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Historical Development of the Sector
By Agatha Jeffers-Gooden PhD, Director, Nevis Financial Services Development & Marketing Department.
The international financial services sector, which commenced in Nevis in 1984, one year after the Federation of St. Kitts and Nevis gained independence from Britain, is now one of the cornerstones of the economy of Nevis. For the first ten years, the NIA concentrated on the formation of international business companies (IBCs). However, in 1994, in recognition of the economic opportunities and growth that could be derived from the sector, the Nevis Island Administration (NIA) expanded its offerings by enacting a series of legislative instruments for the establishment of international exempt trusts, limited liability companies and offshore banks.
During the course of the ensuing years, the NIA expended a considerable amount of time and other resources aimed at developing its financial services infrastructure and establishing recognised expertise in the field. The resulting effect is that Nevis has become known as a viable, vibrant and reputable jurisdiction from which to incorporate international business companies, form limited liability companies, create international exempt trusts and establish offshore banking institutions.
The measures undertaken by the NIA have served to enhance the ability of the service providers on the island to offer effective planning structures to the international financial community. Accordingly, astute international investors now have a unique blend of cutting-edge legislation with approximately 50 highly qualified registered agents, trust and asset management companies and other service providers in Nevis with expertise in law, banking, taxation and finance to meet their needs. These service providers are amply qualified in their respective fields. Many are from other countries and are familiar with matters related to those jurisdictions.
However, the vibrant activity experienced in Nevis was sidelined in June 2000, when the FATF placed the Federation of St. Kitts and Nevis on its list of non-cooperative countries and territories in the fight against money laundering. This was immediately followed by the OECD's listing of the Federation on its list of Uncooperative Tax Havens.
These listings and the consequent effects presented serious challenges to the economy and people of Nevis. Nevertheless, Nevis weathered the storm and has proven to the world that it is resilient. As a demonstration of its commitment to facilitating
legitimate international financial activity, Nevis, along with its sister island, St. Kitts, established a special joint St. Kitts/Nevis Task Force composed of local experts who were charged with developing legislation and other policies that were necessary to strengthen financial services regulation and international cooperation, while at the same time ensuring that Nevis and St. Kitts remained practical jurisdictions from which to conduct international financial business activity. To this end, a great deal of human and financial resources were expended and resulted in numerous initiatives, including the enactment of comprehensive anti-money laundering and other legislative changes.
Removal from the OECD & FATF lists
The work of the Task Force continued for two years, and it came as no surprise to the international community when the Federation of St. Kitts and Nevis was removed from the OECD's list of Tax Havens on March 6, 2002, and from the FATF's list of non-cooperative countries and territories in the fight against money laundering on June 21, 2002. These de-listings suggest that Nevis has been given a clean bill of health and has the international community's stamp of approval for its financial services industry. These actions further bolster the view that Nevis is a viable and reputable financial services centre.
5.2 Importance of The Financial Services Sector
Unquestionably, the international financial services sector is extremely important to the economy of Nevis and to its citizens. It has conferred several direct and indirect benefits on the economy of the island and continues to provide a credible means of development for the island that has little appreciable natural resources for growth and diversification. Direct benefits accrue to the
government in the form of revenues derived from the registration of companies, annual renewal, licensing and other fees. In 2002, direct contribution accounted for 15 percent of the Government's current revenues. At the same time, operators in the sector as well as the spin-off effects bolster the local economy from expenditure on goods and services, the rental of office space and accommodation to other sectors of the economy, such as construction, communications, high technology and the wider financial arena. Furthermore, the sector has provided jobs and vital foreign exchange earnings that are so essential to the social, economic and fiscal well being of the island and the citizens of Nevis. In 2002, these indirect contributions combined with direct contribution from the financial services sector amounted to over 30%.
In addition, the development of the offshore financial services sector has proved to be a happy marriage with Nevis' high-end tourism product. It is now the norm for many investors to combine their business trip with a holiday in Nevis. The natural beauty of the island, in tandem with the temperate climate and the warmth of Nevisians, has served to encourage repeat visits by investors and tourists alike.
5.3 Nevis Enhanced Competitive Position
The initiatives undertaken by Nevis over the years have resulted in Nevis being recognised as a predominant jurisdiction with many competitive advantages. Of notable mention are the following:
" Jurisdiction that has been given a stamp of approval by being removed from the OECD & FATF lists;
" A stable Government based upon the Westminster model of Government and continuity of national policy;
" A stable and secure economy with a strong currency;
" A favourable time zone location.
" Easy accessibility to Europe and North America;
" Temperate climate;
" World-class accommodation facilities;
" A solid reputation with the commitment to having a proper regulatory regime;
" World-class, cutting-edge legislation;
" Approximately 50 highly qualified trust and asset management companies, registered agents and other service providers with expertise in law, accounting, banking, taxation & finance;
" A wide range of developed support services, such as state-of-the-art telecommunications facilities, professional and competent attorneys and accountants and a range of local, regional and international banking institutions;
" A newly renovated airport including a longer runway, a modern tower and a new terminal building;
" A population with a 98% literacy level;
" An adaptable and trainable workforce;
" Easy registration of companies and large availability of names;
" Reservation of company names with up to ten (10) days provided free of charge;
" No personal income taxes.
" Exemption of offshore companies from income, social security, capital gains, withholding, gift, estate and succession taxes;
" The granting of tax holidays, concessions and exemptions to qualified companies under the Fiscal Incentives Act;
" Reasonable incorporation and annual renewal fees;
" A jurisdiction whose watchwords are quality, innovation and integrity.
5.4 International Financial Services Legislation
The four major pillars of the Nevis International Financial Services Industry are the Nevis Business Corporation Ordinance, 1984 (NBCO); the Nevis International Exempt Trust Ordinance, 1994 (NIETO); the Nevis Limited Liability Company Ordinance, 1995 (LLCO); and the Nevis Offshore Banking Ordinance, 1996 (NOBO).
5.4.1 The Nevis Business Corporation Ordinance (1984) (NBCO)
Modelled on the United States Delaware Corporate Statutes and combined with English Common law, the NBCO facilitates the formation of Companies commonly termed as International Business Companies (IBCs)
Under the NBCO, a company may be incorporated to conduct any lawful business, and it is not necessary to enumerate the particular objective for which the company is incorporated. The registration process is quite simple and easily accomplished. Where a person is interested in registering an offshore company in Nevis, such person need only provide the name of the company and ensure that the company complies with the provisions of the Ordinance. It is important to note however, that no person is authorised to carry on or hold himself out as carrying on domestic banking, international banking or insurance business within or from Nevis unless that person is appropriately licensed under the Domestic Banking Act, The Nevis Offshore Banking Ordinance or the Insurance Act, as applicable (For more information on incorporation of a Nevis IBC, please refer to Chapter 8 entitled "Establishing a Business in Nevis".)
Administration
Under the NBCO, an offshore company registered in Nevis is required to maintain a registered agent at all times and a registered office in Nevis. The Ordinance allows the office of the Registered Agent to Act as the office of the company.
Names of Companies
A registered agent may electronically reserve a name with the Registry in seconds at any time of the day or night, with the company being registered in one day.
Accounts and Meetings
Under the NBCO, offshore companies registered in Nevis need not file annual returns. Corporate records may be kept anywhere in the world, and the annual general meetings or meetings of the Board of Directors are not required to be held in Nevis.
Transfer of Domicile
The NBCO facilitates the easy transfer of domicile to and from Nevis. One of the most striking features of the Ordinance is the allowance of emergency transfer of domicile to Nevis during periods of strife, war and civil unrest. Moreover, in certain circumstances, the Registrar of Offshore Companies has the discretion to permit the emergency transfer of domicile without the company first submitting the required paperwork.
Amendment to the NBCO
On November 28, 2001 an amendment to the NBCO was passed in the Nevis Island Assembly. The amendment requires the keeping of a register of the beneficial owners of a corporation. Thus section 3(1) states that "every registered agent shall keep and maintain a record of each bearer share certificate issued by any corporation for which it acts as registered agent and such record shall contain the following information: a. The name of the company issuing the bearer share certificate; b The identification number of the bearer share certificate; c The class of shares and the number of shares contained in the bearer share certificate;
d The identity of the beneficial owner of the shares contained in the bearer share certificate, i.e.; the name, address, date of birth, nationality and such other details of identification as may from time to time be prescribed by the Minister."
Furthermore, section 2 of the Amendment states that "where custody of the bearer certificate is transferred to another registered agent, the registered agent shall notify the Registrar with the provisions within seven days of such transfer."
5.4.2 The Nevis International Exempt Trust Ordinance (NIETO)
The NIETO provides not only for the creation of Charitable, Spendthrift and Protective Trusts, but also includes special provisions that make Nevis arguably one of the preferred jurisdictions for the establishment of Asset Protection Trusts (APTs).
Under the NIETO, in order to create a trust, there are three principal requirements:
" At least one of the Trustees must be a company established under the NBCO;
" The settlor and the beneficiaries must at all times be non-residents of Nevis, and;
" The trust property must not include any land situated in Nevis or St Kitts.
Where an Offshore company is incorporated in Nevis and has its registered office in Nevis, if such company is a trustee of an International Trust, its registered office in Nevis can also be the Trust's registered office.
The NIETO is widely admired by persons wishing to establish offshore trusts, whether for asset protection or estate planning purposes. Some favourable features of this Ordinance include:
The trust assets and income deriving from the corpus of an international trust are exempt from all exchange controls and estate, corporate, gift, income, inheritance, withholding, succession and stamp taxes in Nevis;
The international trust can be created with a single trustee, and the settlor or trustee of the trust may also be named as beneficiary.
Proper Law
Under the NIETO. the proper law of an international trust is the law expressed by the terms of the trust or that which is intended by the settlor to be the proper law. Where no such law is expressed or intended, the law with which the international trust has it closest connection at the time of its creation may be the proper law.
Furthermore, if the law expressed by the terms of the trust or intended by the settlor to be the proper law, or the law with which the international trust has its closest connection at the time of its creation, does not provide for international trust or the category of international trust involved, then the proper law of the international trust shall be the law of Nevis.
Duration of Nevis International Exempt Trust
The rule against perpetuities does not apply to an international trust created under the Nevis Ordinance. The maximum duration of a trust is one hundred years from its creation; however, an international trust established for a charitable or non-charitable purpose may have a duration exceeding one hundred years.
Asset Protection Provisions
The Nevis International Exempt Trust Ordinance captures important features in relation to fraudulent dispositions. Where a creditor seeks to set aside a transfer to an international trust, such creditor is required to establish beyond reasonable doubt that the transfer constitutes a fraudulent disposition. The Nevis Ordinance states expressly that a trust settled or established and a disposition to such Trust shall not be fraudulent as against a creditor or settlor:
" If settled, established or the disposition takes place after the expiration of two (2) years from the date that such creditor cause of action accrued; or
" Where settled, established or the disposition takes place before the expiration of two (2) years from the date that the creditor's cause of action accrued, and that creditor fails to commence such action, before the expiration of one year from the date such settlement, establishment or disposition took place.
In addition, before any creditor can bring any action or proceeding against any trust property, such creditor must first lodge a bond in the amount of EC$25,000 as a security deposit with the Ministry of Finance.
Another important feature of the NIETO is that it provides for the appointment of a Protector. The Protector's function is to monitor the acts of the trustees. The powers conferred on the Protector are determined by the Trust document. This is an important additional protective feature, as the Protector owes a fiduciary duty to the beneficiaries of the Trust or to the purpose for which the trust was created. Such a feature enhances the safety mechanisms within the framework and working of a trust.
Confidentiality
Confidentiality and privacy of an International Trust are ensured by legislation in Nevis. Whilst a trust register is maintained, only the name of the trust and the date of settlement are recorded. The Trust register is not a public document and can only be inspected if a trustee of a specific trust gives written authorization to a person allowing the inspection of the entry of that trust on the register. Any non-criminal judicial proceedings in relation to the Trust must be heard in private and no details whatsoever can be published without leave of the court.
Types of Nevis Trust
There are two types of international exempt trusts that can be established in Nevis. These are 1) the Nevis Trust, and 2) the Foreign Trust.
A trust formed to be a Nevis Trust is a trust that is registered with the Registrar and for which the law of Nevis is the proper law of all or any aspect of the trust under Section 4 of the Ordinance. This trust must be registered with the Registrar within 45 days of the date in which the trust is created, settled or established.
A Foreign Trust is a trust that provides for the law of a jurisdiction other than Nevis to be the governing law of all aspects of the trust. In order to be a Qualified Foreign Trust (QFT) and be provided with the opportunity on some future date to migrate to Nevis, and thereby obtain the full benefit of the Ordinance, the foreign trust must be registered with the Nevis Registrar within 45 days of the date the trust is created, settled or established in the foreign jurisdiction.
Changes to the Fraudulent Conveyance Provision
Changes have been made to the fraudulent conveyance provision by the Amendments to the Nevis International Exempt Trust Ordinance. Section 24 of the Ordinance shows that the claim of a creditor alleging fraudulent conveyance to the property transferred in an alleged fraudulent transfer is limited. The creditor or the settlor defines the cause of action for the purpose of commencing the limitation time period as the earliest cause of action capable of assertion. The creditor who wishes to allege fraudulent conveyance in the Nevis judicial proceedings is required to make all possible claims against all possible parties, including possibly the trust beneficiaries at the time when the claims are first made, or risk being unable to raise such claims in future proceedings involving any such parties with a material interest. Furthermore, the amendment expands the definition of creditor to include not only those persons alleging a cause of action, but also any judgement creditor or assignee of a creditor.
Prohibition to Further Criminal Activity
Another important feature of the amendments to the NIETO is the prohibition on using a Nevis Trust to further criminal activities. The amendment provides that where persons use a Nevis Trust involved in criminal activities, such trust shall be invalid and unenforceable if any part of the trust's assets is the proceeds of a crime for which the settlor is convicted.
Recognition and Enforcement of Foreign Judgements
Section 28 of the Nevis International Exempt Trust Ordinance provides that notwithstanding the provisions of any treaty or convention; the provisions of any statutes; any rule of law, or equity, to the contrary, no proceedings for or in relation to the enforcement or recognition of a judgement obtained in a jurisdiction other than St. Kitts and Nevis against an international trust, settlor, trustee, protector or beneficiary of an international Trust; or a person appointed or instructed in accordance with the express or implied provisions of an instrument or disposition to exercise a function or undertake any act, matter or thing in connection with an international trust; or property of either an international trust or of a trustee or a beneficiary thereof shall be entertained in any court in St. Kitts and Nevis. However, such only applies if that particular judgement is based upon the application of any law that is inconsistent with the provision of the Nevis International Exempt Trust Ordinance or if that judgement relates to a matter or particular aspect that is governed by the law of St. Kitts and Nevis.
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Financial Services 
