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Newsletter | Articles Bahamas Government aims to arrest dwindling IBCs by Lindsay Thompson - Guardian Business Editor, 5 February 2004 The 1989 International Business Companies (IBC) Act that was repealed in 2000 during a comprehensive reform of the financial services industry in order to escape an international blacklist, is to be further amended. The 1989 legislation was replaced by the International Business Companies Act, 2000, one of 11 pieces of financial legislation that came into force on December 29 of that year. With the approximately 100,000 IBCs in 2000 dwindling to 47,040 active ones in 2002, Minister of Financial Services and Investments Allyson Maynard Gibson told parliamentarians on Wednesday, "It is an incontrovertible fact that The Bahamas is no longer considered as a leading jurisdiction for IBCs." Opening debate on the amendments, she said the goal is to achieve a modest level of growth in 2004 as compared to 2003 and thereby minimise further erosion of IBCs. Amendments include, amongst other things, the use of an IBC to carry on the business of external insurance subject to obtaining the requisite licence; provisions relating to mortgages and charges of shares; the minister responsible being allowed to set prescribed minimum share capital, and provision for an increased fee where a company fails to pay at the specific time. An IBC is a corporate entity described by experts as being "tailor-made for the needs of international business", having the attractive features of limited liability, minimal legal restrictions, ease of administration, and speed of incorporation. A Bahamian-incorporated IBC allows a client to operate many aspects of a business with ease and confidentiality, with the additional benefit of tax neutrality, by allowing a client to manage and maximise income. There were approximately 100,000 IBCs in The Bahamas in 2000. At the end of June, 2002, there were only 47,040 active IBCs registered in the country. During the first nine months of 2001 the number of new IBCs registered declined to 4,148 with 14,454 during the same period of 2000. The fall-out resulted from The Bahamas being blacklisted by the Financial Action Task Force (FATF) in 2000, and related initiatives of the Financial Stability Forum and the Treasury Department of the United States. The Bahamas was motivated to re-engineer the sector through the enactment of a package of legislation, to keep with international financial standards. The International Business Companies Act, 2000, repealed the IBC Act, 1989, with the exemption of fees and penalties. The fall-out in the sector followed after a number of offshore financial centres did not respond to the international initiatives of the FATF/OECD. Many IBCs looked elsewhere in competitive jurisdictions resulting in a substantial diminution of IBC business in The Bahamas. "While it is unlikely that in the short term The Bahamas will regain its status as a pre-eminent jurisdiction for the incorporation and registration of IBCs," Mrs. Maynard-Gibson said, "the IBC is an important product which must be offered as a part of a comprehensive range of products and services to prospective investors." She noted that IBCs continue to represent an important component of the country's financial services industry. Revenue from IBCs fees account for approximately $14 million annually, comprised of annual maintenance fees, incorporation fees and fees for other ancillary services, in particular the issuance of certificates of good standing. With regard to the annual registration fees, it has been decided that for companies with an authorised capital of $0 to $50,000 they will remain $350, and the annual fee for companies with an authorised capital of $50,001 and over will be $1,000. Allyson Maynard-Gibson, Minister of Financial Services and Investments.