David King & Co., Attorneys at Law
Belleville Corporate Centre
#38 Pine Road
Belleville, St Michael, BARBADOS
ph: 1(246) 427 3174
fax: 1(246) 436 9541
alt: 1(246) 426 9246
daveking
In its simplest form a captive can be defined as a wholly owned insurance subsidiary of an organisation not in the insurance business whose primary function is to insure some or all the risks of its parent. Since captives were first formed the industry has looked at new ways of developing the captive model to provide appropriate vehicles for a wide range of different owners and users. There are now many types of captives, including:
· | Single-parent captives, underwriting only the risks of related group companies |
· | Diversified captives underwriting unrelated risks in addition to group business |
· | Association captives, which underwrite the risks of members of an industry or trade association. Structured in a very similar way to Mutuals, these are often created by industry groups or associations to insure risks that are difficult or expensive to place in the commercial market |
· | Lower insurance costs. Commercial market insurance premiums must be adequate to meet the cost of claims but, in common with other commercial enterprises, insurers are in business to make money and will therefore include in the premium an element to provide for their overheads and profit. In establishing a captive, the parent seeks to retain the profit within the group rather than see it go to an outside party. A captive may also help reduce insurance costs by charging a premium that more accurately reflects the parent’s loss experience. |
· | Cash flow. Apart from pure underwriting profit, insurers rely heavily on investment income. Premiums are typically paid in advance, while claims are paid out over a longer period. Until claims become payable, the premium is available for investment. By utilising a captive, premiums and investment income are retained within the group, and where the captive is domiciled offshore, that investment income may be untaxed. Additionally, the captive may be able to offer a more flexible premium payment plan thereby offering a direct cash flow advantage to the parent. |
· | Risk retention. A company’s willingness to retain more of its own risk, particularly by increasing deductible levels, may be frustrated by the inadequate discount offered by insurers to take account of the increased deductible and by the fact that the company is unable to establish reserves to pay future claims. Establishment of a captive can help address both these problems. |
· | Unavailability of coverage. Where the commercial market is unable or unwilling to provide coverage for certain risks or where the price quoted is seen to be unreasonable, a captive may provide the cover required. |
· | Risk Management. A captive can act as a focus for the risk management and risk financing activities of its parent organisation. An effective risk management programme will result in recognisable profits for the captive. A captive can also be used by a multinational to set global deductible levels by enabling a local manager to insure with the captive at a level suitable to the size of his own business unit, while the captive only buys reinsurance in excess of the level appropriate to the group as a whole. |
A notarized document is a copy of the document which is certified to be a true copy of the original and signed (notarized) by the one who is a registered Notary Public. This notary public is usually an attorney a lawyer or a justice of the peace. An apostille to a document is the authentication, by a specially appointed government official, of a copy of a public document which has been notarized as a true copy by a notary public. The apostille is accepted under Hague convention of 1961 to all the countries which are signatories to it. Not all countries of the world are members of The Hague convention, but the majority of English speaking and European countries are members
Under the Companies Act, a company means "a body corporate that is incorporated or continued under the Companies Act". It is a separate legal entity from its shareholders or, in the case of a non-profit company, from its members. Upon its incorporation, a company has the capacity, as well as the rights, powers and privileges of an individual.
One of the important considerations behind a decision to incorporate a company as distinct from conducting business as a sole trader, or in partnership with others, is the fact that upon incorporation, the liability of the owners or shareholders of the company is limited to the amount invested in the company or any amount unpaid on their shares. Similarly, in the case of a non-profit company having no share capital, the members of the non-profit company incur no personal liability or individual responsibility for the debts or other liabilities of the company.
A company may be incorporated by one or more competent persons (known as "incorporators"). Competent individuals, as well as bodies corporate may apply to incorporate a company by signing and filing articles of incorporation with the Registrar of Companies. The Companies Act, Cap. 308, expressly prohibits the following individuals from forming or joining in the formation of a company under the Act, namely any individual who is:-
(a) under 18 years of age;
(b) a bankrupt; or
(c) is of unsound mind and has been so found by a tribunal in Barbados or elsewhere.
An incorporator (whether an individual or a corporation) may form a corporation which has shareholders, officers and directors that are completely different persons from the incorporator. "One-man" companies are permissible under Barbados law in as much as a single incorporator may form a company and also be the sole director, officer holder and shareholder of that company. Incorporators are responsible for organizational matters such as filing of the articles of incorporation and designating the first directors of the company who will assume responsibility for the company upon its incorporation.
Section 4(3) of the Companies Act provides that if Articles of Incorporation submitted to the Registrar are accompanied by a statutory declaration by an Attorney-at-law that to the best of his knowledge and belief no signatory to the Articles is an individual described in subsections 4(2) then that declaration is conclusive on the facts declared therein.
What are the main reasons for incorporating?
There are many reasons for incorporating a company. Some of these may be:-
Unless the Supervisor otherwise determines, a licensee carrying on general insurance business is unable to pay its debts if:
A licensee carrying on long-term insurance business is unable to pay its debts if the value of its assets does not exceed its liabilities.
The important fact in determining a director’s liability for action taken as a result of a decision made by the Board is whether that director showed express dissent to the resolution authorising the action taken and voted against it. Section 96 (1) of the Companies Act, states that “ a director who is present at a meeting of the directors or of a committee of directors consents to any resolution passed or action taken at that meeting, unless
A director who votes for, or consents to, a resolution may not dissent under section 96(1). A director who was not present at a meeting at which a resolution was passed or action taken is presumed to have consented thereto unless, within 7 days after he becomes aware of the resolution, he (a) causes his dissent to be placed with the minutes of the meeting, or (b) sends his dissent by registered post or delivers it to the registered office of the company.
How are Mutual Funds licensed and regulated in Barbados?
The regulation, authorisation and control of mutual funds and their managers and administrators carrying on business in, or from within barbados are prescribed by the Mutual Funds Act, 2002-22 and the Mutual Funds Regulations, 2002. A mutual fund may, upon application, be licensed to carry on business in or from Barbados where it has applied for and has been granted a licence under the Act, which is administered by the Barbados Securities Commission. The Act generally makes provision for three types of mutual fund licenses:
A mutual fund is required to inform the Securities Commission of any change of its registered office or its principal office, a change of its operator; or any material change to its structure, organisation or administration within 7 days of the occurrence of such a change and to submit to the Commission in respect of a financial year:
within 4 months after the end of the financial year or within such further period as the Securities Commission may allow.
How are severance payments calculated in Barbados?
In order to qualify for Severance Payments under the Severance Payments Act of Barbados, a person must have been employed for the requisite period of one hundred and four weeks ending with the relevant date, being the date on which the notice to terminate employment expires or whenever the notice is to take effect.
The amount of a severance payment to which an employee is entitled shall be calculated by reference to the period ending with the relevant date during which the employee was continuously employed. The amount of severance starting at the end of the period and reckoning backwards is as follows:
For each complete year of employment,
Barbados has a rigidly enforced Exchange Control regime with the Minister of Finance (currently the Prime Minister) being the Exchange Control Authority, delegating several of his powers under the Exchange Control Act to the Central Bank of Barbados, the country’s Reserve Bank. Residents of Barbados, corporate or individual are prohibited, without prior written permission, from incurring liabilities in foreign currency and liquidating such liabilities, or from holding and dealing in foreign currencies, except that certain “off-shore” companies are expressly exempted from control under their specific constituting legislation such as licenced off-shore banks, exempt insurance companies, international business companies and societies with restricted liability.
David King & Co., Attorneys at Law
Belleville Corporate Centre
#38 Pine Road
Belleville, St Michael, BARBADOS
ph: 1(246) 427 3174
fax: 1(246) 436 9541
alt: 1(246) 426 9246
daveking