The Bahamas

What is the main source of law authorising this entity form?

International Business Companies Act, 2000 (as amended)

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

IBCs like all corporations, offer its shareholders the benefit of separate legal personality i.e. the company is separate and distinct from its directors or members.

(Maximum) period of existence

IBCs have perpetual duration unless expressly stated otherwise in their Memorandum and Articles of Association.

Governing document(s)

An IBC is governed by its Memorandum and Articles of Association. The Memorandum of Association serves as the constitutional document of the IBC, detailing its organizational framework, authorities, and limitations. Within the Memorandum are outlined specifics such as the approved share capital, number of shares, and the categories or series of shares along with their corresponding rights and entitlements. Conversely, the Articles of Association functions as the legally binding agreement that establishes obligations between the company and its shareholders, as well as among the shareholders themselves.

Liability of incorporators / shareholders

IBCs like all corporations, offer its shareholders the benefit of limited liability. IBCs may be limited by shares, limited by guarantee, limited by both shares and guarantee, or unlimited. The liability of the shareholders is limited up to the unpaid amount of the shares they hold.

(Governing) bodies

Generally, under Bahamian law the directors are responsible for managing the business and affairs of a company. This is subject to any limitation as provided for in any unanimous shareholder agreement and the Memorandum and Articles of Association. Whilst the management of a company under the IBC Act is generally within the purview of the company’s directors, the Memorandum of Association and Articles of Association as well as a unanimous shareholders’ agreement may be amended such that the ability of directors to manage the company’s affairs is curtailed or removed altogether.

Other particularities

The Bahamian IBC is known for its flexibility. In this regard, the IBC Act, according to section 10 thereof, states expressly that subject to any limitations in its Memorandum of Association and Articles of Association, the IBC Act or any other law for the time being in force in The Bahamas, a company incorporated under the IBC Act has the power, irrespective of corporate benefit, to perform all acts and engage in all activities necessary or conducive to the conduct, promotion or attainment of the objects or purposes of the company.. An IBC may operate in foreign currency and ,upon approval of the Exchange Control Department of the Central Bank of The Bahamas, may also be designated “resident” for Exchange Control purposes to allow it to operate a Bahamian dollar account and hold Bahamian real estate.

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions and divestitures, equity acquisitions, conversions etc.)?

The company has the ability to enter into international restructurings. Under Bahamian law, the company may enter into a cross-border merger and demerger, asset acquisition, equity acquisition, or exchange of shares.

Can this type of entity be publicly listed or held, or its securities be issued to members of the public?

Yes, an IBC can issue securities to the public market. However, there is an obligation under Bahamian law to register its offering document with the Securities Commission, under the Securities Industry Act, 2024 (the “SIA”). The SIA prohibits the issuance of securities to the public in The Bahamas without first registering a prospectus with the Securities Commission. The SIA does not define a public offering. However, any offer (of any kind) of securities which targets the general public in The Bahamas will likely be deemed a public offering in The Bahamas.

An IBC can also be publicly listed on an exchange. The Bahamas International Securities Exchange is the primary securities exchange in The Bahamas where both local and international companies can list their shares for public offering.

Can this type of entity be used for a non-profit or charitable organization?

An IBC can be used to form a non-profit organization. In order for a non-profit organisation to carry out operations, it must be registered under the Non-Profit Organisations Act, 2019, as amended (the “NPO Act”). Pursuant to the NPO Act, a non-profit organisation means a body of persons whether incorporated or unincorporated, formed and established for the purpose of promoting public policies or objects that are religious, charitable, educational, scientific, environmental, historical, cultural, fraternal, literary, sporting, artistic, athletic or promoting health, and whose gross annual income or any part thereof, if any, and other income are applied to the promotion of those objects, and there is a prohibition of any dividend or refund of contributions to its members, but excludes a religious or charitably founded school registered with the Ministry of Education, and any organisation with political objectives. The NPO Act provides for an unincorporated entity to be registered as a non-profit organisation. However, in practice, it would be best to register as an incorporated entity before registering as a non-profit organisation. Once the entity is registered and then applies for registration under the NPO Act, there would be no requirement to change the name.

2 INCORPORATION/FORMATION/ORGANIZATION

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required, Involvement of notary, company register, governmental authorities, Timing (estimate) , Main costs, including registration and similar fees (excluding legal fees), Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

Within 24 hours from receipt of the relevant documents, a company may be incorporated under the IBC Act at the Companies Department of the Registrar General of The Bahamas (“Companies Registry”) by the Registrar of Companies. The main steps under the IBC Act include the reservation of the company name with the Registrar of Companies, filing of the Memorandum of Association and the Articles of Association, and payment of the requisite incorporation fees. The Memorandum and Articles of Association must be registered with the Registrar of Companies who will issue a Certificate of Incorporation certifying that the company is incorporated. The names of the Directors and Officers of the Company are required under the IBC Act to also be filed at the Companies Registry. Certificates of Incorporation can typically be issued within a few days. The certificate will however bear the date on which the Memorandum and Articles of Association were submitted to the Registrar of Companies. A description of the anticipated business or purpose of the entity is not required for incorporation. There is an annual registration fee payable to the Government, which will be due every January after incorporation. The amount due to the government is dependent on the entity’s share capital. Entities with standard share capital (US$50,000 or less) pay government fees of $350. Entities with non-standard share capital (share capital of more than US$50,000) pay government fees of $1,000. Government fees are subject to a penalty of 10% where payment is not made by April 1. The penalty increases to 50% if payment is not made by November 1, and the entity is struck from the Register of Companies if payment is not made by December 31. Additionally, an IBC will be subject to annual Registered Office/Agent fee to its elected registered agent.

Minimum number of incorporators / shareholders and residency requirements

An IBC is not required to have more than one shareholder. There is no requirement that a national of The Bahamas or a related state be a shareholder of an IBC. However, IBCs, are traditionally deemed non-resident for exchange control purposes and are typically owned by foreign persons seeking to conduct business outside of the local Bahamian economy. Therefore, approval must be obtained from the Central Bank of The Bahamas for a resident shareholder to hold shares in an IBC.

Minimum number of directors (or other applicable officers) and residency requirements

An IBC is not required to have more than one director. There are no residency requirements on the directors of an IBC not carrying on a regulated business, whether the director is an individual or a corporate entity. No regulatory or governmental approvals are necessary in order for a foreign person to act as director of an IBC that is not carrying on a regulated business. Where an IBC is carrying on a regulated business, a residency requirement may be imposed upon directors.

The Companies, being used solely as investment vehicles, would not be subject to any director residency requirements under Bahamian legislation.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

There are no restrictions on capitalization under the IBC Act. There are no share capital minimum requirements.

Is the physical presence of incorporators/directors/shareholders required in the jurisdiction for incorporation, formation, or organisation?

There are no physical presence requirements for incorporators/directors/shareholders under the IBC Act unless the company is operating in a regulated industry which has specific physical presence requirements.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

A tax identification number is not required for incorporation. However, it can be obtained utilizing the Department of Inland Revenue’s Online Tax Administration Portal.

3 REGISTERS

What is the title of the applicable company registry?

The title of the applicable company registry is the Companies Department of the Registrar General of The Bahamas. This is a governmental body.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:

The Memorandum and Articles of Association must be publicly filed and registered with the Companies Department of the Registrar General of The Bahamas and any amendments thereto within twenty-eight (28) days of the passage of the same. As previously stated, the Memorandum of Association serves as the constitutional document of the IBC, detailing its organizational framework, authorities, and limitations. Within the Memorandum are outlined specifics such as the approved share capital, number of shares, and the categories or series of shares along with their corresponding rights and entitlements. The declaration that the company keeps reliable accounts records must be filed with the Companies Registry. Furthermore, the Register of Directors including the names of the Directors and Officers of the Company are also required under the IBC Act to be filed at the Companies Registry and any amendments thereto within twelve (12) months of the appointment of any director or officer. The Register of Members or Shareholders and any minutes or resolutions kept with the Registered Agent are not required to be filed publicly at the Companies Registry. The Register of Members must be kept at the registered office of the company. Under the IBC Act, a Registered Agent is required to keep the following documents at the registered office:

Statutory documents;
Register of members;
Register of directors and officers;
Declaration from Directors that the company keeps reliable accounting records, which shall be available to the Registered Agent pursuant to a valid request;
If there is one, register of mortgages and charges; and
Minute of meetings/resolutions of members.

Additionally, IBCs may elect to file with the Registrar of Companies a register of its mortgages and charges. There is however, no obligation for it to do so. An IBC that has elected to submit for registration a copy of its register of mortgages and charges must, until it otherwise notifies the Registrar, submit for registration any changes in the register of mortgages and charges. Where an IBC submits a copy of its register of mortgages and charges with the Registrar it may elect to cease registration of changes in the register by so informing the Registrar in writing. A Certificate of Good Standing is issued under the IBC Act and confirms that the IBC is on the Register of Companies and has paid all fees and any penalties due under the IBC Act. This Certificate is publicly filed at the Companies Registry. The IBC Act contains numerous provisions with respect to the winding up, dissolution and striking off of companies incorporated under the legislation. The various procedures to be applied are laid down in the IBC Act together with the powers and duties of liquidators and directors. A certificate a dissolution that is publicly filed is issued by the Registrar of Companies certifying that the Company has been dissolved.

4 GOVERNANCE

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

Under Bahamian law, the scope of directors’ duties and responsibilities are contained in the IBC Act. The directors owe a fiduciary duty to their companies and should avoid situations where their duty conflicts with their personal interests. According to the IBC Act, every director, officer, agent and liquidator of a company, in performing his functions, shall act honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Apart from the statutory ministerial duties referred to above the IBC Act does not specify the duties of directors, and the law on the subject is derived from English common law, which is part of Bahamian municipal law. Directors’ duties can generally be summarised as follows:

Duty to exercise reasonable care, skill and diligence;
Duty to act within powers;
Duty to promote the success of the company;
Duty to exercise independent judgment;
Duty to avoid conflicts of interest;
Duty not to accept benefits from third parties; and
Duty to declare interest in proposed transaction or arrangement.

How are the members of the executive body appointed, dismissed and replaced?

The appointment, dismissal and replacement of directors of an IBC are governed by the provisions of the company’s Memorandum and Articles of Association and any unanimous shareholder agreement.

Is it possible to appoint corporate directors or must all directors be natural persons?

Yes, a director of an IBC can be a corporate entity or a natural person/individual.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

The IBC Act does not mandate the designation of non-executive directors. Nonetheless, an IBC is not precluded from appointing both executive and non-executive directors. Typically, the management framework of an IBC follows a one-tier system, wherein a board of directors is entrusted with the responsibility of appointing officers. Each officer or agent, subject to any constraints outlined in the Memorandum and Articles of Association, or a unanimous shareholder agreement, possesses comparable powers and authority to the directors, excluding the authority to determine the remuneration of directors for services rendered to the company. Directors of an IBC are authorized to establish one or more committees, each comprised of one or more directors. The sole restrictions on such committees pertain to their authority to fill a board vacancy and appoint or dismiss officers or agents of the company.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The owners of the company are referred to as shareholders or members of the company. Generally, the constitutive documents (Memorandum of Association and Articles of Association) of a Bahamian company incorporated under the IBC Act will regulate the rights as between the shareholders of the Company. Additionally, it is also possible for shareholders of a company to enter into a unanimous shareholders’ agreement pursuant to which they can agree to regulate certain aspects of their relationship with each other and to otherwise provide for certain rights to be exercised and enjoyed by shareholders.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

Under the IBC Act, decisions by shareholders typically require a simple majority vote, unless the company's Articles of Association specify otherwise. A quorum is usually required for a meeting of shareholders to be valid, and it is also typically determined by the company's Articles of Association.

The majority and quorum requirements can be varied or amended by amending the applicable provisions within the company’s Articles of Association. Such amendments must be made in accordance with the procedures outlined in the company's Articles of Association and the IBC Act.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

There are no special governance regimes specifically tailored for IBC based on their listing on a stock exchange or other specific criteria. Bahamian IBCs are subject to the provisions of the Bahamian IBC Act, which sets out the general rules and requirements for the governance of these companies. However, if an IBC is listed on a stock exchange inside or outside of The Bahamas, it would need to comply with the listing requirements and regulations of that particular stock exchange.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

IBCs are not required under the IBC Act to maintain financial statements. IBCs are, instead, required to file with its Registered Agent a declaration that it keeps reliable accounting records, which shall be available to the Registered Agent pursuant to a valid request. The Registered Agent is obligated, in turn, to file a copy of such declaration with the Companies Registry.

The accounting records kept by an IBC shall be in relation to (a) all sums of money received and expended by the IBC and the matter in respect of which such receipt and expenditure takes place, inclusive of all sales, purchases and other transaction and (b) all assets and liability of the IBC. If the IBC is licensed or registered under any other legislation in The Bahamas, the IBC may be obligated to keep and even file financial statements pursuant to such legislation.

Is the entity permitted to determine its own financial year?

An IBC is typically allowed to determine its own financial year. The IBC Act does not stipulate a specific financial year that companies must adhere to. This flexibility allows companies to choose a financial year-end that aligns with their operations, accounting practices, and reporting requirements.

Is the entity subject to any statutory (external) auditor obligations?

IBCs are not required by the IBC Act to appoint a statutory auditor or conduct an annual audit of their financial statements. However, it is important to note that while there may not be a statutory obligation to appoint an external auditor for an IBC, there may be other factors that could necessitate an audit.

For example, if the IBC is operating in a regulated industry, if it has certain shareholders or investors who require audited financial statements, or if it is listed on a stock exchange that mandates audits, then the company may need to engage an external auditor to conduct audits in compliance with those requirements.

Additionally, even if there is no legal requirement for an audit, some companies choose to voluntarily conduct audits to provide assurance to stakeholders, improve internal controls, and enhance credibility with investors and other stakeholders.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

In the Bahamas, directors of an IBC are not required to appoint a secretary, auditor, or other executive officers. The directors have the authority to make such appointments if they deem it necessary for the operation of the company, but it is not a legal requirement. The flexibility of the IBC Act allows for a simplified corporate structure for IBCs making it an attractive vehicle for international business.

5 OWNERSHIP INTERESTS

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

The title of ownership interests in IBCs are shares.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

The shares of an IBC can be divided into different classes, with different rights attaching to each share class. Typically, there are management shares which carry voting rights in an IBC, and one or two lower classes of shares that do not carry any voting rights. The IBC Act permits IBCs to issue common shares, preference shares, redeemable shares or any combination thereof subject to any limitation in its Memorandum or Articles of Association.

What documentation is required for the transfer of ownership interests?

To transfer shares in a Bahamian International Business Company (IBC), the following documents are typically required:

Share Purchase Agreement between the transferor and the transferee (if required in the circumstances)
Share Transfer Form: A written document that details the transfer of shares from the current shareholder(s) to the new shareholder(s). This form should include details such as the names of the parties involved, the number of shares being transferred, and any relevant conditions of the transfer.
Board Resolution: A resolution passed by the board of directors of the IBC approving the transfer of shares and authorizing the necessary parties to execute the transfer.
Payment of Stamp Duty: In some cases, stamp duty may be applicable on the transfer of shares in a Bahamian IBC, and the relevant stamp duty should be paid.
The registered office of the Company will then update the register of shareholders for the Company, cancel the share certificate(s) of the transferor and issue new share certificate(s) to the transferee.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

Pursuant to the provisions of the Stamp Act 2024 (as amended), the term "sale of a business" is specifically defined as follows:

“(a) the sale, exchange or other transfer or disposition, in whole or in part, of the goodwill or other property comprised in a business, either directly or indirectly, to another person; (b) the transfer or issuance of shares in a company that owns the goodwill or other property of that business; (c) the sale of an interest in a business”

Moreover, per the First Schedule of the Stamp Act, any transaction constituting the sale of a business, to the extent that such transaction involves the sale of property other than land (save for cash and deposit accounts), is subject to a stamp tax at a rate of 6% of the consideration apportioned to property other than land.

The Stamp Act defines a business as:

a business or any part of a business that is licensed or required to apply for a licence under the Business Licence Act, 2023 (No. 13 of 2023) but does not include –

any business that has an average turnover of less than five hundred thousand dollars for the three years immediately preceding the date of the occurrence of the event that is subject to stamp duty;
any business falling within a category of business declared by order of the Minister published in the Gazette to be exempt from the payment of stamp duty on the sale of that business.

A business under the Business Licence Act 2023 (“ the Business Licence Act”) includes:-

(a) a trade, profession, vocation, venture or undertaking;

(b) the provision of personal services, or technical and managerial skills, and any adventure or concern in the nature of trade that does not include employment;

(c) the provision by a club, association or organisation, for a subscription or other consideration, of the facilities or advantages available to its members;

(d) the admission, for consideration of persons to any premises, save and except for activities specified in section 10(4)(a) and (b);

(e) the exploitation of tangible or intangible property for the purpose of obtaining income on a continuing basis from such property.

The definition of business under the Business Licence Act is intended to be an inclusive and not exhaustive definition. It is deemed to include activities that would ordinarily fall within the meaning of the term. For the avoidance of doubt, please note that the definition of “business” under the Stamp Act excludes any business which has an average turnover of less than five hundred thousand dollars ($500,000) for the three years immediately preceding the date of the occurrence of the event that is subject to stamp duty.

Additionally, also of relevance for the purpose of this analysis is section 25 of the Stamp Act, which states that:

The following transactions shall be chargeable for stamp duty in like manner as a direct transfer or sale of a business if entered into for the purpose of effecting a direct or indirect change in the beneficial ownership of any business —

the allotment or issuance to any person or his nominee of any shares of any class in any company such that the person to whom the shares are issued or his nominee thereby becomes entitled to voting rights, dividends, or the surplus assets of the company in place of any person who previously enjoyed those rights;
the variation of the rights of shareholders of a company so that the person in whose favour such rights are varied becomes entitled to dividends or the surplus assets of the company in substitution for or to the exclusion of the other shareholders;
the admission to membership of any person in a company limited by guarantee whether having a share capital or not so that he becomes entitled to dividends or the surplus assets of the company in substitution for or to the exclusion of the other members;
any declaration of trust under which the present owner of a business declares himself a trustee of that business for another person;
any purchase by a company of its own shares, any redemption or cancellation of shares, any retention of shares as treasury shares, any conversion or exchange of shares into, or for, shares or other property of any class or description, or any other action of whatsoever nature that effects or facilitates any direct or indirect increase in the overall proportions of any person’s shareholdings or effective equity in a company;
the addition of any person to the beneficial class of a trust and the contemporaneous or subsequent removal or exclusion of the other beneficiaries of the trust so that the only person who remains beneficially interested under the trust is the person so added;
any other transaction under or in relation to any trust or company resulting in any person indirectly acquiring or succeeding to the beneficial ownership of any business or any part thereof unless the transaction.

In light of the above regarding the definition of "sale of a business" under the Stamp Act, any transaction involving the sale, transfer, or issuance of shares in a company that culminates in the transfer of ownership of the entirety or a portion of the company's property would fall within the purview of a sale of a business under the Stamp Act.

In these circumstances, the share purchase agreement (if applicable) and the share transfer form must be submitted to the Department of Inland Revenue for payment of the applicable stamp duty. The Share Purchase Agreement will subsequently be stamped to evidence the payment of the stamp duty.

However, it is noteworthy that any transaction comprising the sale of any business, to the extent that such sale encompasses the transfer of land or any share in a company possessing land, shall be subject to taxation under the Value Added Tax Act, currently set at a rate of 10%.

Are there any applicable stamp duties imposed when transferring ownership interests?

Please see response above at question 30.

How are shares issued? (including information on payment obligations, registration requirements)

In the Bahamas, shares in an International Business Company (IBC) are typically issued in the following manner:

The Board of Directors of the IBC authorizes the issuance of shares in accordance with the IBC's Memorandum and Articles of Association.
The Board of Directors passes a resolution approving the issuance of shares, specifying the number of shares to be issued, their class, and any other relevant terms.
Once the resolution is passed, the registered agent of the IBC prepares share certificates to document the ownership of the newly issued shares. These certificates should include details such as the shareholder's name, the number of shares issued, the class of shares, and any restrictions or special rights attached to the shares.
The IBC updates its Register of Shareholders to reflect the issuance of new shares, including details of the shareholder(s) who have acquired the shares.
Any applicable consideration for the shares issued must be received by the IBC in accordance with the terms of the share issuance.

It is important to note that the process of issuing shares in a Bahamian IBC may vary based on the company's procedure in the Memorandum and Articles of Association and any relevant regulatory requirements if the company is a regulated entity.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

In accordance with Section 20 of the IBC Act, each share in a company may be issued for various forms of consideration, which include money, services rendered, personal property (such as other shares, debt obligations, or securities in the company), an estate in real property, a promissory note, a binding obligation to contribute money or property, or a combination of these. The provision allows for shares to be issued in exchange for non-cash payments, subject to any restrictions specified in the company's Memorandum and Articles of Association.

Regarding how the value of non-cash payments is established, Section 21(1) of the IBC Act states that shares in a company can be issued for an amount determined by the directors, unless otherwise limited by the company's Memorandum or Articles. The directors hold the authority to decide the value of the consideration received by the company in relation to the issuance of shares. This determination by the directors is considered final and conclusive, except in cases involving fraud or questions of law.

In the context of an IBC, it is not permissible to make share premium contributions without the issuance of shares. Share premium typically represents the amount received by a company that is in excess of the par value of the shares issued. Therefore, in order to have share premium contributions, shares must first be issued by the company. Share premium contributions cannot be made independently of the issuance of shares in an IBC.

Yes, partially paid shares are permitted under the IBC Act subject to any limitations within the company’s Memorandum and Articles of Association.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

An IBC has the authority, subject to any limitations in its Memorandum or Articles, to increase or reduce its authorized capital by amending its Memorandum through a resolution of its directors. In the process, the IBC may adjust the number of shares it is authorized to issue and/or modify the par value of any of its shares. Additionally, an IBC has the option to augment its capital by transferring funds from the surplus account to capital or diminish its capital by returning capital to surplus for the purpose of acquiring its own shares. Any shares acquired may be retained as treasury shares or cancelled. However, if the shares are acquired using capital, they must be cancelled, and the value of those shares is subtracted from the capital.

An IBC is prohibited from reducing its shares unless the directors ascertain that immediately following the reduction, the company would remain solvent. Solvency in this context means the company would be capable of meeting its obligations as they arise in the normal course of business, and the realizable value of its assets would equal or exceed its total liabilities (excluding deferred taxes).

Subject to any restrictions in its Memorandum or Articles of Association and the exceptions outlined in section 32 of the IBC Act, an IBC is permitted to purchase, redeem, or otherwise acquire and retain its own shares, provided it satisfies the solvency criteria mentioned above.

Any requirements with respect to distributions to shareholders?

The Directors of an IBC may, by resolution, declare and pay dividends in money, shares or other property, subject to a solvency test and its Memorandum and Articles of Association.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

The shareholders of an IBC have the authority to establish a shareholders' agreement, which functions in conjunction with the IBC's Memorandum and Articles of Association. Oftentimes, the purpose of a shareholders' agreement is to govern the relationships among the shareholders. Given that the Memorandum and Articles of Association are public documents lodged with the Companies Registry, shareholders have the option to incorporate details they wish to keep confidential within the shareholders' agreement. Although the IBC Act requires that notice of a shareholders' agreement be submitted to the Companies Registry, the actual agreement itself is not mandated to be filed.

6 COSTS AND TAXES

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The amount due to the government is dependent on the entity’s share capital. Entities with standard share capital (US$50,000 or less) pay government fees of $350. Entities with non-standard share capital (share capital of more than US$50,000) pay government fees of $1,000. Government fees are subject to a penalty of 10% where payment is not made by April 1. The penalty increases to 50% if payment is not made by November 1, and the entity is struck from the Register of Companies if payment is not made by December 31. Additionally, an IBC will be subject to annual Registered Office/Agent fee to its elected registered agent.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

The Bahamas does not impose income, capital gains, withholding, corporate, gift, or inheritance taxes. Nevertheless, any individual or entity engaged in business operations within The Bahamas is mandated to seek and secure a business license in accordance with the Business Licence Act 2023. The Business Licence Act 2023 (“BL Act 2023”) was enacted in The Bahamas on September 1, 2023, superseding the former Business Licence Act, 2010, and consolidating and amending the pertinent laws concerning the necessity of obtaining a business license and the associated taxes. All companies engaged in business activities within or emanating from The Bahamas require a business license. Excluded from the definition of business for the purposes of the BL Act 2023 are entities such as an investment fund regulated under the Investment Funds Act, 2019, and a pure equity holding entity. The statutory definition of business under the BL Act 2023 is intended to be comprehensive rather than exhaustive, encompassing activities typically falling within the purview of the term.

Business licenses under the BL Act 2023 are obligatory for individuals conducting business operations in or from within The Bahamas. These licenses expire on December 31 each year, with renewal applications due by January 31 of the subsequent year. Notwithstanding the foregoing, the BL Act 2023 stipulates that a business shall not be deemed unlicensed for three months following the expiration of its license on December 31 due solely to such expiration.

With certain exceptions for designated business activities as outlined in section 10 of the BL Act 2023, all entities incorporated or registered under the Companies Act or the IBC Act, conducting business operations in or from within The Bahamas, are obligated to possess a business license and pay an annual business license tax based on the turnover for the prior calendar year, with rates detailed below.

For an IBC, the BL Act 2023 defines turnover as “all revenues recorded by the international business company in its books and records in The Bahamas, whether or not any portion of such revenues is attributable to activities conducted outside The Bahamas.” In cases where an IBC's turnover is generated from activities both within and outside The Bahamas, the entity must apportion the turnover between locally conducted activities and those outside The Bahamas for tax calculation purposes. Turnover of an IBC arising from operations conducted within The Bahamas includes:

The sale or utilization of tangible or intangible property situated or registered in The Bahamas;
Export of goods;
Sale or provision of goods or services to individuals:

Classified as residents for exchange control purposes; or
Present within The Bahamas at the time of sale or provision of goods/services.

Professional services, comprising legal, architectural, consultancy, engineering, accountancy, and advisory services.

IBC operations within The Bahamas with turnover attributable to local activities are subject to the following tax rates based on annual turnover:

Annual Turnover	Annual Tax
<$100,000	Exempt
$100,000 - $500,000	0.5% of turnover
$500,000 - $5 million	0.75% of turnover
> $5 million	1.25% of turnover

For IBC operations outside The Bahamas with turnover from activities outside the jurisdiction, the following tax rates apply based on annual turnover:

Annual Turnover	Annual Tax
< $1 million	$2,500
> $1 million	0.25% of turnover, capped at $100,000

Moreover,

7 SPECIFIC MATTERS WHICH ARE IMPORTANT OR UNIQUE TO THIS JURISDICTION

Summary of any specific matters, e.g. recent or prospective major legal developments

Commercial Entities (Substance Requirements) Act, 2023 (“CESRA 2023”) repealed and replaced the Commercial Entities (Substance Requirements) Act 2018 (the “Repealed Act”) which came into force on September 1st, 2023. The Repealed Act was originally enacted to ensure that a commercial entity that could be used to artificially attract profits that are not commensurate with its economic activities has a substantial economic presence in The Bahamas, where the entity claims it is not tax resident in another jurisdiction. As was the case under the Repealed Act, CESRA 2023 continues to provide that a commercial entity conducting relevant activities (an “Included Entity”) must meet the economic substance test. CESRA 2023 now provides further clarifying provisions on what constitutes the conduct of each relevant activity. In addition, CESRA 2023 materially changes the manner in which entities report. Entities must now make their economic substance report to their Registered Agent or the Compliance Commission.

Economic Substance Requirements

CESRA 2023 imposes two key obligations. Firstly, CESRA 2023 imposes a reporting obligation on all entities incorporated, registered or continued under the following legislation:

Companies Act (Ch. 308) and includes a foreign company registered under Part VI thereof;
International Business Companies Act (Ch. 309);
Partnership Act (Ch. 310);
Partnership Limited Liability Act (Ch. 311); or
Exempted Limited Partnership Act (Ch. 312).

All Entities are required to report to their Registered Agent or the Compliance Commission where an Entity has no Registered Agent, the information required by section 11 to enable the Registered Agent or Compliance Commission to report in accordance with section 12 the information maintained by it in accordance with section 11 within nine (9) months of the fiscal year end of each entity.

Additionally, CESRA 2023 imposes an obligation to maintain a Substantive Economic Presence in The Bahamas on all Included Entities. “Substantial Economic Presence” in The Bahamas means conducting core income generating activities (whether directly or outsourced to a service provider in The Bahamas) and having direction and management in The Bahamas.

Included Entities are Commercial Entities that carry on any of the following activities (“Relevant Activities”):

banking business has the meaning assigned to such term in the Banks and Trust Companies Regulations Act, 2020 (No. 22 of 2020);
insurance business;
fund management business;
financing and leasing business;
headquarters business;
distribution and service centres business;
shipping business;
commercial use of intellectual property; or
holding business but does not include the business of operating an investment fund.

An Entity is a Commercial Entity unless it is:

resident owned in The Bahamas;
tax resident in a jurisdiction other than The Bahamas; or
an investment fund.

The substance requirements of CESRA only apply to Entities that are tax resident in The Bahamas and not operating in The Bahamas by resident owners. Notwithstanding the foregoing, an Entity will be deemed to be tax resident in The Bahamas absent a claim to the contrary made by the Entity and such Entity providing satisfactory evidence of such foreign tax residence.

An entity is “resident owned in The Bahamas” if one hundred percent of the beneficial interests in an entity is owned directly or indirectly by “one or more natural persons who:

(a) are ordinarily resident and domiciled in The Bahamas; or

(a) have been issued a certificate of annual or permanent residence and who physically resides in The Bahamas for a cumulative period of at least three months in every calendar year.”

Domestic Minimum Top-Up Tax

The Bahamas enacted the Domestic Minimum Top-Up Tax Act, 2024 (hereinafter "the Act") which represents a strategic alignment with international efforts to reform global corporate taxation. Rooted in the OECD’s Pillar Two framework — part of the broader Global Anti-Base Erosion (“GloBE”) Rules — the Act embodies the Bahamas’ commitment to fostering compliance, safeguarding its reputation as a premier offshore financial jurisdiction, and ensuring equitable tax contributions from multinational enterprises (MNEs).

The Act was enacted on 28 November 2024 as part of The Bahamas’ proactive response to evolving international tax standards. Its development followed extensive consultations with stakeholders, including private sector actors, and aligns with the country’s broader commitment to transparency, compliance, and economic stabilization. The legislative move reflects the Bahamas’ strategic positioning within global efforts to prevent profit shifting and tax base erosion.

Under Section 4(1), the Act applies to large MNE groups that maintain group entities in The Bahamas, with an annual consolidated revenue exceeding €750 million (approximately USD 800 million). Entities with revenue below this threshold are excluded from the Domestic Minimum Top-Up Tax (DMTT) but remain subject to other applicable tax regimes. For fiscal years beginning after 31 December 2023, the Act mandates these entities to meet a minimum effective tax rate of 15% on profits attributable to Bahamian operations. The Act does not apply to entities operating exclusively within The Bahamas, regardless of their revenue levels.

An entity shall be deemed located in The Bahamas if it is a tax resident therein or if it constitutes a branch or other permanent establishment of a non-resident entity operating within The Bahamas. An entity is considered a tax resident if it is incorporated, formed, or organized under Bahamian law or if its place of effective management is located in The Bahamas.

An entity is considered part of an MNE group if its financial results are reported on a line-by-line basis within the group’s consolidated financial statements (“CFS”) of the UPE. The Act also extends to 50%-owned joint ventures whose financial results are reported via the equity method within the CFS. Excluded entities, such as pension funds, are not within scope; however, their revenue figures are included in the assessment of whether the revenue threshold is met.

The assessment of whether an MNE group exceeds the €750 million revenue threshold is based on a review of two (2) of the four (4) fiscal years immediately preceding the fiscal year under review. For instance, an MNE group qualifies for the 2025 fiscal year if it reported aggregate revenues of €750 million or more in at least two of the fiscal years 2021 through 2024.

The DMTT Act is deemed to have come into force retroactively as of 1 January 2024. It applies to fiscal years commencing after 31 December 2023, subject to the condition that an IIR or UTPR is required to be applied in 2024 with respect to all Bahamian Constituent Entities of the relevant MNE group. If such application is not required, the liability for DMTT will commence for fiscal years beginning after 31 December 2024.

Entities subject to the DMTT are mandated to file the GloBE Information Return with the Secretary, pursuant to Article 8.1 of the GloBE Model Rules. Returns are required to be filed within 15 months after the last day of the Fiscal Year as required under the OECD Inclusive Framework. However, within the Transition Year, returns are due within 18 months after the last day of the Fiscal Year. This reporting requirement is essential for transparency, compliance, and calculation of the top-up tax owed. The Act also references the need for entities to adhere to any elections or adjustments permitted under the GloBE Rules.

The Domestic Minimum Top-Up Tax Act, 2024 (No. 58 of 2024) (DMTT Act), initially amended section 38 of the Business Licence Act, 2023, to provide an exemption from business licence tax for entities liable for the DMTT. This exemption was enacted to prevent double taxation, ensuring that businesses subject to the DMTT would not be required to pay both the business licence tax and the DMTT on the same taxable activity.

Subsequently, recent proposed amendments have been introduced to both the DMTT Act and the Business Licence Act, 2023. These amendments seek to establish a credit mechanism whereby payments made in respect of the business licence tax may be credited against the liability for the DMTT. As a result, the amendments will restrict the credit to the amount of DMTT payable in the fiscal year in which the relevant business licence is renewed.

The Bahamas’ Domestic Minimum Top-Up Tax Act, 2024, exemplifies a comprehensive legislative strategy to integrate global tax reforms into national law. By mandating a 15% effective tax rate on large multinational entities, the Act not only aligns The Bahamas with the OECD’s Pillar Two standards but also reinforces its commitment to transparency, fairness, and fiscal stability. Its enactment underscores the country’s recognition of the importance of international cooperation in combating tax avoidance, while simultaneously safeguarding its economic interests and maintaining its reputation as a leading financial jurisdiction.

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Lethea Carey

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© 2025, Lennox Paton. All rights reserved by Lennox Paton as author and the owner of the copyright in this chapter. Lennox Paton has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the Global Business Entities Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: 2025