

i. the general partners; and

ii. a majority of the limited partners having a right to vote in respect of such limited partnership interests;

If a unit trust converting:

i. the trustee or such other  persons as required by the terms of the trust instrument; and

ii. The majority of unit holders having the right to vote in respect of such units.

The Articles of Conversion must contain the following information:

i. The name of the ICON;

ii. Provisions detailing the basis upon which the equity interests will be converted to participation interests in the condominium along with details of any rights attaching thereto;

iii. Provisions for the valuation and accounting treatment of the assets and liabilities of the company and any retained earnings upon conversion;

iv. The date on which the company, exempted limited partnership or unit trust was incorporated, continued, established or formed respective and the date it intends to convert;

v. An annexed copy of the governing regulations;

vi. The name and address of the administrator.

The conversion will be evidenced by a certificate of conversion executed by the administrator under seal certifying that the company, exempted limited partnership or unit trust respectively has been converted to an investment condominium.

The Administrator must submit the certificate of conversion and the prescribed fee to the Registrar within seven (7) days of the date of the certificate of conversion.  The ICON's name will be entered on the Register by the Registrar and the certificate of conversion will be stamped by the Registrar once all requirements have been met.  The ICON must then apply to be licensed as an investment fund pursuant to the provisions of the ICON Act and the Investment Funds Act.

The administrator will be required to provide each participant with a confirmation stating:

i. the number of equity interested converted and the number of participating interests held; and

ii. that the conversion has not affected the value of the capital contribution made by such former holder of equity interests or the value of the newly converted participation interests.

Re-domiciling a foreign entity into an ICON

A foreign company or unit trust may be re-domiciled to a Bahamian IBC or unit trust, and then follow the procedure as set out above to convert the new Bahamian structure into an ICON.

RECORD KEEPING

At all given times, the administrator is required to keep at its office:-

i. A copy of its governing regulations and all amendments thereto; and

ii. A register of participant interests

The administrator must also ensure that reliable accounting records are kept in relation to all sums of money received and expended for and on account of the ICON and the matter in respect of which such receipt and expenditure takes place, inclusive of all sales, purchases and other transaction and the assets and liabilities of the ICON.  All records that are to be maintained shall be kept for a minimum period of five (5) years

TAX & EXCHANGE CONTROL EXEMPTIONS

Under the ICON ACT, where a person is a resident of The Bahamas within the meaning of the Exchange Control Regulations, the ICON is exempt from paying any business license tax, any tax on income or distributions accruing to or derived from such ICON or in connection with any transaction to which that ICON or participant is a party.  Further, the ICON is exempt from estate, inheritance, succession or gift tax rate, duty, levy or other charge payable in The Bahamas with respect to any participation interest.

DISSOLUTION OF AN ICON

An ICON may be dissolved compulsorily by the court or voluntarily by virtue of the terms contained in the governing regulations.

FEES

The prescribed fee shall be submitted to the Registrar within seven (7) days of the date of establishment of the ICON.

Registration of an ICON during-

a) First quarter of a calendar year $350.00

b) Second quarter of a calendar year $250.00

c) Third quarter of a calendar year $150.00

d) Fourth quarter of a calendar year $100.00

Filing of Certificate of Conversion $150.00

Certificate of Good Standing $50.00

Certified copy of a-

a) Certificate of Establishment $50.00

b) Certificate of Conversion $50.00

c) Governing Regulations $50.00

(if delivered to the Registrar)

d) Any other document under

the ICON Act $50.00

An Investment Condominium whose name is on the register as at 31st December in any year shall-

a) Before 30th April of the following year pay to the Registrar General an annual fee of $350.00

b) Before 31st October of such year pay an increased annual fee of $450.00

c) After 31st October of such year pay a further increased annual fee of $550.00

Filing of Notice of Dissolution $150.00

Restoration to the register of an ICON  $750.00

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.