TerraLex Cross-Border Guide to Cross-Border Merger & Acquisition Guide

There are areas of business ownership and investment that are expressly designated and reserved for Bahamians only. Apart from these areas, there are no restrictions on foreign ownership or investment although regulatory approval will be required. Ownership and investment by foreigners will require the prior approval of one or more of the Bahamas Investment Authority, the National Economic Council, and the Central Bank of The Bahamas (the “Central Bank”) and/or may be subject to certain limitations. Other regulatory approvals may be required depending on the nature of the investment.

Foreign-owned Bahamian companies, trading exclusively outside of The Bahamas, are free to deal in foreign currencies, but will require the consent of the Central Bank to deal in Bahamian dollars. Foreign-owned Bahamian companies doing business in The Bahamas (which are deemed resident for exchange control purposes) will need Central Bank consent to conduct operations in foreign currencies or to hold foreign currency denominated assets but may establish and maintain foreign currency operating accounts without Central Bank consent of up to the equivalent of US$100,000. These accounts may only be used to facilitate payments for trade and to be financed only from revenues generated in foreign currency and are subject to certain conditions. Central Bank consent would still be required to maintain foreign currency operating accounts with balances of more than US$100,000 equivalent.

There is a wide range of investment incentives available in The Bahamas to support private sector investment by foreign and domestic investors, including the exemption from the payment of customs duties on building materials, exemptions from business license fees, equipment and approved raw materials, and real property taxes for statutorily prescribed periods.

Generally, employees are not entitled to management representation and/or to be consulted in relation to corporate transactions. A contract between a company and a labour union that represents some of its employees may provide the union with management representation and prior notification rights.

If an employee has been employed six months or more but less than twelve months, the minimum period of notice required from an employer to terminate an employee’s contract is one week’s notice or one week’s basic pay in lieu of notice and one week’s basic pay (or part thereof on a pro rata basis) for the said period between six months and twelve months. For employees employed more than twelve months, the minimum period of notice required from an employer to terminate an employee’s contract is two weeks’ notice or two weeks’ basic pay in lieu of notice. In addition, employees employed more than twelve months must receive a payment equivalent to two weeks basic pay (or a part thereof on a pro rata basis) for every completed year of employment up to a maximum of 24 weeks. For supervisory or managerial employees, the minimum period of notice required from an employer to terminate an employee’s contract is one month’s notice or one month’s basic pay in lieu of notice. In addition, supervisory or managerial employees must receive a payment equivalent to one month’s basic pay for every completed year of employment up to 48 weeks.

An employee shall be deemed to be dismissed because of redundancy if (a) his or her employer has ceased, or intends to cease, to carry on the business for which the employee was employed or has ceased, or intends to cease, to carry on that business in the place where the employee was so employed, or (b) the requirements of that business for employees to carry out work of a particular kind of work or the place where an employee was employed to carry out work of a particular kind has ceased or diminished or is expected to cease or diminish. An employee made redundant who has been employed more than twelve months must receive two weeks’ basic pay in lieu of notice or two weeks’ notice. In addition, the employee must receive a redundancy payment of two weeks’ basic pay (or part thereof on a pro rata basis) for each completed year of employment up to 24 weeks. Supervisory or managerial employees made redundant must receive one month’s basic pay in lieu of notice or one month’s notice. In addition, supervisory or managerial employees must receive a redundancy payment of one month’s basic pay (or part thereof on a pro rata basis) for each completed year of employ up to 48 weeks.

Except where there is an agreement to the contrary in a contract of employment, an employer shall not lay off an employee, or place an employee on short-time, except where (a) the employer has temporarily ceased, or intends temporarily to cease, to carry on the business for the purposes of which the employee was employed by him, or has temporarily ceased, or intends temporarily to cease, to carry on that business in the place where the employee was so employed; or (b) the requirements of the business for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where the employee was so employed, have temporarily ceased or diminished, or are expected temporarily to cease or diminish.

Sales of shares of a company involving the transfer of any property other than land (and excepting cash or monies on deposit in a bank) will incur stamp duty at the rate of 6%. A transaction or instrument which (a) has the effect of transferring any interest in a real property holding entity and which would have a similar effect on the legal or beneficial interest in any real property in The Bahamas that is legally or beneficially owned by the entity, had the legal or beneficial ownership of such entity represented the proportionate parts into which that legal or beneficial interest in the real property were divided; or (b) forms part of a series of transactions, and has the cumulative effect on real property as referred to in paragraph (a) above, is chargeable for value added tax at the following rates (i) 2.5% where the value is B$100,000 and under; or (ii) 10% where the value exceeds B$100,000.

The Bahamas does not have a general competition law/antitrust regime.

Documents ordinarily produced and executed at signing meetings include: share purchase agreement; disclosure letter; board resolutions of the parties approving the transaction and giving authority to enter into the transaction documents.

Documents ordinarily produced and executed at closing meetings include: original share certificates together with share transfer forms (the instrument required to transfer title to shares); new share certificates in favour of the buyer and/or its nominees; such waiver consents or other documents required to give good title to the shares; updated register of members; updated register of directors; resignation letters from existing auditors; resignation letters from existing directors and officers; board minutes of the target company approving the registration of the buyer as a shareholder; board minutes or shareholder minutes (as appropriate) reflecting the appointment of persons nominated to the board of directors of the target company by the buyer; and evidence of the release from all charges, debentures, and other security interests over the target company’s assets (assuming that the company is being purchased free from encumbrances).

There is no gap requirement between signing and closing, unless regulatory approvals are required. Where regulatory approvals are required, e.g. if the buyer is a foreign person or if the entity being sold is a licensed entity, under the Banks and Trusts Companies Regulation Act, provision should be made in the agreement for the time required to obtain the necessary approvals.

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A company is ordinarily required to produce a certified board resolution approving the transaction and authorising a person(s) to execute the documents on behalf of the company.

Pursuant to conflict of laws principles, the formal validity of a contract is governed by the law of the country where the contract is made or by the proper law of the contract. Under Bahamian law, a simple contract may be executed under hand whereas a deed must be signed, sealed, and delivered.

A simple contract may be executed by a director or other duly authorised person on behalf of a company without the need to affix the common seal of the company. A deed must be executed strictly in compliance with the Articles of Association of a company as the common seal of the company must be affixed thereto. Usually, the Articles of Association requires that the common seal be affixed by a director in the presence of another director or officer of the company, who must then also sign the deed.

A company may also grant a power of attorney authorising execution by an attorney-in-fact.

If it is intended to record the document at the Registry of Records, then an affidavit of due execution must be sworn before a notary public by either a party to the document or by a witness and such affidavit must be attached to the document, which is then lodged for recording.

A simple contract may be signed by an individual under hand. A deed must be signed, sealed, and delivered by an individual.

If it is intended to record the documents at the Registry of Records, then an affidavit of due execution must be sworn before a notary public by either a party to the document or by a witness and such affidavit must be attached to the document, which is then lodged for recording.

As stated above, the formal validity of a contract is governed by the law where the contract is made or by the proper law of the contract. A foreign company may execute documents in accordance with the law of its place of incorporation or the governing law of the contract. However, if the lex situs of the asset which is the subject of any contract is The Bahamas, then the execution formalities required by Bahamian law must be observed, e.g. any conveyance of an interest in real property in The Bahamas must be signed, sealed, and delivered.

If it is intended to register the documents at the Registry of Records, then an affidavit of due execution must be sworn before a notary public by either a party to the document or by a witness and such affidavit must be attached to the document. If the document is signed abroad, the standing of the notary public must be certified by the issue of an apostille or legalization.

Notaries public do not play any role in share sales and asset purchases except to take oaths where necessary or to certify documents as being true copies, if required.

A notary cannot change the terms of the deal.

The fees of a notary public are nominal.

A notary has no impact on a transaction timetable.

Stockholders are changed by way of a share purchase or transfer of shares and, if required by the Articles of Association of the company, with the approval of the Board of Directors of the company. Appointments of directors and officers are ordinarily made pursuant to the Articles of Association of a company.

The following formalities are required to transfer title to shares in a company: - execution of a written instrument of transfer (share transfer form);

• production of original share certificate;
• target company’s board approval of the transfer if mandated by the Articles of Association;
• target company’s board approval for the issue of a new share certificate to the buyer; and
• registration of the buyer's name on the company's register of members.

It is generally accepted that an individual or a company can appoint a third party to execute documents on its behalf, usually by way of a power of attorney. An instrument creating a power of attorney by an individual must be signed and sealed by, or by direction and in the presence of, the donor of the power. Where an instrument creating a power of attorney by an individual is signed and sealed by a person by direction and in the presence of the donor of the power, two other persons shall be present as witnesses and shall attest the instrument. An instrument creating an enduring power of attorney must be in the prescribed form and must be deposited in the Supreme Court Registry of The Bahamas.

There are no prescribed restrictions.

Under the Evidence Act, the content of documents may be proved either by primary or by secondary evidence. Secondary evidence includes a faxed document and emailed document.

Secondary evidence may be given of the existence, conditions, or contents of a document admissible in evidence in the following cases:

• a) where the original is shown or appears to be in the possession or power of the person against whom the document is sought to be proved, and when after notice has been provided he does not produce it;
• b) when the existence, condition, or contents of the original have been proved to be admitted by the person against whom it is sought to be proved or by his representative in interest;
• c) when there is satisfactory evidence that the original has been lost or destroyed or when after proper search there is reasonable ground for believing that the original has been lost or destroyed;
• d) when the original is of such a nature as not to be easily movable, or is in a country or place from which its removal is not by law permissible;
• e) when the original is a public document (as defined under the Evidence Act);
• f) when the original is a document of which a certified copy is permitted by law to be given in evidence;
• g) when the original consists of numerous accounts or other documents which cannot conveniently be examined in court and the fact to be proved is the general result of the whole collection.

In cases falling under paragraph (a), (c) or (d) any secondary evidence of the contents of the document is admissible. In cases falling under paragraph (e) or (f), a certified copy of the document but no other kind of secondary evidence is admissible. In cases falling under paragraph (g), evidence may be given as to the general result of the documents by any person who has examined them and who is skilled in the examination of such documents.

The Bahamas has adopted electronic signature legislation that includes the acceptance of digital signatures. A person cannot be required to use or accept an electronic signature and the parties may establish reasonable requirements about the manner in which electronic signatures may be accepted. The legal recognition of electronic signatures does not apply to certain types of contracts, e.g. deeds, the conveyance of real property, or the transfer of any interest in real property, court orders, enduring powers of attorney, wills or testamentary instruments or trusts.

Deeds and simple contracts may be executed in counterpart. The counterparts will then be taken together to constitute one instrument.

There are no regulations contained in the Legal Profession Act and the Bahamas Bar (Code of Practice) Regulations which govern or regulate the giving of undertakings by lawyers. However, if an undertaking is given by a lawyer, a breach of that undertaking may be found an action by the recipient of such undertaking if there was consideration for the lawyer’s undertaking or the recipient can show that he suffered loss as a result of his reliance on the lawyer’s undertaking.

A contract may include an escrow arrangement. A transaction may be completed in escrow subject to a subsequent event.

Once the register of members has been updated at closing, there are no further closing formalities.

Formal opinions on due execution are customarily required in transactions, save in smaller transactions. There are no rules of the Bahamas Bar Association concerning the giving of opinions.

This will depend on the complexity of the transaction and the number of regulatory approvals required, if any. There is no particular difference with respect to timing between an asset and a share sale.

Under the common law of The Bahamas, a contract in restraint of trade is defined as “one in which a party agrees with any other party to restrict his liberty in the future to carry on trade with other persons not party to the contract in such manner as he chooses”. As a matter of public policy, the courts of The Bahamas will not enforce any term in a contract in restraint of trade unless it can be justified as reasonable. In determining the reasonableness of the term, the courts of The Bahamas will consider first whether the restraint went farther than to afford adequate protection to the party in whose favour it was granted, secondly whether it can be justified as being in the interests of the party restrained, and, thirdly, whether it is contrary to the public interest. The question as to whether or not a term is contrary to the public interest will involve a balancing act between competing public policy considerations, namely the freedom of trade and the freedom to contract.