St. Lucia’s IBC: Steady in Changing Times  - Nicholas John, Barrister-at-Law

Now into its fourth year as an offshore center, St. Lucia is proving to the industry and the world that its model not only works, but is the new standard for an international financial center. Amidst the challenges of the Organisation for Economic Co-operation and Development (“the OECD”) and the Financial Action Task Force (“the FATF”), St. Lucia has not had to make any alterations to the laws governing international financial services.

Having had in place at the outset, laws regulating all service providers, prohibiting money laundering, and providing a range of expected services, the FATF never had cause to blacklist the jurisdiction.

More importantly are the features of the International Business Companies Act (“IBC”). At the time of passage of the law, St. Lucia choose the high ground and set standards for the IBC that were unheard of in the industry. The primary departure from the norm was that the law never permitted bearer shares. Such instruments made the determination of beneficial ownership impossible and were seen to be going against the grain of international regulatory standards. While other jurisdictions and some intermediaries commented negatively, the FATF, and many reputable intermediaries and professionals found this to be the standard that they wanted to see emerge.

The bearer share direction is now clearly proven correct. Intermediaries using St. Lucia have no difficulty in face of the FATF demands. In other jurisdictions, particularly the British Virgin Islands (“BVI”), the move is afoot to “immobilize” bearer shares. This requires placing the bearer shares with a custodian who has to be approved by the regulators in the BVI. This raises two important concerns; 1) what is the point of bearer shares if they have to be held by a custodian, who has to know the beneficial owner(s)? and 2) is the custodian not the owner? While the second question is the cause of much academic debate at present, the more important one is the first. It seems clear that the bearer share concept has died and that these attempts only increase the cost of using an IBC and amount to life support for a terminal case.

The cost implications are many. Firstly there is the cost of the custodian, the hesitance of some of the major banks to open accounts for bearer share companies, and in some cases banks insisting that they must be custodians for the bearer shares. In some jurisdictions there are proposals now being considered to significantly increase the annual fee for an IBC that has not prohibited bearer shares by amending its articles, and then the cost of amendment.

Quite apart from prohibiting bearer shares, registered agents in St. Lucia are required to have a register of shareholders and directors for each IBC. The standard requirement in other IBC jurisdictions was in some cases for the registered agent to maintain only a register of shareholders. The drafters of the St. Lucia legislation realized that this too was against the grain. As the directors are the ones charged with the management and control of the companies there had to be some record of who they were.

Again the other jurisdictions are scrambling to address this concern. The Bahamas some two years ago started making changes to its director requirement that led to a loss of business due to extra costs and the uncertainty caused by the changes. Now other jurisdictions including the BVI are moving to require a register of directors be kept at the registered office of the company. The issue again here is cost of compliance and the time to get all the records in order, issues which St. Lucia IBC users do not have to deal with.

The St. Lucia IBC model has other benefits that set it apart. There is pro rating of the $300 annual fee in the year of incorporation on a quarterly basis, so that a company formed in January pays $300, while one formed in November pays $75 incorporation fee. Related to this is the universal renewal date for annual fees of January 1st in each subsequent year, making administration of the companies easier with one renewal date linked to the calendar year.

As far as service and speed are concerned, St. Lucia has developed an online registry, Pinnacle St. Lucia which is state of the art. This online system mirrors exactly the processes that can be done via traditional means, just allowing them to be done almost instantaneously. Service providers world wide are able to access the registry to do name searches and process applications for incorporation, the entire incorporation process taking as little as half an hour to complete. Follow up amendments, requests for certificate of good standing etc are processed the same day, as the IBC registry and registrar are dedicated to IBCs and international trusts only.

Registered agents in St. Lucia are keen to take advantage of this opportunity and are providing attractive re-domiciliation packages for companies wishing to be continued into St. Lucia. The charges, especially for those wishing to re-domicile in the fourth quarter are very reasonable and become even more attractive based on the volume. The present exodus from other jurisdictions is raising concern about exit fees from the former registered agent wherever the company may have been domiciled. In this regard the St. Lucian registered agents are prepared to agree at the outset the charges to be levied upon a decision to continue out of the jurisdiction, such charges being fairly assed on the basis of time, or other agreed methodology.

Uncertainty and change have proven to be the greatest causes of concern for users of offshore jurisdictions. When the giants of old have to alter their modus operandi, the question that is raised is where does this stop? St. Lucia has proven that its model is the new standard and for its users there has been no uncertainty or change in these most trying times, allowing intermediaries to focus on growing their business and enjoying the fruits thereof.

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