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:

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; The shareholders of a company shall be participants with all attendant rights and obligations of participants under the ICON Act; 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; The unit holders of a unit trust shall be participants with all attendant rights and obligations of participants pursuant...