THE BAHAMAS Law and Practice Contributed by: Alistair Chisnall and Erica Paine, Graham Thompson
Major Transactions, Including Syndicated Lenders In major financing transactions, where there may be a group of syndicated lenders, a collateral trust would often be established and the mort- gages, security instruments and other Bahamian collateral securing the loan would not be held directly by any lender but would be held by a specially formed Bahamian security trustee as a collateral agent for the named beneficiaries of the trust from time to time. The trustee of the collateral trust is typically a Bahamian com - pany that holds an unrestricted Banking and Trust Licence in The Bahamas. Quite often, it is preferred for the collateral trustee to hold the trust assets under the collateral trust in a wholly owned special purpose Bahamian International Business Company, the issued shares of which would constitute the corpus of the collateral trust, with the company, in turn, holding the security instruments. 3.2 Typical Security Created by Commercial Investors Forms of security for financing the acquisition and development of commercial real estate can vary widely, but the most common forms of • debentures (by companies); • legal or equitable mortgages; • pledges/charges over shares of a land-own - ing company or its parent; • assignments of rent or other revenue; • assignments of insurance; • promissory notes; and • corporate or personal guarantees. security include: • legal charges;
The Conveyancing and Law of Property Act, 1909 Under this act, a legal mortgage of real property, personal property and fixtures has the effect of conveying and transferring title to the lender, leaving the borrower with an equitable right to redeem the mortgage by payment of the mort - gage debt. The Companies Act, 1992 and the International Business Companies Act, 2000 Under these acts, a company may by deben - ture charge real property and specific personal property by way of legal mortgage and create a first priority floating charge on all other present and future assets and undertakings (including intangibles), which would crystallise in the event of default. A legal mortgage or debenture must be made or issued as a deed, and should be recorded in the Registry of Records in order to preserve priority against subsequent encumbrances. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders Investments Board Permits While a lender is not required to hold a bank or trust licence in order to lend money to an entity based in The Bahamas, a foreign lender intend - ing to acquire an interest in real estate as a mort - gagee by virtue of a legal mortgage must obtain a permit from the Investments Board under the IPL Act. A legal mortgage is deemed to be null and void in law in the absence of such a permit. As with the granting of a permit to a foreign purchaser of real estate, a permit granted to a lender is transaction-specific, but such permits are routinely issued by the Investments Board upon submission of a completed application and standard due diligence.
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