BAHAMAS Law and Practice Contributed by: Alistair Chisnall and Erica Paine, Graham Thompson
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. The Conveyancing and Law of Property Act, 1909 security include: • legal charges; 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. Exchange Control Department Approvals In addition, as required by the Exchange Control Regulations Act (which regulates transactions between “resident” and “non-resident” entities), a lender (whether deemed to be “resident” or “non-resident” for exchange control purposes) will have to obtain certain approvals from the Exchange Control Department of the Central Bank of The Bahamas in order to lend money in foreign currency, including to a Domestic Company or an International Business Com - pany (IBC) that is deemed to be “resident” for exchange control purposes. Such exchange control approvals typically also include the lend - er obtaining confirmation from the Central Bank
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