BAHAMAS Law and Practice Contributed by: Alistair Chisnall and Erica Paine, Graham Thompson
that, upon drawdown of the loan by the bor - rower, the lender will be granted “approved loan status” (also referred to as “approved investment status” ) in order for the lender to receive repay - ments in foreign currency from the borrower. Subject to the pre-closing approvals mentioned above, a lender is not required to obtain any further government approvals to facilitate a pro - posed loan transaction or to seek government approval in respect of any of the remedies the lender may wish to exercise in respect of its security (other than judicial approvals). Registration as a Foreign Company It should be noted that, as a matter of policy rather than law, the Investments Board requires a foreign entity (whether a lender or a purchaser) that intends to acquire an interest in real estate in The Bahamas to register as a foreign company under the Companies Act of The Bahamas as a condition for obtaining a certificate or permit from the Board. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Under the VAT Act, a debenture or mortgage that secures a monetary obligation would attract VAT at a rate of 1% of the monetary obligation secured. Where additional security is granted in respect of the same loan and the principal instrument attracts tax at a rate of 1%, no tax is charged on the collateral security documents provided that they are submitted for stamping at the same time. The industry standard is for applicable tax and related closing costs to be paid by the borrower. 3.5 Legal Requirements Before an Entity Can Give Valid Security There are no rules or requirements that must be complied with before an entity can give valid
security, except for the government approvals noted in 3.1 Financing Acquisitions of Commer- cial Real Estate and the matters of general law which specify the following, where a party is a corporate entity: • the proposed loan transaction and granting of security are completed in accordance with the corporate governance requirements; and • where a corporate guarantee is given as security, the giving of the guarantee is consid - ered as having reasonably been in the inter - ests of the guarantor and done with commer - cial justification. 3.6 Formalities When a Borrower Is in Default A legal mortgage over real property in The Baha - mas has the effect of conveying title to a lender, and under Bahamian law a lender may do the following, in the event of default by the borrower: • exercise its power of sale of the property to a third-party purchaser without judicial sanc - tion; • seek (voluntarily, and not by requirement of law) judicial sanction of the sale of the prop - erty to a third-party purchaser; or • apply to the courts for a Foreclosure Order, which would extinguish the borrower’s right to redeem the mortgage and result in abso - lute ownership by the lender. Under the Conveyancing and Law of Property Act, 1909, a lender is entitled to exercise the power of sale (the most common and expedient remedy used by lenders) under one of the fol - lowing circumstances: • notice requiring payment of the mortgage money has been served on the borrower, and default has been made in payment of the
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