Amicorp offers Bahamian ICON Funds

2016/december/Amicorp-offers-bahamian-ICON-funds

An ideal cost efficient private label fund solution for Latin American clients

Amicorp has established a number of Bahamian ICON funds for various Brazilian and Mexican clients. ICON funds are cost efficient and ideal private label funds for all types of clients.

The ICON is the newest and most-ground breaking example of The Bahamas’ market-sensitivity and regulatory responsiveness. Although not limited to use by investors and fund managers from any one country, this new vehicle was created and tailored on the basis of Brazilian fund regulations and industry practices. The condominium has been a part of the Brazilian civil code for nearly a century and all of Brazil’s approximately 13,000 funds are organized as condominiums.

The ICON is a contractual relationship subsisting between one or more investors (called participants) under which the investors agree to pool assets for the purpose of investing those assets as a collective. The structure is then licensed and fully regulated as an investment fund.

Similar to the Brazilian condominium, the ICON possesses no distinct legal personality except that for the purpose of the legislation it is able to hold assets in its name; enter into agreements into its name; and sue or be sued in its name. The lack of legal personality is addressed by the appointment of a governing administrator that is empowered to transact in its name, and represent and bind the ICON.

The ICON is established upon the terms and conditions, and with the rights and powers, subject to any limitations, empowered to borrow and lend money and give security over its assets as provided under the ICON’s governing regulations and Bahamian law.

Establishing an ICON

There are 3 routes to becoming an ICON:

  • Establish an ICON, and then license it as an investment fund.
  • Convert an existing Bahamian IBC, exempted limited partnership, or unit trust into an ICON, and then license it as an investment fund.
  • Re-domicile a foreign company or partnership to its Bahamian counterpart, convert the entity into an ICON, or in the case of a foreign trust change its governing law to that of The Bahamas, and convert it into an ICON, and then license it as an investment fund.

An ICON is established upon the execution of its governing regulations by one or more initial participants. The establishment of an ICON is evidenced by the certificate of establishment, signed by the governing administrator. The certificate of establishment together with the prescribed fee is submitted to the Registrar of Companies within seven days of the date of establishment. Upon receipt of the certificate of establishment and the prescribed fee, the Registrar shall enter the name of the ICON in the register.

Legal Form

Investment funds may be set up as a company, partnership, unit trust, investment condominium, or other similar body formed and organized under the laws of The Bahamas. Bahamian law also allows for multiple portfolios to be operated under one legal structure while avoiding cross liability between them. This eliminates the need for separate legal structures and make it well-suited to for instance for umbrella funds.

The Securities Commission has pre-approved seven templates, with six templates currently in use:

SMART FUND 001: a fund for discretionarily managed accounts of Bahamian institutions

SMART FUND 002: an incubator fund with a maximum of ten professional investors

SMART FUND 004: a private investment company with a maximum of five investors

SMART FUND 005: a private investment fund with a maximum of five professional investors

SMART FUND 006: a side pocket fund where illiquid assets from an existing identified investment fund can be transferred into, provided however that no more than 30% of the gross assets of the existing identified investment fund are invested in the SMART fund

SMART FUND 007: also known as the Super Qualified Investment Fund. 007 represents the lion share of all new Bahamian fund launches over the past two years. Over such a short period of time, it has come to represent nearly 10% of all SMART funds licensed in the jurisdiction, according to data released by the Securities Commission. 007 serves as a regulatory wrapper for structuring private placement funds open to no more than 50 investors, each of whom is required to make a minimum initial investment of USD 500,000 or its equivalent. What sets the 007 apart, other than the expanded investor pool, from the other SMART funds, is that the director of the fund choose the appointment and location of the fund administrator, similar to the appointment of any other service provider.

Closed-ended funds are outside of the scope of regulation.


Conversion of existing fund structure to an ICON

The Bahamian ICON legislation allows for the conversion of an existing Bahamian IBC, exempted limited partnership, or unit trust into an ICON and then license it as an investment fund.

To effect the conversion, all of the directors and majority of voting shareholders, all of the general partners and majority of voting limited partners or the trustee and majority of the voting unit holders, as the case may be, must prepare and approve the Articles of Conversion which must include, inter alia, the following provisions:

  • provisions detailing the basis upon which equity interests shall be converted to participation interests in the ICON along with details of any rights attaching thereto;
  • provisions for the valuation and accounting treatment of the assets and liabilities and any retained earnings upon conversion;
  • the date of incorporation, continuation, registration or establishment, as the case may be, and intended date for conversion to an ICON ; and
  • an annexed copy of the Governing Regulations.

Once the Articles of Conversion have been approved, the Administrator must prepare and submit to the Registrar General’s Department within 7 days the Certificate of Conversion along with the requisite fee. The RG will enter the name of the ICON on the register and then stamp the Certificate of Conversion.

At the date of conversion, all of the assets and liabilities of the existing Bahamian structure will be vested in the ICON and the existing Bahamian structure will be struck to the register and will cease to exist without being dissolved or wound-up, as the case may be. All of the equity interests of the structure will be converted into participation interests in accordance with the Articles of Conversion. Participants remain liable for any amount unpaid on any equity interest incurred prior to conversion.

The provisions relating to licensing apply to a converted ICON as they do to a newly established ICON. It is important to note that conversion does not relieve officers, directors, trustees or partners from liability nor does it extinguish any debt or liability of the entity/UT prior to conversion.

For foreign entities, the normal route for re-domiciling the foreign company, exempted limited partnership, or unit trust to a Bahamian company, Bahamian exempted limited partnership, or Bahamian trust and then converting the Bahamian structure into an ICON as provided above.

In relation to foreign companies and exempted limited partnerships, the caveat is that the foreign law and constitutional documents of the company or partnership must allow for the re-domiciliation of the entity. With respect to foreign trusts, the trust instrument must include powers to (i) change the governing law of the trust to that of The Bahamas; and (ii) vary the provisions of the trust.

Administrators

The initial participants must appoint a governing administrator and a general administrator which roles may be filled by a single entity or separate entities.

The governing administrator shall have the authority to bind the ICON and the acts of the governing administrator as the case may be shall so bind the ICON unless such governing administrator acting has in fact no authority to act in the particular matter, and the person with whom it is dealing knows or reasonably ought to know that it has no authority.

  • Amicorp Bahamas Management Limited is licensed to act as governing administrator of an ICON.
  • Amicorp Fund Services N.V. is licensed to act as general administrator of an ICON.

Record Keeping

The governing administrator of the ICON is required to keep at its office:

  • a copy of its governing regulations and all amendments thereto; and
  • a register of participant interests.

The governing administrator must also ensure that reliable accounting records are kept in relation to all sums of money received and expended for and on account of the ICON and the matter in respect of which such receipt and expenditure takes place, inclusive of all sales, purchases and other transaction and the assets and liabilities of the ICON. All records that are to be maintained shall be kept for a minimum period of five (5) years.

Tax and Exchange Control Exemptions

Funds and non-Bahamian investors are exempted from all tax levied by Bahamian authorities. The ICON is exempt from paying any business license tax, any tax on income or distributions accruing to or derived from such ICON or in connection with any transaction to which that ICON or participant is a party. Further, the ICON is exempt from estate, inheritance, succession or gift tax rate, duty, levy, or other charge payable in The Bahamas with respect to any participation interest. The profits paid to investors will, of course, remain subject to tax in the hands of the investors.

The Bahamas: A Jurisdiction of Choice

The Bahamas is ideally positioned as a leading international financial center, with the existence of a highly skilled professional talent pool, legislation conducive to business, a risk based regulatory environment, and systems for the prevention and detection of money laundering and financing of terrorism. The depth and quality of financial services institutions is complemented by the provision of a tax neutral platform for all business activity. The Bahamas is listed on the white list of the OECD and is a FATF-recognized jurisdiction with respect to KYC/AML/FATF standards.

Amicorp Bahamas

Amicorp has its own office in Nassau, The Bahamas. Amicorp Bahamas Management Limited is the premier provider of corporate services to international clients. We are devoted to providing high-class service to our clients and demonstrating our unwavering commitment to efficiency and reliability, developing a longstanding relationship with our clients predicated on trust and confidence.


For further information, please contact:

Marvin Taylor

Marvin Taylor

Managing Director
Amicorp Bahamas Management Limited
+1 242 603 5575/6
m.taylor@amicorp.com
Geralda Kral-Buckley

Geralda Kral-Buckley

Global Head – Private Clients
Amicorp Group
+41 44 252 08 80
g.buckley@amicorp.com