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The Bahamas Investment Condominium – ICON (Part 2)

In this issue, we discuss the benefits, effects and process of converting an existing fund structure, such as a company, exempted limited partnership or unit trust to an Investment Condominium (“ICON”).

Our Legal Updates November 2014 introduced you to the ICON, The Bahamas’ most recent financial services product enabled by the Investment Condominium Act, 2014 (“ICON Act”).

To recap, the ICON is intended to be an alternative to a traditional company, unit trust or exempted limited partnership vehicle for use in relation to investment funds.  It must be licensed as one or other of the already-existing Bahamian investment funds, namely, a SMART fund, professional fund or standard fund.

Benefits of Conversion

The main benefits of conversion are:

  • To allow for conversion of structures already in The Bahamas to ICON’s;
  • To accommodate the re-domiciliation of investment funds to The Bahamas; and
  • To allow for unbroken continuity of the fund, while changing the character of the underlying legal structure that comprises it.

Only entities incorporated or continued under the International Business Companies Act, 2000 (“IBC Act”) of The Bahamas, an exempted limited partnership registered under the Exempted Limited Partnership Act, 1995 of The Bahamas and unit trusts established under the laws of The Bahamas are able to convert to an ICON.  However, entities in other jurisdictions are able to take advantage of existing continuation procedures in the IBC Act – that is, continue into The Bahamas as international business company and then convert to an ICON.  Existing unit trusts that are governed by a foreign law may utilize any power to change the governing law contained in the trust instrument to that of The Bahamas. Once the trust is governed by the laws of The Bahamas, it may convert to an ICON.

Effects of Conversion

Some of the effects of conversion are:

(a)  The company, exempted limited partnership or unit trust shall cease to be body corporate, exempted limited partnership or unit trust, as applicable, without dissolving or being wound up;

(b)  The shareholders of a company shall be participants with all attendant rights and obligations of participants under the ICON Act;

(c)  The general and limited partners of an exempted limited partnership shall be participants with all attendant rights and obligations of participants pursuant to the ICON Act;

(d)  The unit holders of a unit trust shall be participants with all attendant rights and obligations of participants pursuant to the ICON Act;

(e)  No conviction, judgement, ruling, order, claim, debt, liability or obligation due or to become due and no cause existing against the entity, former shareholder, director, officer, agent, partner or trustee, as applicable,  or any other person is released or impaired by its conversion to an ICON.


Process for converting a company to an ICON

1. A majority of voting shareholders and all directors are to agree and adopt the Articles of Conversion.

2. Certificate of conversion is signed by the Administrator under seal and filed with the Registrar General in The Bahamas (“RGD”) within 7 days of date of certificate along with prescribed fee.

3. RGD stamps certificate of conversion – stamped certificate of conversion is prima facie evidence of compliance with all requirements in respect of conversion.

4. ICON applies to be licensed as a fund.

5. Administrator issues confirmation to each participant (former shareholders) stating:

(a)  The number of shares converted and the number of participation interests held by such participant; and

(b)  That the conversion has not affected the value of any capital contribution.

Note: Conversion that takes place while a company is not in good standing is void and of no effect.


Process for converting an exempted limited partnership to an ICON

1. A majority of limited partners having the right to vote and all general partners are to agree and adopt the Articles of Conversion.

2. Certificate of conversion is signed by the Administrator under seal and filed with the RGD within 7 days of date of certificate along with prescribed fee.

3. RGD stamps certificate of conversion – stamped certificate of conversion is prima facie evidence of compliance with all requirements in respect of conversion.

4. ICON applies to be licensed as a fund.

5. Administrator issues confirmation to each participant (former general and limited partners) stating:

(a)  The number of partnership  interests converted and the number of participation interests held by each participant; and

(b)  That conversion has not affected the value of any capital contribution.

Note: Conversion that occurs while an exempted limited partnership is not in good standing is void and of no effect.


Process for converting a unit trust to an ICON

1. Articles of Conversion are to be approved by the trustee or such other person as required by the terms of the trust instrument and by the majority of the unit holders having voting rights.

2. Certificate of conversion is signed by the Administrator under seal and filed with the RGD within 7 days of date of certificate along with prescribed fee.

3. RGD stamps certificate of conversion – stamped certificate of conversion is prima facie evidence of compliance with all requirements in respect of conversion.

4. ICON applies to be licensed as a fund.

5. Administrator issues confirmation to each participant (former unit holders) stating:

(a)  The number of trust units converted and the number of participation interests held by each participant; and

(b)  That conversion has not affected the value of any capital contribution.

Note: Any conversion of a unit trust that occurs on a date when such unit trust is in the process of being wound up or dissolved is void and of no effect.


Content of Articles of Conversion

i. Name;

ii. Provisions detailing the basis upon which shares of a company, limited partnership interests of an exempted limited partnership or units of a unit trust, as applicable, shall be converted to participation interest in the ICON along with details of any rights;

iii. Provisions for valuation and accounting treatment of the assets and liabilities of the company, exempted limited partnership or unit trust, as applicable, and in all cases, any retained earnings upon conversion;

iv. In the case of a company, the date on which the company was incorporated or continued and the date on which it intends to covert to an ICON;

v.  In the case of an exempted limited partnership, the date on which the partnership was registered and the date it intends to convert to an ICON;

vi. In the case of a unit trust, the date on which the unit trust was established and the date on which it intends to convert to an ICON;

vii. In all cases, the Governing Regulations of the ICON containing the information prescribed by the First Schedule of the ICON Act, are to be annexed to the Articles of Conversion;

viii. In the case of a company, the Governing Regulations are to be approved by the shareholders of the company;

ix. In the case of an exempted limited partnership, the Governing Regulations are to be approved by the general partner and the limited partners;

x. In the case of a unit trust, the Governing Regulations are to be adopted by the trustee and such other persons as may be required by the trust instrument; and

xi. In all cases, the name and address of the Administrator.

DELANEY PARTNERS is well-equipped to advise you in all aspects of the ICON.  For more information please contact Samantha Knowles-Pratt (skpratt@delaneypartners.com), Pamela Klonaris (pklonaris@delaneypartners.com), or Sofia Papageorge (spapageorge@delaneypartners.com).

© Delaney Partners, June 2015.

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