Amendments to the Foundation Act, 2004
Introduction
The Foundations Act, 2004 (the "Act") defines a foundation (the "Foundation") as an entity, established by a Certificate of Registration. The Foundation charter (the "Charter") creates a Foundation that is resident and domiciled in The Bahamas. The Foundation is a vehicle used for holding private assets for the benefit of a persons or purposes. These assets are endowed to the Foundation to be managed in accordance with the objects or purposes specified in the Charter.
The Foundations (Amendment) Act, 2007 (the "Amendment") came into force on May 1, 2007. Some of the more important amendments relate to the appointment of a Foundation agent (the "Foundation agent"), the compulsory nature of the Foundation Council (the "Council") in the absence of officers, and the rights of a beneficiary.
Amendments
Disclosure of Public Information
The names and addresses of the founder and members of the foundation council will be kept at the registered office of the foundation and not be a matter of public record.
Foundation Agent
The Foundation agent shall be a duly licensed financial and corporate service provider (the "FCSP") under the Financial and Corporate Services Providers Act or a licensed trust company under the Banks and Trust Companies Regulation Act, but shall not be an officer of the Foundation (the "Officer(s)"). The appointment of a person as Foundation agent may not be assigned.
The Foundation agent shall have the same duties and responsibilities as the secretary of the Foundation (the "Secretary") relating to anti-money laundering and counterterrorism regulations and ensuring that the foundation complies with statutory requirements. In the event a Foundation has a Foundation agent and a Secretary who does not perform any of the statutory duties prescribed by the act, such Secretary need not be a licensed FCSP or trust company under the Amendment. A foundation agent can be excluded from all liability except for fraud and willful misconduct, whereas an officer or council member cannot be excluded for liability arising in respect of any acts or omissions of such persons due to fraud, gross negligence, willful misconduct or dishonesty on the part of any of them.
Foundation Council
Under the Act, the appointment of a Council is optional. However, where there are no officers appointed, the Amendment requires that the Charter provide for the appointment of a Council. Such Council may consist of (i) two or more natural persons (ii) a legal person and one or more natural person, or (iii) a legal person by itself. It should be noted that Council members need not be located in The Bahamas.
The functions of the Council are similar to those of directors of a company. They include ensuring that the Foundation and the Officers comply with the Charter and articles (the "Articles") and supervising the Officers and their management of the Foundation. In addition, the Council is entitled to (i) access to the books and records of the Foundation, (ii) be informed of all meetings of the Officers, (iii) attend and be heard but not vote at such meetings, (iv) be included in the circulation of Foundation documents, and (v) be informed of any delegation of powers to an Officer.
Rights of a beneficiary
The Amendment provides for a beneficiary of a foundation who has a vested interest in the assets of the Foundation the right to request certain information. Such information includes the Charter, the Articles, any audit report, and any minutes of any meeting of the officers or the Council or other supervisory body. In addition, the Amendment allows for information or documents relating to the vested interest of the beneficiary in which the terms of the foundation or any exercise of power or discretion are to be found and all financial statements of the Foundation as they relate to the said beneficiary’s interest to be viewed.
The Amendment also gives a beneficiary the right to confidentiality. The officers of the Council, whether upon request of the other beneficiaries or in the officers’ absolute discretion, shall take all reasonable steps to secure the confidentiality of other beneficiaries when disclosing the aforementioned information to a beneficiary. Information cannot be disclosed to a third party without the express or implied consent of a beneficiary. If a beneficiary is a minor or incapacitated, the consent of a parent or legal guardian will be required.
Funding a Foundation
Previously, it seemed that assets of at least US$10,000 had to be transferred to the foundation before it was registered. This had caused some practical difficulty in establishing the foundation because many banks do not wish to open an account for a foundation until it is registered. The amendment makes it clear that assets need not be transferred until after registration although there will be a commitment in the charter by the founder to transfer the assets.
Financial Records
The form in which financial statements must be kept has been greatly simplified. A foundation need only keep such financial statement accounts and records as the officers consider necessary or desirable to reflect the financial position of the foundation.
Model Charter
Given the fact that many practitioners are now more familiar with foundations, and also to reflect the proposed changes in the legislation, a revised version of the charter replaces the existing model.
Winding Up Rules
Winding Up Rules for Foundations were promulgated on 7th February, 2007.
(Extracted from a BFSR article prepared for BFSB by Heather L. Thompson, Partner and Christie E. Cash, Legal Clerk, of Higgs & Johnson law firm)