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Bahamas Rolls Out A New Structure For Offshore Wealth Toolbox

Tom Burroughes

15 March 2012

The concept of an “executive entity” – which carries out functions on behalf of certain trusts – has now become a reality in the Bahamas following recent legislation, adding to the toolbox of financial structures based from that jurisdiction.

These entities, or “BEEs”, carry out executive functions in a trust where existing individuals or companies are unsuited to the roles, according to international law firm LG, which says it played a key role advising Bahamas lawmakers about the issue.

The development of this new structure is yet another sign of how offshore financial centres such as the Cayman Islands, Liechtenstein, Switzerland and the Channel Islands are competing to provide innovative wealth products.

BEEs are attractive because they remove “unnecessary layers of ownership at the top levels of wealth structures” and also protect people with limited liability, LG said in a commentary on how these entities work.

LG said it proposed the concept in response to clients who were concerned about who should be the decision-makers within their wealth structures.

The BEE is a perpetual entity. “It is therefore ideal to act as shareholder of a private trustee company, or as a protector, enforcer, advisory board or corporate director. Individuals, companies or purpose trusts are not best suited for these roles, with the result that when they are used in a structure, they are the weak link from a succession, control and governance perspective,” LG said.

The executive entity works as follows: officers of such an entity can be the founder’s chosen family members or trusted advisors. In the past, such people may have been wary of acting as a protector or enforcer of a trust due to the risk they could be personally liable for a loss to the trust if in breach of their fiduciary duty, LG said.

“Furthermore, officers’ details are not publicly available in the Bahamas and there is no requirement for a Bahamian resident officer to sit on the board. A BEE is therefore very attractive for those families for whom confidentiality is key and for whom decisions must be made by the right people,” it said.

A BEE does not have to have shareholders or beneficiaries; it cannot hold any value apart from money needed to carry out its functions and meet any capital adequacy requirements, LG continued.