BAHAMAS Law and Practice Contributed by: Sharmon Y. Ingraham, Higgs & Johnson
8. Family Business Succession Planning 8.1 Succession Strategies Common strategies used in family business succes- sion planning in The Bahamas include: • the use of voting shares versus ownership shares; • the joint ownership of ownership shares with rights of survivorship; • the use of purpose trusts to hold the ownership of operating entities; • the use of foundations to hold operating enti- ties and facilitate succession exclusively among descendants; and • the appointment of next-generation individuals as directors in the lifetime of the settlor, founder primary owner. 8.2 Legal and Tax Considerations Business entities that undertake operations and activi- ties within scope of the Business Licence Act, 2023 are required to be licensed under that legislation in The Bahamas. While there are no estate taxes or income taxes, so termed, applicable to business entities, in respect of its business undertaking such entities are subject to business licence tax on their turnover. The rate of such tax is pegged by the legislation to the level of turnover earned by the entity. 9. Trusts, Foundations and Related Entities 9.1 Choice of Planning Vehicle There is a long history of trust creation and use in The Bahamas, arising from the jurisdiction’s com- mon law heritage. In particular, discretionary trusts, directed powers trusts, settlor reserved powers trusts and purpose trusts are commonly used forms of trust instrument. Asset protection trusts are also available in The Bahamas. Foundations, both private family and charitable options, may be established under the provisions of the Foundations Act, Chapter 369D, Statute Law of The Bahamas. Foundations are generally favoured by
individuals who have a civil law background or under- takings. Asset holding as well as equity holding incorporate entities are also options available in The Bahamas for estate planning. 9.2 Recent Developments Affecting Planning Vehicles Recent efforts in the tax sector in The Bahamas have reduced exemptions and exclusions once available in respect of trusts, resulting in a nuanced evaluation by clients of the various planning vehicles in the jurisdic- tion, and of the suitability of those vehicles in the light of their family circumstances and objectives. 10. Fiduciary Regulation, Standards and Taxation 10.1 Corporate and Professional Fiduciaries Corporate and professional fiduciaries are subject to regulatory oversight in The Bahamas in their admin- istration of trusts, whether local or international. Cor- porate trustees are licenced and regulated by the Central Bank of The Bahamas while individuals, pro- viding trust services as a business, are regulated by the Securities Commission pursuant to its obligations under the Financial and Corporate Services Providers Act, 2020. Individuals who serve as trustee, but who do not provide such services as a business under- taking, are not within scope of the Banks and Trust Companies Regulations Act, 2020 or the Financial and Corporate Services Providers Act, 2020. Corporate and professional trustees, as profession- als having a particular skill or expertise, may be held to a higher standard of liability than non-professional persons serving as trustees of trusts pursuant to the provisions of Section 5 of the Trustee Act, Chapter 176, Statute Law of The Bahamas. It is possible to exclude the application of the section, and such lim- iting provision is frequently specifically contained in trust instruments. It is possible to form and utilise private trust compa- nies in The Bahamas. The Banks and Trust Compa- nies (Private Trust Companies and Qualified Execu-
14 CHAMBERS.COM
Powered by FlippingBook