More opposition to the Companies and Trusts Bills

Well, don't say that the Robing Room didn't warn you. Today the Association of Seychelles Accountants, whose Chairman is the much respected Chartered Accountant Mr Bernard Pool, circulated its comments on the proposed Companies Bill 2011 and gave it an overwhelming thumbs down. Amongst many other points, they too found it curious that the Companies Bill sought to remove the proprietary company. They also pointed out that the Bill did not serve the recommendations of the OECD. The Bar Association of Seychelles had already commented on the bill since February 21. Their comments may be viewed here.

The Bar Association of Seychelles also released its comments on the proposed Trusts Bill 2011 today. Rejecting it in even stronger terms than the Companies Bill, 2011. They noted that the concept of trusts is incompatible with the Seychelles legal regime. The Bar Association also noted that this Trusts Bill would allow the true identities of the shareholders of IBC's to be hidden even further, which goes against the recommendations of the OECD on more information on the owners of offshore entities.

Today was the deadline for the public to comment on the 3 bills that were on display on the SIBA website. As far as the Robing Room is aware, it appears that no organization had the time to come out with a position paper on the International Corporate Service Providers Bill, 2011. That said, this bill would have affected the members of SAOPRA (the association of corporate service providers) more than anyone else.

In fact it was SAOPRA that led the charge against the Bills by managing to arrange a meeting with the proponents of the Bill only a day or two after the advertisements for comments came out. And although members of the bar were invited to attend, the vast majority decided to boycott the meeting, which the bar believed would have been held only so that the proponents of the bills could tell the higher ups that they did "hold consultations" with the main stakeholders. A few years ago, workshops were held on the Securities Act 2007 and despite some lawyers (the real ones) pointing out some obvious flaws in the piece of legislation, nothing was ever done to correct the flaws and today the Seychelles stock market can be found at... oh wait... there isn't one.

The Robing Room is the official blog of the Seychelles Legal Environment Website (sites.google.com/site/theseychelleslegalenvironment), the only website about the Seychelles Legal Environment that is constantly updated.

The Companies Bill, the Trusts Bill and the OECD - What's it all about?

Well we have all been hearing about the Companies Bill, the Trusts Bill etc etc..., the SBC continues to show adverts on the telly reminding the public that if they want to comment on any of the Bills, they should do so by February 25.

We've heard that the Bar Association thinks that the Companies Bills 2011 is rubbish and the Robing Room has heard through the grapevine that the Association of Seychelles Accountants are going to basically say the same thing on the Companies Bill.

But why does the Government or certain factions of the Government believe that the current laws needs changing?

It is all apparently because the Organization for Economic Co-operation and Development ("OECD") has been applying some pressure on Seychelles. In particular, the OECD is concerned with the lack of information on the accounts and owners of Seychelles' offshore entities. Put another way, the OECD disapproves of how our current laws allow our offshore companies, primarily the International Business Company ("IBC"), to function without having to provide audited accounts or details on who owns these companies. Not a very transparent practice. Offshore entities have been accused as vehicles for "tax avoidance" (people in the industry like to call it "wealth management"), and the OECD doesn't seem too happy about the fact that there is no easily accessible information on the financial affairs of these offshore entities and its owners. Apparently, the OECD, who maintains a black list of countries with poor transparency laws, has threatened to put Seychelles in the black list unless something is done.

Hesto presto, SIBA, in charge of the offshore industry in Seychelles decided to act upon this. What should they do? Did they go to the Attorney General for advice? Doesn't look like it. Did they consult any of the key institutions connected with the offshore industry? Nope. Apparently, they hired one man to draft the Companies Bill and formulate its policies without wider consultation and the same man also drafted the Trusts Bill, but this time this Trusts Bill was also reviewed by "one of the world's largest offshore law firms and have some of the world’s leading offshore trust lawyers in the major small island state financial services jurisdictions, including Bermuda, Jersey, Cayman Islands, BVI and Mauritius".

This Companies Bill 2011 now wants to change domestic company laws, the Civil Code, the Business Tax Act, accounting practices for not only offshore entities, but also domestic ones and so on and so on. But wait a minute, isn't the OECD's concern only to do with offshore entities? So what is SIBA doing tinkering with other areas of the law that the OECD isn't even concerned about?

Then here comes the odd thing - the Trusts Bill 2011. This bill will actually further protect the true identities of the owners of these offshore entities by making declaration of trusts to the authorities optional. So we have SIBA engaging someone to draft a Companies Bill to please the OECD, then at the same time, SIBA engages that same person, with the assistance of "one of the world's largest offshore law firms and have some of the world’s leading offshore trust lawyers in the major small island state financial services jurisdictions, including Bermuda, Jersey, Cayman Islands, BVI and Mauritius" to prepare the Trusts Bill 2011 to defeat the very concerns that the OECD has.

So the people supporting the Companies Bill 2011 are saying that it must get passed to please the OECD and then, at the same time, that very same Companies Bill 2011 isn't actually addressing the OECD concerns and then in comes the Trusts Bill 2011, which goes even further against the OECD recommendations. Are the people who are backing these Bills begging the OECD to put Seychelles on the black list? Cause it definitely looks like it. The Government might as well tell the OECD to put us on the top of that black list right now.

This is what happens when you don't hold honest and proper consultations with the real experts such as your Attorney General, your legal practitioners (the real ones who actually did a proper pupillage), your accountants and most importantly... your public.

The Robing Room is the official blog of the Seychelles Legal Environment Website (sites.google.com/site/theseychelleslegalenvironment), the only website about the Seychelles Legal Environment that is constantly updated.

Bar Association of Seychelles Speaks Out Against Proposed Companies Bill 2011

In a letter addressed to the Policy and Strategy Division of the Ministry of Finance dated today, the Bar Association of Seychelles ("BAS") made known its position on the Proposed Companies Bill 2011. BAS called on the Government to reject the bill  "in its entirety".

BAS states that the policy changes with regards to domestic companies appears to be unsubstantiated and that the bill seeks to change not only the "existing company laws, but also established and entirely separate areas of the law...". BAS goes on to state that the bill seeks to encroach upon the acquired rights and predetermined obligations of individuals and not only companies. BAS goes on to state that if the bill is enacted as is, "its effect and consequences would have wide ranging and negative repercussions."

BAS went on to state that the exercise of company law reform should be done in wider consultation with lawyers and other stakeholders and should not be the ambit of "a select few individuals".

Already the word is out that those in high positions in Government are now considering opening a dialogue with BAS and the wider community. What is sad about all of this is that open dialogue should have been the very first step in any exercise to amend such an important area of the law such as a country's company laws.

The only way that the public can be certain that there is sincere attempt for company law reform is if the Government rejects this woeful Companies Bill 2011 and its accompanying white paper from SIBA and start from scratch, but this time, with the involvement of all of the stakeholders, and this includes the public at large.

The first step would be to decide on what needs changing or improvement with regards to our current laws. Only then should a policy paper be drawn. And once this is put to the public, only then should any amendments or new pieces of legislation be drawn up.

SIBA should also be investigated. Domestic company laws, laws on capacity, laws on pledges are areas of the law that are none of their concern (and areas of the law that the bill sought to change). How come SIBA are drawing up policy papers on these areas of the law? How come SIBA has come up with an almost 400 page Companies Bill? Did they use Government funds to produce these documents? Are they using parastatal employees to do work on these documents, which are outside of their functioning area (basically incorporating international business companies)? Should the Ombudsman investigate SIBA? Should the President look into the affairs and the composition of the board of SIBA? SIBA should be concentrating on doing something concerning the laws that they have already messed up such as laws on the mutual funds and the securities industry (hey where's that stock market that was supposed to be up and running 3 years ago?) instead of messing up other areas of the law that are none of their concern.

The Robing Room is the official blog of the Seychelles Legal Environment Website (sites.google.com/site/theseychelleslegalenvironment), the only website about the Seychelles Legal Environment that is constantly updated.

Proposed Trust Bill 2011 Finally Made Public

Since last Tuesday, February 15, SIBA had caused advertisements on television and on the Nation stating that the proposed Trusts Bill 2011 could be downloaded from their website and that the public should comment on this bill by the 25th February 2011. Once again, the adverts direct that comments should be directed to the Ministry of Finance's policy and strategy division at dgpol@finance.gov.sc

While everyone was busy scrutinizing the proposed companies bill 2011, SIBA sneaked in the proposed Trusts Bill 2011 sometime late on Friday, February 18. This Trusts Bill 2011 is incompatible with the laws of Seychelles. It ignores established laws on legal and beneficial ownership of Seychelles properties. It allows property in Seychelles to be held in trust and although it seeks to prevent immovable property (land) from being held on trust, their are obvious loopholes allowing for Seychelles immovable property to be held on trust.

Potentially, it can lead to schemes being devised so that non-Seychellois may become beneficial owners of Seychelles immovable property without having to go through the sanction application process (non-Seychellois must obtain Government permission to own land in Seychelles) and pay sanction application fees (1.5% the market value of the immovable property) and sanction fees (up to 30% the market value of the immovable property), it will this deprive the Government of much needed income. Already it is well known that there are land transactions that flout our immovable property foreign ownership laws.

This bill, if passed, would also create uncertainty when it comes to purchasing land in Seychelles and may increase the risk involved where a foreigner seeks to purchase property from one of the numerous integrated resort schemes, the risk would be particularly higher for second purchasers. It would also increase risk with regards to the purchase and/or pledge of shares, something that will concern multi-national transactions involving IBC's.

The introduction of the constructive trust concept to local property will also have wide ranging negative consequences and could lead to property disputes emanating amongst co-habitants.

Once again, SIBA wishes to push forward with legislation that will only cause more problems instead of solving any. This Trusts Bill and the Companies Bill have not been drafted by the Government's drafting division in the Attorney General's Chambers and the Attorney General's Chambers has had no input into it.

This Trusts Bill goes against the very fabric of our civil law. Once again its proponents appear to be unappreciative of Seychelles civil law. And just like with the proposed Companies Bill, there has been no consultations with the public on the policies behind this Trusts Bill.

The word from the grapevine is that those in very high places are getting fed up with the nonsense from the people of SIBA and its "friends". Those with the real power are realizing that SIBA's only success has been the incorporation of IBC's (essentially clerical work), introduced in the mid-90's in conjunction with SIBA's inception. Since then, SIBA, despite being well funded, has failed miserably to successfully break into any other industry. International Trusts and Foundations have not proven to be as successful as the IBC and SIBA has failed completely in launching the mutual funds and securities industry. Employment opportunities for our legal and business graduates are being stifled. Many are stating that the success with IBC's was even more of a 'lazare' than Lazare Picault's landing on Mahe.

We need individuals in SIBA who know our legal environment, who appreciate its subtleties, who can garner the respect of our legal profession and most importantly, who can actually do something more than just incorporating IBC's. With the real right people in SIBA, Seychelles could go far as a financial centre. We don't need to wait for oil to be prosperous.

The Robing Room is the official blog of the Seychelles Legal Environment Website (sites.google.com/site/theseychelleslegalenvironment), the only website about the Seychelles Legal Environment that is constantly updated.

Lawyers Condemn Proposed Companies Bill 2011

The past few days have seen a flurry of correspondence amongst those in the legal profession. The consensus is that the proposed Companies Bill 2011, accessible from the SIBA website, is ill thought of and should go no further.

Corporate law heavyweights such as Conrad Lablache and  Kieran Shah, SC have publicly denounced the bill in its present form. In light of the distaste for the bill amongst the legal professionals, Attorney General Ronny Govinden has suggested to the members of the bar that perhaps consultations should be held and recommendations brought to the Government's attention.

Lawyers argue that although there may be a need to revise certain aspects of Seychelles' companies legislation, the bill fails to address this. The bill also goes beyond its mandate and seeks to alter other areas of the law. The bill's proponents also appear to lack an appreciation and understanding of Seychelles' civil law and if enacted in its present form, it will create a myriad of problems.

The Robing Room is the official blog of the Seychelles Legal Environment Website (sites.google.com/site/theseychelleslegalenvironment), the only website about the Seychelles Legal Environment that is constantly updated.

Proposal for Companies Act 2011 put to the public

SIBA has called on the public to comment on a new companies act that seeks to reform and modernize Seychelles' companies legislation. The public has until the 25th February 2011 to provide its feedback. The proposed bill seeks to unify all of the various companies legislation into one comprehensive act.

The white paper and the proposed bill can be downloaded from the SIBA website through the following link http://www.siba.net/index.php?s=downloads.

Comments should be forwarded to the Ministry of Finance at dgpol@finance.gov.sc

A brief perusal of the bill reveals that it seeks to do away with the proprietary limited company, this despite the fact that the vast majority of Seychelles companies are proprietary limited companies. Proprietary limited companies, are companies formed by small groups of individuals, usually within a family circle or close network of friends, it gives the shareholders of these companies certain statutory protections, ensuring that the ownership and control of such companies stay within the family circle or close network of friends. The proposed bill, if passed, will remove all of these statutory protections. And although these may be catered for by amending such a companies' constitutional documents, it will require positive action from the shareholders of such companies to make such changes. Lots of problems will be caused to shareholders of proprietary companies if the proposed bill is passed as is.

Another significant change is that the proposed bill seeks to do away with the Registrar General's role as the Registrar of Companies and transfer that role to SIBA, or a successor organization to SIBA. The Registrar General maintains the register of ordinary companies in addition to the land register and other official registers (business names, register of deeds), located at Kignsgate House, it is a one-stop shop for inquiring into virtually all official local registers. SIBA is presently the Registrar of International Business Companies (IBC's), which is a company that is registered in Seychelles but is not allowed to engage in business in Seychelles (barring certain administrative functions), the IBC is used for wealth management purposes and as a part of complex holding structures. To transfer the ordinary companies registry functions to SIBA would cause several practical difficulties. If one wanted to ascertain if an ordinary company is in good standing and if it owns land or whether it owns certain business names, one will then have to deal with 2 separate registries to obtain such information. It's like having the hospital at Mont Fleuri and transferring the pharmacy to Roche Caiman. Bravo!

The Mutual and Hedge Fund Act 2008 was a failure. The Securities Act 2007 is also a failure. Both were being touted as brilliant pieces of legislation by SIBA. Both have failed to garner any significant business in Seychelles. Both led to our Members of National Assembly wasting their time and energy to raise their hands to pass it as legislation. But at least that was the limit of the damage it caused. The proposed bill, if passed, will have even more negative consequences. It also encroaches into areas that are the preserve of the Civil Code of Seychelles (laws on pledges, incapacity etc), which shows a lack of appreciation of Seychelles law from the bill's drafters and proponents.

The vast majority of the members of the Bar Association of Seychelles are against the proposed companies bill and virtually all of the older lawyers think that it is an abomination. The bill presents itself as a modern reform to our laws but actually creates more problems instead of solving any. The vast majority of SAOPRA (the association of corporate service providers, who deal in IBC registration and administration amongst other things) also think that the proposed bill is ill-conceived.

In an advert on the Nation of Tuesday, 15th February, SIBA also advertised that comments on a proposed Trust Bill 2011 and Corporate Service Providers Bill 2011 would also be welcomed from the public and that all of these bills are available from their website. But at the time of going to press (the Nation), none of these two bills were available for download. Yet, SIBA has placed a deadline of 25th February for the public to comment on these bills. Hey genuises, how can the public comment on the bills when you are not allowing the public access to them? (As of noon, 16/02/2011, the SIBA website is now stating that the two proposed bills "will be uploaded shortly").

The proposed companies bill should be thrown into the bin like the proposed LPA that SIBA was pushing for.

If the Government really wants to reform the company laws, this should be done with the consultation of the main stakeholders of the country. The business community should be engaged with the lawyers, accountants, corporate service providers and the tax authorities, at the very least. Areas needing change should be identified and then proposals for reform suggested. If a new act is needed, then so be it, if only certain amendments to the current laws are required, then let that be the solution. Only then should any draft bill/amendments be made, and even then, it should be drafted by proper qualified legal draftsmen.

These secret drafts in which the public is given only a week or two to comment on is a sham and is disgusting in a supposed democratic society.

The Robing Room is the official blog of the Seychelles Legal Environment Website (sites.google.com/site/theseychelleslegalenvironment), the only website about the Seychelles Legal Environment that is constantly updated.