On the 17th of December 2017 the highly anticipated Commercial Enterprises Act ascended into legislation as the Bahamas’ latest enactments to boost the nations flagging financial services industry. As described by Prime Minister Dr. Hubert A. Minnis during the 27th Annual Bahamas Business Outlook Seminar, the Act will encourage both domestic and foreign investment in The Bahamas, while allowing for the creation of certain economic zones were deemed necessary throughout the country. “We must utilize our strategic assets and comparative advantages to create more Bahamian entrepreneurs even as we seek international investors and partners from North America, Asia, Europe, South America, Africa, the Middle East, Australia and the Pacific,” Prime Minister Minnis said. (1)
Indeed, the Commercial Enterprises Act aims to retain the Bahamas’ competitive edge in the world’s financial services industry, ranking as the fourth largest offshore financial centre in the world, after the Cayman Islands, Hong Kong, and Singapore. In placing the size of the Bahamas’ international financial service sector in context, Singapore’s financial service industry was only 1.5 times’ larger in comparison, despite its economy being 52 times’ larger than the Bahamas. The International Monetary Fund (IMF) has identified the Bahamas as having one of the largest insurance sectors in the region while hosting one of the largest onshore banking system, equivalent to 150 per cent of its Gross Domestic Product, with many European and US banking institutions focusing most of their Caribbean offshore claims in either the Bahamas or Barbados. (2)
Defining Specific Commercial Enterprise
As the Bahamas’ financial services industry is 72 times larger than the country’s gross domestic product (GDP) it is clear that the country intends to develop other ‘specified commercial enterprises’ in The Bahamas, while implementing key statutory components to facilitate growth. A ‘Specified Commercial Enterprise’ is an enterprise that is approved by the Bahamas Investment Board that:
- a Bahamian;
- a non-Bahamian with an investment of no less than Two hundred and Fifty thousand Dollars ($250,000.00);
- a joint venture or partnership between a Bahamian and a non-Bahamian;
- That carries on any of the following business undertakings (specified in the First Schedule):
|Captive Insurance||Bioinformatics & Analytics|
|Mutual Fund Administration||Nano Technology|
|Wealth Management||Boutique Health Facilities|
|International Trade||Data Storage or Warehousing|
|International Arbitrage||Aviation Approved Maintenance Operations|
|Computer Programming||Aviation Registration|
|Software Design & Writing||Call Centres|
|Manufacturing or Assembly Manufacturers (3)|
Under this definition, eligible Bahamian applicants can be either natural persons or a legal person registered in accordance with the Companies Act (Ch.308) that is 60% Bahamian owned (i.e. a local limited (Ltd.) company, ‘trading as’ entity, etc.). Eligible non-Bahamian applicants can be natural persons or a legal person being an incorporated or unincorporated body formed under the laws of a country other than the Bahamas (and registered under the Companies Act).
One highlight of the Commercial Enterprises Act is the formal ‘statutory’ recognition of joint ventures and partnerships between Bahamians and non-Bahamians to form the ‘specified commercial enterprise’. Although there are no prior laws barring the partnerships/ joint ventures between Bahamian and non-Bahamian persons, such business arrangements often came with its fair share of complications to the disadvantage of the non-Bahamian, such as the inability to control local banking facilities without a valid work/ residence permit, or the hardship of holding a foreign dollar account by Bahamians. Such complications required legal navigation by an attorney equipped with craftily drafted contracts and other assurances between the parties in order to facilitate ordinary administrative functions, work permit applications, and the flow of revenue from the business.
With the Commercial Enterprises Act, non-Bahamians are now able to maintain a ‘hands-on’ approach to everyday affairs of the business almost immediately upon the provision of a long-term work permit, which would facilitate the unlimited entry into the Bahamas, with permission to reside and to work for the company throughout the validity of the permit. Permit holders would be allowed to open bank accounts on behalf of the enterprise at local banks as authorized signatories to banking facilities, and generally, represent the enterprise in all business activities. Under the Commercial Enterprises Act, request for work permits is only permitted for executives, managers, or individuals with specialized knowledge relating to the enterprise.
Specific Commercial Enterprise Certification
Upon approval of the submitted application and request for work permits to the Commercial Enterprises Facilitation Unit, the Bahamas Investment Board may issue a Specified Commercial Enterprise Certificate (hereinafter referred to as “the SCE Certificate”) which formally confirms the authorization of the enterprise and entitles the business to a specified number of work permits for specified post. The recipient of the SCE Certificate would be authorized to freely enter the Bahamas for the purpose of ‘setting up or conducting such specified commercial enterprise in reliance upon the said certificate’, along with any in-house professional designated by him in writing. In-house professionals are employees rendering professional or advisory services to an SCE within the strict confines of the undertakings of that enterprise and not in competition with professionals and advisors in the open marketplace of the Bahamas.
Upon entering the Bahamas, holders of the SCE Certificate are required to submit a work permit application (with the SCE Certificate attached) to the Department of Immigration within thirty (30) days on entry, to which the Director of Immigration is required to determine work permit application no later than fourteen (14) days after the application is filed. If there is a failure to determine the work permit application within 14 days, the permit shall be deemed to have been granted, and may only be revoked if the Director has reasonable grounds for doing so on the basis of public safety, public morality, or national security. The Director shall grant a work permit in the first instance for a period of three (3) years, which may be renewed for a further 3 years on application.
Despite the advantages proposed by the Commercial Enterprises Act, opponents have dubbed the new Act as a backdoor to economic citizenship, following a trend of Caribbean countries that have adopted the approach of transferring or the dual recognition of nationality on the basis of economic partnership or investment. Economic citizenship has been criticized as a flawed process due in part to a lack of transparency and accountability exercised by some Caribbean nation-states, placing them at risk of facilitating illicit activities. In some cases, the investment threshold to participate in national transference schemes is low, as little as $100,000.00 in some cases, which raises issues as to whether such incentives actually benefit economic growth for the country. (4)
Such allegations of ‘backdoor’ economic citizenship have been rejected by the Bahamas Government, as the notion of gaining citizenship in the Bahamas via economic investment appears incompatible to the prescribed methods of citizenship enshrined in the Bahamas Constitution. Although holders of long-term work permits may apply for Permanent Residency status it is unclear whether the Commercial Enterprises Act may facilitate such eligibility, as the Act gives no indication of extending the validity of a work permit longer than 6 years, or for a defined period which would make permanent residency possible. As the Act is in its early stages of development the public remains interested in seeing its impact on the Bahamian economy, its effect on the country’s employment rate, and raising new industries to the benefit of all.
1.Press Release: Commercial Enterprises Act to Help Create Small, Medium – Sized Bahamian Businesses, Bahamas Information Services, January 18, 2018.
2.Press Release: Offshore Sector 72 Times Larger than the Bahamas GDP. Tribune Newspaper.http://www.tribune242.com/news/2013/aug/09/offshore-sector-72-times-larger-than-bahamas-gdp/
3.Commercial Enterprises Act 2017
4.Press Release: Bahamas Commercial Enterprises Legislation Raises Citizenship Concerns. CaribbeanNews.https://www.caribbeannewsnow.com/2018/01/09/bahamas-commercial-enterprises-legislation-raises-citizenship-concerns/