the Bahamas IBC or

International Business Company

With so many different options available today, it can be confusing to decide which jurisdiction is correct or the most appropriate for your incorporation needs. To make the process somewhat easier, the following is a brief description of the Bahamas IBC structure and also a comparison to the attributes of a Panamanian Incorporation.

 

The International Business Companies Act of 1989 brought about the formal recognition of the Bahamas IBC. Since that time, additional legislation in 1995 regarding Mutual Funds has made the Bahamas a favored domicile for both individual investors and offshore mutual fund firms alike. Here are some key points regarding the creation of a Bahamian IBC:

Language – English is the official language of The Bahamas and therefore all legal documents are drafted in English. For some individuals, this in and of itself is an important point when looking for a jurisdiction.

Name of the Company - Any name can be selected that is of course not currently in use or registered to another company. The words "Limited", "Corporation", "Societe Anonyme", "Gesellschaft Mit Beschrankter Haftung", "Incorporated" or the related abbreviations for above terms may be used to indicate that the Bahamas IBC is in fact an incorporated entity.

However, no company name or title can contain the terms "Assurance", "Bank", "Building Society", "Chamber of Commerce", "Chartered", "Cooperative", "Imperial", "Insurance", "Royal", "Municipal" or "Trust".

Directors – One unique aspect of the Bahamas IBC is that only one natural person or juridical person is required for a directors position. Unlike some other jurisdictions that may require three persons to be named as directors, the Bahamas require that there be only one. Of course, it is permitted to have as many directors as may be desired. The names of directors or officers are not public record.

Shares – Shares may be issued in bearer or registered form. Regardless of the method desired, there is no registration process with respect to shares nor is there disclosure in the public record of the company shareholders.

Bank Accounts and Banking Secrecy - Many clients may wish to establish a bank account in the name of their Bahamas IBC and of course this can be easily accomplished. Like most modern banking jurisdictions, the client will be required to submit a photocopy of their passport and a banking reference.

One important point regarding Bahamian banking secrecy is that banking institutions are prohibited from divulging a clients or accountholders information to a third party without the express consent of the account holder or under a Bahamian court order. However, banking institutions are permitted to divulge that a particular client or company does in fact have an account with that bank. While the bank cannot, under Bahamian law, divulge details or account balances, they certainly can divulge who their account holders are. This is an important difference between what banking secrecy actually means in the Bahamas in comparison to other jurisdictions.

 

A Bahamian IBC or Panamanian Company?

We often hear clients asking us that very question. Like you, they want to know which is really better. The answer is that it honestly depends upon what you are trying to accomplish and if you in fact prefer the attributes of one in comparison to the other. In other words, neither can be called equivalent. There are both positives and negatives to each one.

One advantage that the Bahamas IBC may have over the Panamanian Incorporation is of course that the documents are in English. If a client may be looking to use the corporation as a vehicle for business in other English speaking jurisdictions, then the Bahamian IBC may be preferable for this purpose. Also, the Bahamas IBC requires only one director where as the Panamanian Company does require three. In addition, directors do not have to be recorded or indicated in the public registrar, where as Panamanian directors are mentioned in the corporate documents filed with the registrar. Is this a positive or a negative? Well, if the director is not mentioned in the corporate filing, then who actually can attest to the person holding rights and responsibility for the directorship. The answer is the attorney doing the incorporation.

Another key difference with the Bahamas IBC is that is receives a tax exemption, but only for twenty years. In addition, the Bahamas IBC is forbidden to engage in business with Bahamian citizens or to own property in the Bahamas. This means that the Bahamian IBC can own bank accounts or investments tax free for the first twenty years, but it cannot own land or engage in a traditional business enterprise in the Bahamas. Since there is no distinction in Panama between a corporation that may be established for asset protection purposes or for an actual business enterprise in Panama, there are no such divisions under the law. In other words, a Panamanian Corporation enjoys a tax-exempt status as long as its business activities and income are derived from sources outside of Panama. So while a Bahamas IBC enjoys a twenty-year tax exemption, A Panamanian Company enjoys a permanent one as long as the previous mentioned conditions are met. In addition, the Panamanian Corporation can own real estate in Panama without restriction. Both of course enjoy the benefits of receiving local bank account interest free from taxation.

This discussion is not meant to allude that one jurisdiction is better than the other - just different. For example, we know that the law in the Bahamas is based upon Common Law while law in Panama is based upon Civil Law. Which in reality is a better domicile? Again, that depends. The Bahamian IBC may be a better choice for such issues as protection of patents and other intellectual property, while Panama may be a better choice if the concerns are for protection from frivolous lawsuits or divorce actions (see information about the Panamanian Foundation). So in reality, it is not just a question of one jurisdiction that speaks English vs. another that speaks Spanish. It really comes down to which one serves the needs of the client.

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