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102
Corporate Governance Series
OCTOBER 2013
Corporations & Corporate Governance in Turks and Caicos
In light of the global economic turmoil, banks for example must continue to change their corporate governance and risk management structures and practices in response to the financial crisis. Additionally, policymakers and regulators have to ensure that their efforts to reform the financial services sector create a level playing field in regulation across all jurisdictions. To find out about the issues surrounding corporations and corporate governance in Turks and Caicos, Lawyer Monthly speaks to David Whitford, a senior corporate commercial attorney at Misick & Stanbrook, in Providenciales, Turks and Caicos Islands. Here David provides an overview of corporate governance considerations for international business corporations registered in the Turks and Caicos Islands (“TCI”).
tcI is an attractive jurisdiction in terms of corporate rules, shareholders and management. Why is this?
The TCI regulatory scheme permits the establishment of ordinary companies, exempted companies, limited life companies, unlimited companies, limited companies, companies with mixed liability and varying liability, hybrid companies and also limited partnerships and trusts.
The establishment of any required registration process for these entities is generally straightforward and can usually be completed for a fixed cost and within fairly short timeframes. TCI is often an attractive option as an offshore financial centre as there are no corporate or personal income taxes in TCI.
The TCI company registration in regard to international business is the TCI exempted company (or international business company). A TCI exempted company is registered to conduct business almost exclusively overseas and upon registration is exempted from future company taxation for a minimum period of 20 years.
For business being conducted within TCI, the appropriate company usually registered is a TCI ordinary company. This is in many ways similar to a TCI exempted company although the regulation of a TCI ordinary company is greater than an exempted company.
What is the current status of tcI’s legal framework on corporate governance?
Companies registered in TCI are incorporated pursuant to the provisions of the TCI Companies Ordinance. The provisions of this ordinance are strongly influenced by English company law.
TCI has an extensive regulatory framework covering almost all aspects of the TCI corporate and financial industry and which are designed to regulate financial, professional and corporate governance standards in a broader context. While company formation is regulated by the TCI Companies Ordinance, other
legislation regulates banks, agents, insurance
companies, brokers, trusts companies, investment dealers and mutual funds administrators.
There has been a progressive development in legislative regulation in TCI since the 1990s to date and this has included robust anti-money laundering and anti-terrorist financing regulations. This has enhanced TCI’s reputation as an offshore financial centre.
can you tell us about the Binding corporate Rules (BcR) in tcI?
In terms of TCI exempted companies, each exempted company is required to establish a registered office in TCI where a licensed company agent maintains the company’s corporate records. A representative is also required to be nominated to accept service of legal process on behalf of the company in TCI.
Exempted companies are usually limited liability companies and therefore shareholder liability is limited to the extent of the shareholdings but with the usual exceptions such as fraud and related exceptions. The usual management structure of TCI registered companies is a board of one or more directors and generally directors are afforded wide powers concerning management of the company.
Certain decisions in regard to the company require a special resolution of the shareholders (which is defined under the TCI Companies Ordinance as 75% approval of the voting shareholders) but most decisions only require an ordinary shareholder majority.
The only statutory requirement in terms of
management is that every TCI registered company must have at least one director and one secretary. The director and the secretary can be the same legal person and the director or secretary may be an individual or company.
This usual comparably straightforward structure can enhance business management decisions.
Therefore, the effective management of
shareholders’ interests outside TCI is important. For TCI exempted companies, there is no requirement to prepare or file audited accounts and no statutory meetings are necessary but if such meetings are to occur, they can be held anywhere outside TCI. Furthermore, a TCI company can conclude contracts within or outside TCI and exercise any of its powers in connection with its business outside TCI. A TCI registered company also has the right to open bank accounts in TCI.
Shareholders have the power under corporate governance; what sort of effect does this have on business?
This is extremely positive. TCI shareholders have the right to elect the board of directors, to question the company’s directors and officers and to remove them should they so desire. The flexibility and historical regulation of TCI registered companies in a quieter tax free jurisdiction can lead to attractive benefits and these are based upon solid well established English based standards of corporate governance. LM
Misick & Stanbrook is the leading law firm in TCI and serves both international and domestic clients ranging from multinational corporations to private individuals. TCI is a British Overseas Territory located approximately 500 miles southeast of Miami, Florida at the southern tip of The Bahamas islands chain.
david Whitford Senior Attorney T: 649 946 4732 E: davidw@misickstanbrook.tc