ST LUCIA: THE NEW FRONTIER FOR INTERNATIONAL FINANCIAL SERVICES

HISTORY CONFIRMS THAT St. Lucia long ago established itself in the arena of international commerce. Indeed, so significant was its strategic importance as an offshore location that the island changed hands 14 times and was fiercely fought over by the British and French from 1664 to 1814...

ST LUCIA: THE NEW FRONTIER FOR INTERNATIONAL FINANCIAL SERVICES
By Ryan Devaux
(General Manager, Bank of Saint Lucia International Limited British sovereignty was finally established in 1814 and continued until independence in 1979)

The focus of yesteryear's striving for an offshore presence was largely based on controlling and utilising the large natural harbour with which St, Lucia has been blessed.

The international focus today is on utilising St. Lucia's international financial services sector and taking advantage of the attractive suite of legislation in place to facilitate this business. While its significance as an offshore location may have longsince been established, St. Lucia is relatively new to the world of international financial services,

This late entrance, in 2000, has enabled a legislative framework that international regulators have commended, especially for the care with which each Act was created and for the fact that collectively the regulatory framework provides a synergy not commonly found in international service jurisdictions and meets the highest international regulatory standards.

The legislation and regulations are designed to attract high quality business and permit the efficient flow of transactions relating to this business; however, at the same time, they have been created to make it extremely difficult and, as a result, uninviting for any illegitimate business to find a home here.

Testimony to the stability and strength of the legislation is the fact that no alterations have had to be made to facilitate the recommendations and requirements of the OECD or FATF and St. Lucia has never been blacklisted by these institutions. St. Lucia's focus from the outset, and continuing today, has been on attracting quality business rather than purely volume-driven business.

As a result, the jurisdiction has not positioned itself as the lowest cost jurisdiction in the international financial services arena, but rather boasts of a competent and highly professional service sector committed to meeting and exceeding the service needs of international investors using our jurisdiction.

The jurisdiction has grown steadily and there is now a stable cadre of service providers who have enjoyed a healthy return on their investment. The jurisdiction is currently exploring opportunities to make it more attractive for other international service providers to make St. Lucia a jurisdiction of choice in their global toolkit, All international financial service providers must be licensed to offer their services, and they are continuously supervised to ensure that best practices arc adopted and that they conduct their business in a manner that preserves St. Lucia's solid reputation.

St. Lucia's international financial services sector provides for the following entities:
• International business companies (IBC's)
• International trusts
• International banks
• International mutual funds, and
• International insurance companies Pinnacle St. Lucia, one of the most technologically advanced online public registries in the world, offers efficiency and security and serves as the official registry for IBCs and the registration of trusts. Pinnacle allows end users to carry out searches, make inquiries of the registry and file documents directly with the IBC registry.

In the first quarter of 2008, the online registry will make files documents available to end users in portable document format (PDF), allowing full searches to be conducted entirely online.

St, Lucia's legislation provides for strict confidentiality of the ownership and directors of IBCs, and this information must reside with a local registered agent and is not public information unless the company elects to file this information. Access to this information can only obtained by pursuing the matter through the courts of St. Lucia.

IBCs are the most common legal vehicle being used in the jurisdiction. Important features associated with the St. Lucia IBC include the fact that they do not allow for bearer shares, there is no minimum capital requirement (providing the IBC is not engaging in a licensed activity such as insurance or banking) and they can be re-domiciled and continued in St. Lucia from other jurisdictions.

Every IBC must have a local registered agent and at least one shareholder and one director, The annual renewal fee for an IBC is US$300 regardless of the capital base and the renewal date is January 1st annually.

With regard to the incorporation fee, it is prorated quarterly in the year of incorporation or re-domiciliation such that the cost in the third and fourth quarters is US$150 and US$75 respectively.

This offers a strategic advantage for intermediaries interested in setting up or transferring significant volumes of business. International trusts are afforded strong asset protection provisions under the relevant Act. Highlights include a limitation period of two years from the date of settlement of the trust or disposition of the relevant asset and the need to post a US$25,000 deposit for security against costs in order to initiate legal action.

The settlor and trust instrument are confidential documents held by a registered agent and the Act provides for some control to be exercised by the settlor over the trust. In addition to the International Trust, practitioners also have the benefit of utilising a domestic trust which recognises the laws of England as the governing laws.

Some have argued that trust practitioners have the best of both worlds in St. Lucia! International banking law allows For Class A and Class B banks, with the former able to conduct business with third parties and the latter restricted to business with parties listed at the time of application.

Capital requirements start at US$1 million for Class A banks and US$250,000 for Class B banks. All international banks must be incorporated as an IBC and any IBC being established for the purpose of obtaining a banking license must first apply to the Minister of Finance for approval in principle to incorporate the IBC.

This is the first regulatory/due diligence hurdle and it is not easy to cross. As an IBC, the bank is required to have a registered agent and a registered office. All licencees must have at least two directors (natural persons), at least one of whom must be resident in St. Lucia. Each bank is required to have an audit conducted annually.

There are provisions in the Act that provide for confidentiality through the application process and then on to the Operations of successful licencees. International mutual funds are another option available in St. Lucia and service providers have the benefit of utilising private or public mutual funds, Public funds are required to obtain a mutual fund licence and the fund itself can be constituted as either an IBC or a unit trust established under the International Trusts Act.

The fund is required to have registered office or a registered trustee licensed under the Registered Agent and Trustee Licensing Act. The fund is required to have an administrator in St. Lucia and it must file an offering document, unless an exemption has been granted by the Minister.

The private mutual fund is designed to facilitate the "sophisticated investor" and can have up to 100 persons invested in the Fund with the minimum required investment of US$50,000. Private mutual funds are only required to register with the Director of the Financial Sector Supervision Unit.

It is advisable that the Director be advised as early as possible and preferably in advance of the start of private mutual fund business. This feature of the private mutual fund requirements is another example of how the jurisdiction seeks to facilitate business within our robust regulatory and legal framework.

For persons wishing to use St. Lucia as an administration location For funds, and there are benefits for doing so, the law requires that the administrator obtain either a general licence or a restricted licence which would be applicable to a specified pool of funds. The administrator must be an IBC and, as is the case with other licenced activities, requires that there must be no less than two directors (natural persons), one of whom must be resident. Both administrators and public Funds are required to file audited financial statements with the regulator.

Completing the St. Lucia offering is international insurance and included in that law is the recently passed incorporated cell legislation. Incorporated cell companies offer additional legal benefits that some of the other protected cell regimes do not offer, while at the same time providing for the flexibility that makes these types of vehicles attractive for a variety of structured solutions including risk mitigation, asset protection and investment diversification.

Captive insurance, reinsurance, life, and general insurance are all uses of the International Insurance Act and capital requirements range from US$50.000 to US$ 100,000.

Insurance companies must be registered as an IBC, but must first make a preliminary application to the Minister for approval to incorporate. This requirement is in place to ensure that only persons with the relevant experience are granted licences to operate, Director and audit requirements are in line with those highlighted previously for licensed IBC entities.

There are no foreign exchange controls in place in St. Lucia and IBCs are exempt from tax or may elect to pay tax at 1 per cent. This election is significant for purposes of utilising the CARICOM Double Tax Agreement to which St, Lucia is a signatory. By paying tax in St. Lucia, dividends can be remitted tax free to any CARICOM member country,

This has led to a significant benefit for St. Lucia with a lot of the regional expansion being structured through St. Lucia and could provide for benefits when layered with a treaty jurisdiction such as Barbados. In addition to income tax, IBCs are exempt from withholding taxes, capital gains tax and stamp duties.

The Money Laundering Prevention Act ensures that St. Lucia has kept pace with the international requirements for preventing money laundering, terrorist financing and being a facilitator of all the other nefarious activities that are so often incorrectly perceived to be associated with well-run jurisdictions such as St. Lucia. Looking forward, the International Partnership Act has been passed by Parliament and is expected to be brought into law as soon as the regulations for the Act are completed which is expected to be in the near term.

The International Partnership has been incorporated into the Mutual Fund Act and will serve as another avenue for establishing mutual fund business in St. Lucia. There are other benefits to St. Lucia such as the strong telecommunications infrastructure, ease of international accessibility, with St. Lucia offering two airports, and a well-educated workforce drawn from the population of approximately 170,000.

Testimony to the strength of our educational system is the fact that St. Lucia has the distinction of having produced two Nobel Laureates, the most of any country in the world on a per capita basis. And if all of this has not excited you, as I write this our annual Food and Rum festival is on, next mouth brings the Kalalu World Music festival, and then our world class Jazz festival in May.

The real estate market too has boomed and there are numerous world- class developments taking place that all make St. Lucia an excellent jurisdiction for direct investment and from which to structure and manage global wealth. We look forward to welcoming you here!

For more information about the international financial services sector in St. Lucia, please contact the author at ryan.devaux@boslil.com, or visit www.pinnaclestlucia.com.

ST LUCIA – FACT FILE GENERAL OVERVIEW

• Location: Caribbean Region.
• Time zone: GMT -4.
• Population: 170,650.
• Capital: Castries.
• Airport (s) : George Charles Airport, Castries (Regional) Hewanorra International Airport, Vieuw Fort (Long Haul).
• Language: English.
• Currency: East Caribbean Dollar.
• Political system: Constitutional Democracy within British Commonwealth.
• International dialling code: +1 758
• Legal system: International
• Financial Services, Common Law, Domestic Highbrid (Common/Civil).

TAX

• Personal income tax: Resident 30%.
• Corporate income tax: IBCs exempt or 3%.
• Exchange restrictions: None.
• Tax treaties: Caricom.

SHARE CAPITAL

• Permitted currencies: Any.
• Minimum authorized capital: One Unit of Currency.
• Minimum share issue: One.

TYPE OF ENTITY

• Shelf companies: Yes.
• Timescale for new entities: 30 minutes – Online Registry.
• Incorporation fees :US$300.
• Annual fees: US$300, Pro-rated quarterly in year registration.

DIRECTORS

• Minimum number: One.
• Residency requirements: Not unless licensed as bank or insurance company.
• Corporate directors: Allowed.
• Meetings / frequency: Whenever required.

SHAREHOLDERS

• Disclosure Bearer shares: Not Allowed.
• Minimum number: One.
• Public share registry: None.
• Meetings / frequency: Whenever required.

ACCOUNTS

• Annual return: None.
• Audit requirements: Optional (unless licensed).

OTHER

• Registered office: Yes.
• Domicile issues: None.
• Company naming restrictions: Not Many.