The Tribune

By FAY SIMMONS

TRIBUNE Business Reporter

jsimmons@tribunemedia.net

THE GOVERNMENT is moving to close a gap in the Bahamas' corporate legislation that allows ownership of company shares to be transferred through physical certificates without the same formal registration required for ordinary registered shares.

Chester Cooper, deputy prime minister, speaking on the Companies Amendment Bill in Parliament, said the measure would bring domestic company law into alignment with the framework already established under the International Business Companies (IBCs) Act and international best practice.

Mr Cooper said the legislative change was necessary to ensure The Bahamas maintained its reputation as a well-regulated international financial services centre.

The Bill prohibits companies from issuing bearer shares, repeals the existing provision authorising bearer shares and bearer share warrants, and introduces a six-month transition period for companies that may still have such instruments in circulation.

A bearer share is a certificate whose ownership is associated with whoever physically holds it, rather than a named shareholder recorded in a company's register. Under this arrangement, ownership can effectively change hands through the transfer of the certificate without the same formal registration of the new owner.

Mr Cooper said the practice reflected an earlier era of commerce and presented challenges in a modern financial system where regulators and international partners require reliable information about company ownership.

“There are many concerns internationally, like money laundering, like terrorist financing, and other illicit activities that may be more easily facilitated with bearer certificates than a registration system,” he said.

Jobeth Coleby-Davis, minister of utilities, energy and aviation, said the amendment would complete a process already undertaken in the IBCs sector, ensuring that the Companies Act no longer retained provisions permitting bearer shares.

She pointed to Recommendation 24 of the Financial Action Task Force (FATF), which addresses transparency in the ownership and control of legal persons, and said The Bahamas is seeking to bring its domestic legislation into line with those standards.

The Bill amends section 38 of the Companies Act to provide that companies may allot registered shares but not shares issued to a bearer. It also repeals section 48, which currently authorises bearer shares and bearer share warrants.

A new section will require companies that have issued bearer shares under the existing law to recall them within six months of the provision coming into force, cancel them and replace them with registered shares in accordance with the Act and any applicable regulations.

Any bearer shares not recalled and cancelled within that period would become null and void and without effect.

The Bill also amends the first schedule of the Companies Act, which contains model articles of association governing the internal operation of companies to remove provisions and references relating to share warrants.

Mrs Coleby-Davis said the reform did not mean company ownership information would be made public, distinguishing between the right to commercial privacy and the anonymity associated with bearer shares.

“The Bill preserves the first and removes only the second,” she said.

Mr Cooper described the amendment as a prudent measure to modernise the country's corporate framework and maintain its standing in international financial services.

The legislation forms part of broader efforts to ensure The Bahamas' financial services framework remains aligned with international standards.