by Julia Rawlins-Bentham
Barbados is now even more attractive as an international business jurisdiction with the enactment of the foundations legislation that was laid in Parliament earlier this month.
The new legislation gives civil law persons, such as investors in Central and Latin America, a chance to set-up a foundation and have control over it.
Senior Legal Officer in the Ministry of International Business and International Transport, Stefan Mayers, explained that potential investors from civil law countries were hesitant to have a trustee manage their assets.
“If you set up a trust they would have to have a professional trustee and they would have to give over their assets to the person to manage for them. But with a foundation they retain more control,” he explained.
He said that Barbados continued to expand its tax treaty network, concluding tax agreements with several countries in Central and Latin America, including Mexico and Panama. To date, the country is also engaged in discussions with Chile, Colombia, and Brazil.
“These countries are civil law jurisdictions and as such, have no concept in their law of the trust structure which has been the cornerstone of tax and estate planning in common law countries like Barbados,” Mayers said.
However, he pointed out that the foundations legislation had created a way for the founder, and the owner of the assets, to transfer ownership to a separate legal entity while still being able to exercise significant control over how the assets are managed and distributed.
“The foundation is a registered legal entity with the same capacity, rights and privileges as a natural person (similar to a company) so it can sue and be sued. Evidence of registration or deposit of the foundation is conclusive of its status as a legal person. Assets placed within the Foundation are solely owned by the foundation and not by the designated beneficiaries of the foundations,” Mayers noted. He added that there were no requirements to register such an entity that did not have a commercial purpose.
In explaining the structure and function of the body, the Senior Legal Officer stated that a foundation was flexible and could be established for an indefinite or fixed period, for charitable, commercial or private purposes.
“The founder may be an individual, corporation or nominee,” he said.
That founder may also reserve certain powers and dictate the manner in which the organisation’s assets are to be managed in the charter and articles (if any) of the foundation. In addition, Mayers said the founder may appoint a guardian to ensure the foundation council, responsible for carrying out the purpose of the body, fulfills its duties and complies with the requirement to manage and distribute its assets in accordance with the wishes of the founder as expressed in constitutive documents.
“For foundations, other than international foundations, at least one member of the … council must be a resident of Barbados,” Mayers explained.
In pointing out other features of the legislation, the senior legal officer said one of the requirements was that proper records and accounts must be kept, and are subject to inspection by a Foundation Council member, and where applicable, the registered agent, auditor or guardian of the foundation.
“There are also filing and notice requirements with respect to information which must be provided to the Registrar,” he noted.
Mayers added that vested beneficiaries of a foundation must be notified of their interest and will be entitled to request types of information from the foundation.
As it relates to compliance, Mayers said international foundations must have a registered agent who holds a valid licence issued under the International Corporate and Trust Service Providers Act.
“The registration process is similar to that for a Barbadian company, and the Registrar of Companies will be the Registrar of Foundations,” he stressed.
Another key feature in the foundations legislation is the aspect of confidentiality, where information acquired in an official capacity may only be disclosed under very specific circumstances. Mayers also highlighted the fact that there was no requirement to register a foundation which did not have a commercial purpose, and stressed that investigations must be held in camera.