BAHAMAS Law and Practice Contributed by: Sean Moree KC, Vanessa Smith and Erin Hill, McKinney, Bancroft & Hughes
ers to ensure that full disclosure is being made. This has resulted in some litigation by settlors and benefi - ciaries of trusts who challenge that their structures are reportable. In some instances, regulators have had regard to the Proceeds of Crime Act, 2018 and the property freezing order regimes thereunder. This has led to an increase in regulatory disputes between trus - tees/beneficiaries and the enforcement authority con - cerning legacy structures and CRS filing obligations. 5.2 Mechanism for Compensation Where the dispute involves an application to set aside a property freezing order, the court may require an undertaking in damages from the enforcement author - ity. To the extent it is a trust dispute between benefi - ciaries centred around any entitlement to the corpus of the trust fund or whether assets have been appro - priately settled on trusts, orders can range from equi - table restitution to equitable damages; to the extent it is a breach of trust claim against trustees, remedies can include orders for account and/or equitable dam - ages. 6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries The use of corporate fiduciaries is prevalent in The Bahamas. Corporate and professional trustees are held to a higher standard of conduct than a reason - ably prudent trustee. Furthermore, should a trustee hold themselves out as having a specialised skill or knowledge, they will be held to a higher standard for the skill or knowledge they possess. 6.2 Fiduciary Liabilities Generally, it is not possible to pierce the veil of a trust, foundation or similar entity and hold the fiduciaries lia - ble for the liabilities of such entity. However, when the fiduciary has acted beyond the scope of their office, it is arguable that they owe personal responsibility to the claimant. Exoneration and exculpatory clauses are often used in The Bahamas as a mechanism to protect fiduciaries from liability. Trustees also have the ability to delegate authority for specific aspects of administration, which
will absolve them from liability as long as they have acted reasonably and satisfied the appropriate duty of care in the selection of the agents. 6.3 Fiduciary Regulation Section 5 of the Trustee Act requires trustees to “make, retain and change investments as a prudent investor would, having regard to the purposes, distri - bution requirements and other circumstances of the trust”. Furthermore, the banking, trust and financial services industry in The Bahamas is regulated by the Securities Commission of The Bahamas, the Central Bank of The Bahamas and the Compliance Commis - sion of The Bahamas. These regulators are governed by statute that regulates banking, trust and financial institutions in The Bahamas, and they often issue reg - ulations and guidelines to facilitate fiscally responsible financial transactions, including investments. 6.4 Fiduciary Investment Generally, a trustee’s investment theory should be that of a reasonably prudent business person invest - ing their own money, with an obligation to maintain a diversified, balanced and conservative investment approach to the trust assets. However, there may be a specific direction as to the makeup of the investment portfolio that will guide the trustee. Trusts, foundations or similar entities are authorised to hold active businesses as there are no limitations on investments held in these structures. However, holding active businesses will present challenges to fiduciaries, who would not actively participate in the day-to-day running of the business owned by the trust. In these circumstances, a Re Lucking or Bart - lett clause would likely be included in the trust deed, which protects the trustee from having to inquire into the running of the business. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship The Bahamas does not have a programme for “citi - zenship by investment”. However, non-Bahamians may reside in The Bahamas and own real property once the necessary permits are acquired. Permits
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