50454 Doing Business 2010 Bahamas, the © 2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, D.C. 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail feedback@worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. 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Additional copies of Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth and Doing Business in 2004: Understanding Regulations may be purchased at www.doingbusiness.org ISBN: 978-0-8213-7961-5 E-ISBN: 978-0-8213-7965-3 DOI: 10.1596/978-0-8213-7961-5 ISSN: 1729-2638 Library of Congress Cataloging-in-Publishing Data has been applied for. Printed in the United States. Current features News on the Doing Business project www.doingbusiness.org Rankings How economies rank-from 1 to 183 www.doingbusiness.org/economyrankings Contents Reformers Short summaries of DB2010 reforms, lists of reformers since DB2004 Introduction 1 and a ranking simulation tool and Aggregate Rankings www.doingbusiness.org/reformers Starting a Business 5 Historical data Customized data sets since DB2004 Dealing with www.doingbusiness.org/customquery Construction Permits 10 Methodology and research Employing Workers 15 The methodologies and research papers underlying Doing Business www.doingbusiness.org/MethodologySurveys Registering Property 19 Getting Credit 24 Download reports Access to Doing Business reports as well as subnational and regional reports, reform case studies and customized country and regional Protecting Investors 28 profiles www.doingbusiness.org/downloads Paying Taxes 32 Subnational and regional projects Trading Across Borders 36 Differences in business regulations at the subnational and regional level Enforcing Contracts 40 www.doingbusiness.org/subnational Closing a Business 44 Law Library Online collection of business laws and regulations relating to Doing Business 2010 48 business and gender issues Reforms www.doingbusiness.org/lawlibrary www.doingbusiness.org/genderlawlibrary Local partners More than 8,000 specialists in 183 economies who participate in Doing Business www.doingbusiness.org/LocalPartners Reformers' Club Celebrating the top 10 Doing Business reformers www.doingbusiness.org/Reformers/ReformersClub.aspx Business Planet Interactive map on the ease of doing business http://www.doingbusiness.org/map Doing Business 2010: Reforming Through Difficult Times is the seventh in a series of annual reports investigating regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time. A set of regulations affecting 10 stages of a business's life are measured: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2010: Reforming Through Difficult Times are current as of June 1, 2009*. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why. The Doing Business methodology has limitations. Other areas important to business such as an economy's proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by Doing Business. To make the data comparable across economies, the indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in designing reform. The data set covers 183 economies: 46 in Sub-Saharan Africa, 32 in Latin America and The Caribbean, 27 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 19 in the Middle East and North Africa and 8 in South Asia, as well as 27 OECD high-income economies as benchmarks. The following pages present the summary Doing Business indicators for the Bahamas. The data used for this country profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the "good practice" economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good-practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report. Doing Business 2010: Reforming Through Difficult Times presents the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on ordering the report, are available on the Doing Business website (www.doingbusiness.org). * Except for the Paying Taxes indicator that refers to the period January to December of 2008. Note: Doing Business 2008 and Doing Business 2009 data and rankings have been recalculated to reflect changes to the methodology and the addition of new countries (in the case of the rankings). 1 Economy Rankings - Ease of Doing Business Bahamas, the is ranked 68 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing Business. Bahamas, the - Compared to global good practice economy as well as selected economies: Bahamas, the's ranking in Doing Business 2010 Rank Doing Business 2010 Ease of Doing Business 68 Starting a Business 61 Dealing with Construction Permits 100 Employing Workers 42 Registering Property 149 Getting Credit 71 Protecting Investors 109 Paying Taxes 43 Trading Across Borders 37 Enforcing Contracts 120 2 Closing a Business 31 Summary of Indicators - Bahamas, the Starting a Business Procedures (number) 7 Time (days) 31 Cost (% of income per capita) 8.5 Min. capital (% of income per capita) 0.0 Dealing with Construction Permits Procedures (number) 18 Time (days) 197 Cost (% of income per capita) 208.6 Employing Workers Difficulty of hiring index (0-100) 0 Rigidity of hours index (0-100) 0 Difficulty of redundancy index (0-10) 40 Rigidity of employment index (0-100) 13 Redundancy costs (weeks of salary) 26 Registering Property Procedures (number) 7 Time (days) 48 Cost (% of property value) 12.5 Getting Credit Strength of legal rights index (0-10) 9 Depth of credit information index (0-6) 0 Public registry coverage (% of adults) 0.0 Private bureau coverage (% of adults) 0.0 Protecting Investors Extent of disclosure index (0-10) 2 Extent of director liability index (0-10) 5 Ease of shareholder suits index (0-10) 7 Strength of investor protection index (0-10) 4.7 Paying Taxes Payments (number per year) 17 Time (hours per year) 58 Profit tax (%) 0.0 Labor tax and contributions (%) 6.1 Other taxes (%) 40.9 Total tax rate (% profit) 47.0 4 Trading Across Borders Documents to export (number) 5 Time to export (days) 16 Cost to export (US$ per container) 930 Documents to import (number) 5 Time to import (days) 13 Cost to import (US$ per container) 1380 Enforcing Contracts Procedures (number) 49 Time (days) 427 Cost (% of claim) 28.9 Closing a Business Recovery rate (cents on the dollar) 54.7 Time (years) 5.0 Cost (% of estate) 4 When entrepreneurs draw up a business plan and try to get under way, the first hurdles they face are the procedures required to incorporate and register the new firm before they can legally operate. Economies differ greatly in how they regulate the entry of new businesses. In some the process is straightforward and affordable. In others the procedures are so burdensome that entrepreneurs may have to bribe officials to speed up the process or may decide to run their business informally. Analysis shows that burdensome entry regulations do not increase the quality of products, make work safer or reduce pollution. Instead, they constrain private investment; push more people into the informal economy; increase consumer prices and fuel corruption. Methodology The data on starting a business is based on a survey and research investigating the procedures that a standard small to medium -size company needs to complete to start operations legally. This includes obtaining all necessary permits and licenses and completing all required inscriptions, verifications and notifications with authorities to enable the company to formally operate. Procedures are recorded only where interaction is required with an external party. It is assumed that the founders complete all procedures themselves unless professional services (such as by a notary or lawyer) are required by law. Voluntary procedures are not counted, nor are industry­specific requirements and utility hook-ups. Lawful shortcuts are counted. It is assumed that all in formation is readily available to the entrepreneur, that there has been no prior contact with officials and that all government and nongovernment entities involved in the process function without corruption. Survey Case Study The business: is a limited l iability company conducting general commercial activities is located in the largest business city is 100% domestically owned has a start-up capital of 10 times income per capita has a turnover of at least 100 times income per capita has between 10 and 50 employees does not qualify for any special benefits does not own real estate 5 1. Historical data: Starting a Business in the Bahamas Starting a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 48 61 Procedures (number) 7 7 7 Time (days) 31 31 31 Cost (% of income per capita) 10.3 9.8 8.5 Min. capital (% of income per capita) 0.0 0.0 0.0 2. The following graphs illustrates the Starting a Business indicators in the Bahamas over the past 3 years: 6 3. Steps to Starting a Business in the Bahamas It requires 7 procedures, takes 31 days, and costs 8.49 % GNI per capita to start a business in the Bahamas. List of Procedures: 1. Search for a Company name and reserve the proposed name online 2. A lawyer prepares and notarizes the company documents (memorandum and articles of association). 3. A stamp duty has to be obtained from the Public Treasury for the Memorandum. 4. File t company documents at the Companies Registry 5. Obtain the National Insurance Number for the Company from the National Insurance Board 6. Register the company for a business license at the Valuation/Business License Department of the Ministry of Finance. 7. Company Seal More detail is included in the appendix. 7 4. Benchmarking Starting a Business Regulations: Bahamas, the is ranked 61 overall for Starting a Business. Ranking of the Bahamas in Starting a Business - Compared to good practice and selected economies: 8 The following table shows Starting a Business data for the Bahamas compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of Min. capital (number) income per (% of income Economies capita) per capita) Denmark* 0.0 New Zealand* 1 1 0.0 Selected Economy Bahamas, the 7 31 8.5 0.0 Comparator Economies Antigua and Barbuda 8 21 9.6 0.0 Dominica 5 14 22.6 0.0 Grenada 6 20 24.6 0.0 St. Kitts and Nevis 8 45 11.9 0.0 St. Lucia 5 14 21.8 0.0 * The following economies are also good practice economies for : Procedures (number): Canada Cost (% of income per capita): Slovenia 9 Once entrepreneurs have registered a business, what regulations do they face in operating it? To measure such regulation, Doing Business focuses on the construction sector. Construction companies are under constant pressure from government to comply with i nspections, with licensing and safety regulations, from customers to be quick and cost-effective. These conflicting pressures point to the tradeoff in building regulation; the tradeoff between protecting people (construction workers, tenants, passersby) and keeping the cost of building affordable. In many economies, especially poor ones, complying with building regulations is so costly in time and money that many builders opt out. Builders may pay bribes to pass inspections or simply build illegally, leadi ng to hazardous construction. Where the regulatory burden is large, entrepreneurs may tend to move their activity into the informal economy. There they operate with less concern for safety, leaving everyone worse off. In other economies compliance is simple, straightforward and inexpensive, yielding better results. Methodology The indicators on dealing with construction permits record all procedures officially required for an entrepreneur in the construction industry to build a warehouse. These include su bmitting project documents (building plans, site maps) to the authorities, obtaining all necessary licenses and permits, completing all required notifications and receiving all necessary inspections. They also include procedures for obtaining utility conne ctions, such as electricity, telephone, water and sewerage. The time and cost to complete each procedure under normal circumstances are calculated. All official fees associated with legally completing the procedures are included. Time is recorded in calendar days. The survey assumes that the entrepreneur is aware of all existing regulations and does not use an intermediary to complete the procedures unless required to do so by law. Survey Case Study The business: is a small to medium-size limited liabilit y company is located in the largest business city is domestically owned and operated, in the construction business has 20 qualified employees The warehouse to be built : is a new construction (there was no previous construction on the land) has complete architectural and technical plans prepared by a licensed architect will be connected to electricity, water, sewerage (sewage system, septic tank or their equivalent) and one land phone line. The connection to each utility network will be 32 feet, 10 inches ( 10 meters) long. will be used for general storage, such as of books or stationery. The warehouse will not be used for any goods requiring special conditions, such as food, chemicals or pharmaceuticals. will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements). 10 1. Historical data: Dealing with Construction Permits in the Bahamas Dealing with Construction Permits data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 93 100 Procedures (number) 18 18 18 Time (days) 197 197 197 Cost (% of income per capita) 252.0 241.6 208.6 2. The following graphs illustrates the Dealing with Construction Permits indicators in the Bahamas over the past 3 years: 11 3. Steps to Building a Warehouse in the Bahamas It requires 18 procedures, takes 197 days, and costs 208.60 % GNI per capita to build a warehouse in the Bahamas. List of Procedures: 1. Request and obtain "approval in principle" (planning 12. Request electrical service permission) with the Town Planning Committee 13. Receive electrical inspection 2. Request and obtain building permit at the Building Control Unit of the Ministry of Works 14. Obtain electrical service 3. Obtain plumbing certificate Request water and sewage 15. 4. Request electrical certificate Receive water and sewage inspection 16. 5. Receive inspection for electrical certificate Obtain water and sewage service 17. 6. Obtain electrical certificate Obtain telephone service 18. 7. Receive inspection - floor 8. Receive inspection - walls 9. Receive inspection - roof 10. Receive final inspection 11. Obtain occupancy permit 12 More detail is included in the appendix. 4. Benchmarking Dealing with Construction Permits Regulations: Bahamas, the is ranked 100 overall for Dealing with Construction Permits. Ranking of the Bahamas in Dealing with Construction Permits - Compared to good practice and selected economies: 13 The following table shows Dealing with Construction Permits data for the Bahamas compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) income per Economies capita) Denmark 6 Qatar 0.6 Singapore 25 Selected Economy Bahamas, the 18 197 208.6 Comparator Economies Antigua and Barbuda 13 156 21.3 Dominica 13 182 11.3 Grenada 10 149 25.3 St. Kitts and Nevis 14 67 4.8 St. Lucia 9 139 29.5 14 Economies worldwide have established a system of laws and institutions intended to protect workers and guarantee a minimum standard of living for its population. This system generally encompasses four bodies of law: employment, industrial relations, social security and occupational health and safety laws. Employment regulations are needed to allow efficient contracting between employers and workers and to protect workers from discriminatory or unfair treatment by employers. Doing Business measures flexibility in the regulation of hiring, working hours and dismissal in a manner consistent with the conventions of the International Labour Organization (ILO). An economy can have the most flexible labor regulations as measured by Doing Business while ratifying and complying with all conventions directly relevant to the factors measured by Doing Business and with the ILO core labor standards. No economy can achieve a better score by failing to comply with these conventions. Governments all over the world face the challenge of finding the right balance between worker protection and labor market flexibility. But in developing countries especially, regulators often err to one extreme, pushing employers and workers into the informal sector. Analysis across economies shows that while employment regulation generally increases the tenure and wages of incumbent workers, overly rigid regulations may have undesirable side effects. These include less job creation, smaller company size, less investment in research and develop ment, and longer spells of unemployment and thus the obsolescence of skills, all of which may reduce productivity growth. Methodology Two measures are presented: a rigidity of employment index and a redundancy cost measure. The rigidity of employment in dex is the average of three sub-indices: difficulty of hiring, rigidity of hours and difficulty of redundancy. Each index takes values between 0 and 100, with higher values indicating more rigid regulation. The difficulty of hiring index measures the flexi bility of contracts and the ratio of the minimum wage to the value added per worker. The rigidity of hours index covers restrictions on weekend and night work, requirements relating to working time and the workweek taking into account legal provisions that refer specifically to small to medium-size companies in the manufacturing industry in which continuous operation is economically necessary, as well as mandated days of annual leave with pay. The difficulty of redundancy index covers workers' legal protec tions against dismissal, including the grounds permitted for dismissal and procedures for dismissal (individual and collective): notification and approval requirements, retraining or reassignment obligations and priority rules for dismissals and reemployme nt. The Redundancy cost indicator measures the cost of advance notice requirements, severance payments and penalties due when terminating a redundant worker, expressed in weeks of salary. Survey Case Study The business: is a limited liability company o perating in the manufacturing sector is located in the largest business city is 100% domestically owned has 60 employees The company is also assumed to be subject to collective bargaining agreements in economies where such agreements cover more than half the manufacturing sector and apply even to firms not party to them. 15 1. Historical data: Employing Workers in the Bahamas Employing Workers data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 55 42 Redundancy costs (weeks of salary) 26 26 26 Rigidity of employment index (0-100) 17 17 13 2. The following graphs illustrates the Employing Workers indicators in the Bahamas over the past 3 years: 16 3. Benchmarking Employing Workers Regulations: Bahamas, the is ranked 42 overall for Employing Workers. Ranking of the Bahamas in Employing Workers - Compared to good practice and selected economies: 17 The following table shows Employing Workers data for the Bahamas compared to good practice and comparator economies: Good Practice Rigidity of Redundancy employment costs (weeks Economies index (0-100) of salary) Hong Kong, China* 0 New Zealand* 0 Selected Economy Bahamas, the 13 26 Comparator Economies Antigua and Barbuda 10 52 Dominica 15 58 Grenada 15 29 St. Kitts and Nevis 7 13 St. Lucia 0 56 * The following economies are also good practice economies for : Rigidity of employment index (0-100): Australia, Brunei Darussalam, Kuwait, Marshall Islands, Singapore, St. Lucia, Uganda, United States Redundancy costs (weeks of salary): Denmark, Iraq, Marshall Islands, Micronesia, Fed. Sts., Palau, Puerto Rico, Tonga, United States 18 Formal property titles help promote the transfer of land, encourage investment and give entrepreneurs access to formal credit markets. But a large share of property in developing economies is not formally registered. Informal titles cannot be used as secur ity in obtaining loans, which limits financing opportunities for businesses. Many governments have recognized this and started extensive property titling programs. But bringing assets into the formal sector is only part of the story. The more difficult and costly it is to formally transfer property, the greater the chances that formalized titles will quickly become informal again. Eliminating unnecessary obstacles to registering and transferring property is therefore important for economic development. Efficient property registration reduces transaction costs and helps to formalize property titles. Simple procedures to register property are also associated with greater perceived security of property rights and less corruption. That s, benefits all entrepreneur especially women, the young and the poor. The rich have few problems protecting their property rights. They can afford to invest in security systems and other measures to defend their property. But small entrepreneurs cannot. Reform can change this. Methodology Doing Business records the full sequence of procedures necessary for a business (buyer) to purchase a property from another business (seller) and to transfer the property title to the buyer's name. The property of land and building will be tran sferred in its entirety. The transaction is considered complete when the buyer can use the property as collateral for a bank loan. Local property lawyers and officials in property registries provide information on required procedures as well as the time and cost to complete each one. For most economies the data are based on responses from both. Based on the responses, three indicators are constructed: number of procedures to register property time to register property (in calendar days) official costs to register property (as a percentage of the property value) Survey Case Study The buyer and seller: are limited liability companies are private nationals (no foreign ownership) are located in periurban area of the largest business city conduct general commercial activities The property: consists of land and a 2 -story building (warehouse) is located in the periurban commercial zone of the largest business city The land area is 557.4 m 2 (6,000 square feet). The warehouse has a total area of 929 m2 (10,000 square feet). has a value equal to 50 times income per capita The seller company owned the property for the last 10 years. is registered in the land registry and/or cadastre and is free of all disputes . 19 1. Historical data: Registering Property in the Bahamas Registering Property data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 147 149 Procedures (number) 7 7 7 Time (days) 48 48 48 Cost (% of property value) 12.5 12.5 12.5 2. The following graphs illustrates the Registering Property indicators in the Bahamas over the past 3 years: 20 3. Steps to Registering Property in the Bahamas It requires 7 procedures, takes 48 days, and costs 12.50 % of property value to register the property in the Bahamas. List of Procedures: 1. Notarization of affidavits of witnesses to signatures of conveyance 2. Lawyer or his clerk checks for encumbrances at the Registry of records (regarding any mortgages on the property). 3. Lawyer checks for judgments against the property at the Supreme Court 4. Lawyer checks for other companies using the same property at the Company Registrar. 5. Real property tax status enquiry with the Valuation office of the Ministry of Finance. 6. Payment of Stamp Duty 7. Lodge the conveyance for recording at registry of records More detail is included in the appendix. 21 4. Benchmarking Registering Property Regulations: Bahamas, the is ranked 149 overall for Registering Property. Ranking of the Bahamas in Registering Property - Compared to good practice and selected economies: 22 The following table shows Registering Property data for the Bahamas compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) property Economies value) New Zealand* 2 Norway* 1 Saudi Arabia 0.0 Selected Economy Bahamas, the 7 48 12.5 Comparator Economies Antigua and Barbuda 6 26 10.8 Dominica 5 42 13.7 Grenada 8 77 7.4 St. Kitts and Nevis 6 81 13.3 St. Lucia 6 16 7.4 * The following economies are also good practice economies for : Procedures (number): United Arab Emirates Time (days): Saudi Arabia, Thailand, United Arab Emirates 23 Firms consistently rate access to credit as among the greatest barriers to their operation and growth. Doing Business constructs two sets of indicators of how well credit markets function: one on credit registries and the other on legal rights of borrowers and lenders. Credit registries, institutions that collect and distribute credit information on borrowers, can greatly expand access to credit. By sharing credit information, they help lenders assess risk and allocate credit more efficiently. They also free entrepreneurs from having to rely on personal connections alone when trying to obtain credit. Methodology Credit information: three indicators are constructed: depth of credit information index, which measures the extent to which the rules of a credit information system facilitate lending based on the scope of information distributed, the ease of access to information and the quality of information public registry coverage, which reports the number of individuals and firms covered by a public credit re gistry as a percentage of the adult population private bureau coverage, which reports the number of individuals and firms, covered by a private credit bureau as a percentage of the adult population Legal Rights: the strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders. Ten points are analyzed: Can a business use movable assets as collateral while keeping possession of the assets, and can any financial institution accept such assets as collateral? Does the law allow a business to grant a non -possessory security right in a single category of revolving movable assets, without requiring a specific description of the secured assets? Does the law allow a business to grant a non pos sessory security right in substantially all of its assets, without requiring a specific description of the secured assets? Can a security right extend to future or after -acquired assets and extend automatically to the products, proceeds or replacements of the original assets? Is general description of debts and obligations permitted in collateral agreements and in registration documents, so that all types of obligations and debts can be secured by stating a maximum rather than a specific amount between the parties? Is a collateral registry in operation that is unified geographically and by asset type as well as being indexed by the name of the grantor of a security right? Are secured creditors paid first when a debtor defaults outside an insolvency procedure or when a business is liquidated? Are secured creditors subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure? Are parties allowed to agree in a collateral agreement that the lender may enforce its security right out of court? Legal Rights Survey Case Study The Debtor: is a Private Limited Liability Company has its headquarters and only base of operations in the largest business city obtains a loan from a local bank (the Cred itor) for an amount up to 10 times income (GNI) per capita Both debtor and creditor are 100% domestically owned. 24 1. Historical data: Getting Credit in the Bahamas Getting Credit data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 68 71 Strength of legal rights index (0-10) 9 9 9 Depth of credit information index (0-6) 0 0 0 Private bureau coverage (% of adults) .. 0.0 0.0 Public registry coverage (% of adults) .. 0.0 0.0 2. The following graphs illustrates the Getting Credit indicators in the Bahamas over the past 3 years: 25 3. Benchmarking Getting Credit Regulations: Bahamas, the is ranked 71 overall for Getting Credit. Ranking of the Bahamas in Getting Credit - Compared to good practice and selected economies: 26 The following table shows Getting Credit data for the Bahamas compared to good practice and comparator economies: Good Practice Strength of Depth of Public Private legal rights credit registry bureau Economies index (0-10) information coverage (% coverage (% index (0-6) of adults) of adults) New Zealand* 100.0 Portugal 81.3 Singapore* 10 United Kingdom 6 Selected Economy Bahamas, the 9 0 0.0 0.0 Comparator Economies Antigua and Barbuda 7 0 0.0 0.0 Dominica 9 0 0.0 0.0 Grenada 8 0 0.0 0.0 St. Kitts and Nevis 8 0 0.0 0.0 St. Lucia 8 0 0.0 0.0 * The following economies are also good practice economies for : Strength of legal rights index (0-10): Hong Kong, China, Kenya, Kyrgyz Republic, Malaysia Private bureau coverage (% of adults): Argentina, Australia, Canada, Iceland, Ireland, Norway, Sweden, United Kingdom, United States 27 countries have the highest credit information index. 27 Companies grow by raising capital, either through a bank loan or by attracting equity investors. Selling shares allows companies to expand without the need to provide collateral and repay bank loans. However, investors worry about their money, and look for laws that protect them. A study finds that the presence of legal and regulatory protections for investors explains up to 73% of the decision to invest. In contrast, company characteristics explain only between 4% and 22%*. Good protections for minority sh areholders are associated with larger and more active stock markets. Thus both governments and businesses have an interest in reforms strengthening investor protections. Methodology To document some of the protections investors have, Doing Business mea sures how economies regulate a standard case of self- dealing, use of corporate assets for personal gain. Three indices of investor protection are constructed based on the answers to these and other questions. All indices range from 0 to 10, with higher values indicating more protections or greater disclosure. The three indices are: The extent of disclosure index covers approval procedures, requirements for immediate disclosure to the public and shareholders of proposed transactions, requirements for disclosure in periodic filings and reports and the availability of external review of transactions before they take place. The extent of director liability index covers the ability of investors to hold Mr. James and the board of directors liable for damages, the ability to rescind the transaction, the availability of fines and jail time associated with self -dealing, the availability of direct or derivative suits and the ability to require Mr. James to pay back his personal profits from the transaction. The ease of shareholder suits index covers the availability of documents that can be used during trial, the ability of the investor to examine the defendant and other witnesses, shareholders' access to internal documents of the company, the appointment of an inspect or to investigate the transaction and the standard of proof applicable to a civil suit against the directors. These three indices are averaged to create the strength of investor protection index. Survey case study Mr. James, a director and the majority shareholder of a public company, proposes that the company purchase used trucks from another company he owns. The price is higher than the going price for used trucks. The transaction goes forward. All required approvals are obtained, and all required disclosures made, though the transaction is prejudicial to the purchasing company. Shareholders sue the interested parties and the members of the board of directors. Several questions arise: Who approves the transaction? What information must be disclosed ? What company documents can investors access? What do minority shareholders have to prove to get the transaction stopped or to receive compensation from Mr. James? *Doidge, Kardyi and Stulz (2007) 28 1. Historical data: Protecting Investors in the Bahamas Protecting Investors data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 105 109 Strength of investor protection index (0-10) 4.7 4.7 4.7 2. The following graph illustrates the Protecting Investors index in the Bahamas compared to best practice and selected Economies: 9.7 6.3 6.3 6.3 6.3 6.3 4.7 a da ic ud nd nd a he in i na rb a a uc N tts ,t a om re al .L a as i is Ba igu an t. K Ze G D ev m St nt ha ew S A d Ba N Note: The higher the score, the greater the investor protection. 29 3. Benchmarking Protecting Investors Regulations: Bahamas, the is ranked 109 overall for Protecting Investors. Ranking of the Bahamas in Protecting Investors - Compared to good practice and selected economies: 30 The following table shows Protecting Investors data for the Bahamas compared to good practice and comparator economies: Good Practice Strength of investor Economies protection index (0-10) New Zealand 9.7 Selected Economy Bahamas, the 4.7 Comparator Economies Antigua and Barbuda 6.3 Dominica 6.3 Grenada 6.3 St. Kitts and Nevis 6.3 St. Lucia 6.3 31 Taxes are essential. Without them there would be no money to provide public amenities, infrastructure and services which are crucial for a properly functioning economy. But particularly for small and medium size companies, they may opt out and choose to op erate in the informal sector. One way to enhance tax compliance is to ease and simplify the process of paying taxes for such businesses. Methodology The Doing Business tax survey records the effective tax that a small and medium company must pay and the administrative costs of doing so. Three indicators are constructed: number of tax payments, which takes into account the method of payment, the frequency of payments and the number of agencies involved in our standardized case study. time, which measures the number of hours per year necessary to prepare and file tax returns and to pay the corporate income tax, value added tax, sales tax or goods and service tax and labor taxes and mandatory contributions. total tax rate, which measures the amount of taxes and mandatory contributions payable by the company during the second year of operation. This amount, expressed as a percentage of commercial profit, is the sum of all the different taxes payable after accounting for various deductions and exemptions. Survey case study TaxpayerCo is a medium-size business that started operations last year. Doing Business asks tax practitioners in 183 economies to review TaxpayerCo's financial statements and a standard list of transactions that the company completed during the year. Respondents are asked how much in taxes and mandatory contributions the business must pay and what the process is for doing so. The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. Taxes and mandatory contributions are measured at all levels of government and include corporate income tax, turnover tax, all labor taxes and contributions paid by the company (including mandatory contrib utions paid to private pension or insurance funds), property tax, property transfer tax, dividend tax, capital gains tax, financial transactions tax, vehicle tax, sales tax and other small taxes (such as fuel tax, stamp duty and local taxes). A range of standard deductions and exemptions are also recorded. 32 1. Historical data: Paying Taxes in the Bahamas Paying Taxes data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 41 43 Total tax rate (% profit) 47.0 47.0 47.0 Payments (number per year) 17 17 17 Time (hours per year) 58 58 58 2. The following graphs illustrates the Paying Taxes indicators in the Bahamas over the past 3 years: 33 3. Benchmarking Paying Taxes Regulations: Bahamas, the is ranked 43 overall for Paying Taxes. Ranking of the Bahamas in Paying Taxes - Compared to good practice and selected economies: 34 The following table shows Paying Taxes data for the Bahamas compared to good practice and comparator economies: Good Practice Payments Time (hours Total tax rate (number per per year) (% profit) Economies year) Maldives* 1 0 Timor-Leste 0.2 Selected Economy Bahamas, the 17 58 47.0 Comparator Economies Antigua and Barbuda 56 207 41.5 Dominica 38 120 37.0 Grenada 30 140 45.3 St. Kitts and Nevis 24 155 52.7 St. Lucia 32 92 34.4 * The following economies are also good practice economies for : Payments (number per year): Qatar 35 The benefits of trade are well documented; as are the obstacles to trade. Tariffs, quotas and distance from large markets greatly increase the cost of goods or prevent trading altogether. But with bigger ships and faster planes, the world is shrinking. Glo bal and regional trade agreements have reduced trade barriers. Yet Africa's share of global trade is smaller today than it was 25 years ago. So is the Middle East's, excluding oil exports. Many entrepreneurs face numerous hurdles to exporting or importing goods, including delays at the border. They often give up. Others never try. In fact, the potential gains from trade facilitation may be greater than those arising from only tariff reductions. Methodology Doing Business compiles procedural requirements for trading a standard shipment of goods by ocean transport. Every procedure and the associated documents, time and cost, for importing and exporting the goods is recorded, starting with the contractual agreement between the two parties and ending with delivery of the goods. For importing the goods, the procedures measured range from the vessel's arrival at the port of entry to the shipment's delivery at the importer's warehouse. For exporting the goods, the procedures measured range from the packing of thegoods at the factory to their departure from the port of exit. Payment is by letter of credit and the time and cost for issuing or securing a letter of credit is taken into account. Documents recorded include port filing documents, customs declaration and clearance documents, as well as official documents exchanged between the parties to the transaction. Time is recorded in calendar days, from the beginning to the end of each procedure. Cost includes the fees levied on a 20 -foot container in U.S. dollars . All the fees associated with completing the procedures to export or import the goods are included, such as costs for documents, administrative fees for customs clearance and technical control, terminal handling charges and inland transport. The cost measure does not include tariffs or duties. Economies that have efficient customs, good transport networks and fewer document requirements, making compliance with export and import procedures faster and cheaper, are more competitive globally. That can lead to more exports; and exports are associated with faster growth and more jobs. Conversely, a need to file many documents is associated with more corruption in customs. Faced with long delays and frequent demands for bribes, many traders may avoid customs altogether. Instead, they smuggle goods across the border. This defeats the very purpose in having border control of trade to levy taxes and ensure high quality of goods. Survey case study To make the data comparable across countries, several assumptions about the business and the traded goods are used: The business is of medium size . The business employs 60 people . The business is located in the peri-urban area of the economy'slargest business city . The business is a private, limited liability company, dom estically owned, formally registered and operating under commercial laws and regulations of the economy. The traded goods are ordinary, legally manufactured products transported in a dry-cargo, 20-foot FCL (full container load) container. 36 1. Historical data: Trading Across Borders in the Bahamas Trading Across Borders data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 37 37 Cost to export (US$ per container) 930 930 930 Cost to import (US$ per container) 1380 1380 1380 Documents to export (number) 4 5 5 Documents to import (number) 5 5 5 Time to export (days) 16 16 16 Time to import (days) 13 13 13 2. The following graphs illustrates the Trading Across Borders indicators in the Bahamas over the past 3 years: 37 3. Benchmarking Trading Across Borders Regulations: Bahamas, the is ranked 37 overall for Trading Across Borders. Ranking of the Bahamas in Trading Across Borders - Compared to good practice and selected economies: 38 The following table shows Trading Across Borders data for the Bahamas compared to good practice and comparator economies: Good Practice Documents to Time to Cost to Documents to Time to Cost to export export (days) export (US$ import import (days) import (US$ Economies (number) per (number) per container) container) Denmark* 5 France 2 2 Malaysia 450 Singapore 3 439 Selected Economy Bahamas, the 5 16 930 5 13 1380 Comparator Economies Antigua and Barbuda 5 15 1133 5 15 1633 Dominica 7 13 1297 8 15 1310 Grenada 6 14 1226 5 19 2479 St. Kitts and Nevis 6 12 850 6 13 2138 St. Lucia 5 14 1600 8 18 2645 * The following economies are also good practice economies for : Time to export (days): Estonia 39 Where contract enforcement is efficient, businesses are more likely to engage with new borrowers or customers. Doing Business tracks the efficiency of the judicial system in resolving a commercial dispute, following the step -by- step evolution of a commercial sale dispute before local courts. The data is collected through study of the codes of civil procedure and other court regulations as well as through surveys completed by local litigation lawyers (and, in a quarter of the countries, by judges as well). Justice delayed is often justice denied. And in many economies only the rich can afford to go to court. For the rest, justice is out of reach. In the absence of efficient courts, firms undertake fewer investments or business transactions. And they prefer to involve only a small group of people who know each other from previous dealings. Methodology Rankings on enforcing contracts are based on 3 sub-indicators: number of procedures, which are defined as any interaction between the parties or between them and the judge or court officer. This includes steps to file the case, steps for trial and judgment and steps necessary to enforce the judgment. time, which counts the number of calendar days from the moment the Seller files the lawsuit in court until payme nt is received. This includes both the days on which actions take place and the waiting periods in between. cost, which is recorded as a percentage of the claim (assumed to be equivalent to 200% of income per capita). Three types of costs are recorded: court costs (including expert fees), enforcement costs (including costs for a public sale of Buyer's assets) and attorney fees. Survey case Study The dispute concerns a contract for the sale of goods between two businesses (the Seller and the Buyer). Both are located in the economy's largest business city. The Seller sells and delivers goods, worth 200% of the economy's income per capita, to the Buyer. The Buyer refuses to pay on the grounds that they were not of adequate quality. The Seller sues the Buyer to recover the amount under the sales agreement (200% of the economy's income per capita). The claim is filed before a court in the economy's largest business city with jurisdiction over commercial cases worth 200% of the income per capita and is disputed on the merits. Judgment is 100% in favor of the Seller and is not appealed. The Seller enforces the judgment and the money is successfully collected through a public sale of Buyer's assets. 40 1. Historical data: Enforcing Contracts in the Bahamas Enforcing Contracts data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 121 120 Procedures (number) 49 49 49 Time (days) 427 427 427 Cost (% of claim) 28.9 28.9 28.9 2. The following graphs illustrates the Enforcing Contracts indicators in the Bahamas over the past 3 years: 41 3. Benchmarking Enforcing Contracts Regulations: Bahamas, the is ranked 120 overall for Enforcing Contracts. Ranking of the Bahamas in Enforcing Contracts - Compared to good practice and selected economies: 42 The following table shows Enforcing Contracts data for the Bahamas compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) claim) Economies Bhutan 0.1 Ireland 20 Singapore 150 Selected Economy Bahamas, the 49 427 28.9 Comparator Economies Antigua and Barbuda 45 351 22.7 Dominica 47 681 36.0 Grenada 47 688 32.6 St. Kitts and Nevis 47 578 20.5 St. Lucia 47 635 37.3 43 The economic crises of the 1990s in emerging markets, from East Asia to Latin America, from Russia to Mexico, raised concerns about the design of bankruptcy systems and the ability of such systems to help reorganize viable companies and close down unviable ones. In countries where bankruptcy is inefficient, unviable businesses linger for years, keeping assets and human capital from being reallocated to more productive uses. Bottlenecks in bankruptcy cut into the amount claimants can recover. In countries w here bankruptcy laws are inefficient, this is a strong deterrent to investment. Access to credit shrinks, and nonperforming loans and financial risk grow because creditors cannot recover overdue loans. Conversely, efficient bankruptcy laws can encourage entrepreneurs. The freedom to fail, and to do so through an efficient process, puts people and capital to their most effective use. The result is more productive businesses and more jobs. The Doing Business indicators identify weaknesses in the bankruptcy l aw as well as the main procedural and administrative bottlenecks in the bankruptcy process. In many developing countries bankruptcy is so inefficient that creditors hardly ever use it. In countries such as these, reform would best focus on improving contra ct enforcement outside bankruptcy. Methodology Three measures are constructed from the survey responses: the time to go through the insolvency process, the cost to go through the process and the recovery rate, how much of the insolvency estate is recovered by stakeholders, taking into account the time, cost, depreciation of assets and the outcome of the insolvency proceeding. Survey case study The data on closing a business are developed using a standard s et of case assumptions to track a company going through the step -by- step procedures of the bankruptcy process. It is assumed that: the company is a domestically owned the company is a limited liability corporation operating a hotel in the country's largest business city the company has 201 employees, 1 main secured creditor and 50 unsecured creditors Assumptions are also made about the future cash flows. The case is designed so that the company has a higher value as a going concern, that is, the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. The data are derived from questionnaires answered by attorneys at private law firms. 44 1. Historical data: Closing Business in the Bahamas Closing a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 31 31 Time (years) 5.0 5.0 5.0 Cost (% of estate) 4 4 4 Recovery rate (cents on the dollar) 54.7 54.7 54.7 2. The following graphs illustrates the Closing Business indicators in the Bahamas over the past 3 years: 45 3. Benchmarking Closing Business Regulations: Bahamas, the is ranked 31 overall for Closing a Business. Ranking of the Bahamas in Closing Business - Compared to good practice and selected economies: 46 The following table shows Closing Business data for the Bahamas compared to good practice and comparator economies: Good Practice Recovery rate Time (years) Cost (% of (cents on the estate) Economies dollar) Ireland 0.4 Japan 92.5 Singapore* 1 Selected Economy Bahamas, the 54.7 5.0 4 Comparator Economies Antigua and Barbuda 35.5 3.0 7 Dominica 0.0 no practice no practice Grenada 0.0 no practice no practice St. Kitts and Nevis 0.0 no practice no practice St. Lucia 42.9 2.0 9 * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 47 Number of reforms in Doing Business 2010 Dealing with Construction Trading Across Borders Positive Reform Registering Property Enforcing Contracts Employing Workers Protecting Investors Starting a Business Closing a Business Negative Reform Total Getting Credit Paying Taxes number Permits of Rank reforms Economy 1 Rwanda 7 2 Kyrgyz Republic 7 3 Macedonia, FYR 7 4 Belarus 6 5 United Arab Emirates 3 6 Moldova 3 7 Colombia 8 8 Tajikistan 5 9 Egypt, Arab Rep. 4 10 Liberia 3 Bahamas, the Antigua and Barbuda Dominica St. Kitts and Nevis 1 St. Lucia 1 Grenada 2 Note: Economies are ranked on the number and impact of reforms, Doing Business selects the economies that reformed in 3 or more of the Doing Business topics. Second, it ranks these economies on the increase in rank in Ease of Doing Business from the previous year. The larger the improvement, the higher the ranking as a reformer. 48 Antigua and Barbuda In Antigua and Barbuda no major reform was recorded. Bahamas, the In The Bahamas no major reform was recorded. Belarus Belarus eased the process for getting construction permits by simplifying approval processes. Restrictions relating to redundancy dismissals were eased by raising the threshold for prior notification requirements. Tax payments were made more convenient through increased use of electronic systems--reducing tax compliance times--while lower ecological and turnover tax rates and a reduction in the number of payments for property tax reduced the tax burden on businesses. Property registration continues to improve, with faster processing and elimination of the requirement for notarization. Business start-up was eased by simplifying registration formalities, abolishing the minimum capital requirement, limiting the role of notaries, and removing the need for a company seal approval. Implementation of a risk-based management system and improvement of border crossing operations reduced transit times for trade. Colombia Colombia passed several decrees continuing its efforts to regulate the profession of insolvency administrators. The government eased the construction permit process with a new construction decree that categorizes building projects based on risk and allows electronic verification for certain documents. Access to credit improved thanks to a new credit information law that guarantees the right of borrowers to inspect their own data and new rules that make it mandatory for credit providers to consult and share information with credit bureaus. The tax burden on businesses was eased with the introduction of electronic tax filing and payment, and some payments were reduced. An amendment to the Company Law strengthened investor protections by making it easier to sue directors in cases of prejudicial transactions between interested parties. Property registration was made easier by making it possible to obtain required certificates online and by making standard preliminary sale agreements available free of charge. Business start-up was made easier by creating a public-private health provider that enables faster affiliation of employees and through a tool that allows online pre-enrollment with the social security office. Implementation of an electronic declaration system has expedited customs clearance. Dominica In Dominica no major reform was recorded. Egypt, Arab Rep. The Arab Republic of Egypt, a former global leading reformer and a regional leading reformer in 2008/09, continued to make it easier to deal with construction permits by issuing executive articles for the 2008 construction law and eliminating most preapprovals for construction permits. Contract enforcement was expedited with the creation of commercial courts. Access to credit information has expanded with the addition of retailers to the database of the private credit bureau. Finally, company start-up was eased by the removal of the minimum capital requirement. Grenada In Grenada additional staffing at the Grenada High Court has been reducing the court's backlog and easing contract enforcement. With ongoing training of customs agents and brokers and implementation of electronic reference sources, Grenada has reduced the time for trading across borders. Kyrgyz Republic The Kyrgyz Republic eased the process for getting construction permits by streamlining the fee structure, introducing a risk-based system of approval and building control, allowing low-risk projects to conduct an internal building control process, and simplifying the process for obtaining utility connections. Requirements relating to redundancy dismissals and worker reassignment were eased. Access to credit was enhanced by making secured lending more flexible and allowing general descriptions of encumbered assets and of debts and obligations. In addition, amendments to the Civil Code provide for automatic extension of security rights to proceeds of the original assets. The tax burden on businesses was eased by reducing the rates for several taxes and the number of payments for several. Surveying and notarization requirements were made optional for property registration, and business start-up was eased by eliminating the minimum capital requirement, reducing the registration time, and abolishing various post-registration fees and the need to open a bank account before registration. The elimination of six previously required documents and the simplification of inspection procedures has sped up trading across borders. 49 Liberia Liberia eased the process for getting construction permits by lowering the permit fee and cost of obtaining a power generator, abolishing the requirement to obtain a tax waiver certificate before submitting documents to obtain a building permit, and making fixed telephone connections more readily available for public use with the reopening of the national phone company. Business start-up was eased by removing the need to obtain an environmental impact assessment when forming a general trading company. The trade process was expedited by creating a one-stop shop bringing together various ministries and agencies, and streamlining the inspection regime. Macedonia, FYR The Former Yugoslav Republic of Macedonia has been reforming the construction permit process, shortening waiting times but raising fees. Worker hiring was made more flexible by allowing greater use of fixed-term contracts, easing restrictions on working hours, and making redundancy dismissals more flexible. The public credit bureau increased its coverage by introducing a better database that includes more information and by lowering the minimum loan threshold. Social security payments were classified in five groups, and social security contribution rates reduced. Investor protections were increased by regulating the approval of transactions between interested parties, increasing disclosure requirements in annual reports, and making it easier to sue directors in cases of prejudicial transactions between interested parties. Property registration was eased with the introduction of new time limits at the real estate cadastre--reducing the average time to register a title deed by eight days--and a non-encumbrance certificate can now be obtained from the real estate registry instead of through the court. Business start-up was simplified by integrating procedures at a one-stop shop. Moldova Moldova lowered the rates for social security contributions paid by employers. Property registration was simplified by eliminating the requirement for a cadastral sketch, reducing procedures from six to five and days from 48 to 5. Business start-up was eased by implementing an expedited company registration service. Rwanda Rwanda improved the process for dealing with distressed companies with a new law aimed at streamlining reorganization. Employing workers was made easier by abolishing the maximum duration for fixed-term contracts and allowing unlimited renewals of such contracts, as well as by allowing redundancy procedures to be more flexible, with consultation and notification of third parties no longer required. Getting credit was made easier with a new secured transactions act and insolvency act to make secured lending more flexible, allowing a wider range of assets to be used as collateral and a general description of debts and obligations. In addition, out of court enforcement of collateral has become available to secured creditors, who also now have top priority within bankruptcy. A new company law has strengthened investor protections by requiring greater corporate disclosure, director liability, and shareholder access to information. Property registration was simplified by decreasing the number of days required to transfer a property. Business start-up was eased by eliminating a notarization requirement; introducing standardized memorandums of association; enabling online publication; consolidating name checking, registration fee payment, tax registration, and company registration procedures; and shortening the time required to process completed applications. By implementing administrative changes--such as increased operating hours and enhanced cooperation at the border, along with the removal of some documentation requirements for importers and exporters--Rwanda has improved trading times. St. Kitts and Nevis St. Kitts and Nevis shortened trading times by allowing electronic submission of customs declarations. St. Lucia St. Lucia eased business start-up by making it possible to check availability and reserve company names online. Tajikistan Tajikistan amended its insolvency law, aiming to reduce statutory time limits and the costs of proceedings. Changes were introduced that simplified the construction permit process, reducing procedures and time. A new law on credit histories improves access to credit information by creating a private credit bureau. Investor protections were strengthened with amendments to the joint stock company law, increasing disclosure requirements for transactions involving conflicts of interest, allowing for greater director liability, and giving shareholders the chance to request that harmful related-party transactions be rescinded. The state duty for property transfer has quadrupled, raising the cost of registering property by 2.8 percent of a property's value. Business start-up was eased by reducing the minimum capital requirement and shortening the time to obtain a tax identification number. 50 United Arab Emirates The United Arab Emirates shortened the time for delivering building permits by improving its online system for processing applications. Business start-up was eased by simplifying the documents needed for registration, abolishing the minimum capital requirement, and removing the requirement that proof of deposit of capital be shown for registration. Greater capacity at the container terminal, elimination of the terminal handling receipt as a required document, and an increase in trade finance products, have improved trade processes. 51 APPENDICES Starting a Business in the Bahamas This table summarizes the procedures and costs associated with setting up a business in the Bahamas. STANDARDIZED COMPANY Legal Form: Limited Liability Company (LLC) Minimum Capital Requirement: City: Nassau Registration Requirements: No: Procedure Time to complete Cost to complete 1 Search for a Company name and reserve the proposed name online 1 0 2 A lawyer prepares and notarizes the company documents 1 650 (memorandum and articles of association). 3 A stamp duty has to be obtained from the Public Treasury for the 1 795 Memorandum. 4 File t company documents at the Companies Registry 10 370 5 Obtain the National Insurance Number for the Company from the 1 0 National Insurance Board 6 Register the company for a business license at the Valuation/Business 17 100 License Department of the Ministry of Finance. 7 * Company Seal 2 30 * Takes place simultaneously with another procedure. 52 Procedure 1 Search for a Company name and reserve the proposed name online Time to complete: 1 Cost to complete: 0 Comment: The online name search system has been in place since 2004 and its estimate that less than 50% of all applicants use it while the rest still request the search in person. Since the majority of people cannot search it, it is mainly done by lawyers and service providers who include the name fees in their fees. The name reservation expires after 90 days. Procedure 2 A lawyer prepares and notarizes the company documents (memorandum and articles of association). Time to complete: 1 Cost to complete: 650 Comment: Legally, only the memorandum has to be filed at the moment of the incorporation. Standard Articles of Association are available and the memorandum has to be a statutory declaration. Therefore, the most common scenario is to prepares both. Since 2001, the Bahamas has issued many provisions on anti-money laundering and since then the information requested from the client has increased. Usually, a client has to provide the law firm with a financial and a character reference as well as a copy of his or her passport. Affidavit must be executed by witness to subscribers to Memorandum and Articles of Association and a Statutory Declaration must be executed by Notary Public that has notarized the affidavit before another Notary Public. Lawyer should be a notary (at the same time) Procedure 3 A stamp duty has to be obtained from the Public Treasury for the Memorandum. Time to complete: 1 Cost to complete: 795 Comment: the fees includes $60 stamp duty is payable on the first $5,000 authorized capital of the company and $3 for every additional $1,000 authorized capital. Procedure 4 File t company documents at the Companies Registry Time to complete: 10 Cost to complete: 370 Comment: The registration is usually done by the lawyer. The company is incorporated on the date that the incorporation documents are submitted to the Companies Registry. A registration fee of $330 is paid at the Registrar General's office($300 for the Memorandum and $30 for the Articles of Association). Once the final incorporation certificate is ready, an additional fee of $4 per page is charged to obtain a certified copy of the Memorandum & Articles of Association. Procedure 5 Obtain the National Insurance Number for the Company from the National Insurance Board Time to complete: 1 Cost to complete: 0 Comment: The National Insurance Number is a requirement to obtain business license. According to the National Insurance Act, every employer has to have a national insurance employer's 53 number. This could be obtained at no cost and it can be done in a day (by mail or in person). Employer also registers the employees if they have not been registered already. The documents required for registration are birth certificate, photograph, and certificate of incorporation. Procedure 6 Register the company for a business license at the Valuation/Business License Department of the Ministry of Finance. Time to complete: 17 Cost to complete: 100 Comment: By law, companies has to have a business license but only non-Bahamians have to have it before starting a business. To obtain the license, the following documents have to be provided: proof of citizenship, copy of the certificate of incorporation, Registration of the business/trade name, a simple copy of the lease agreement of the office space or proof of ownership if owned, and a national insurance number. Flat fee of $100 for the first time registration is charged. Moreover, annual fees are levied as a percentage on the turnover of the company from the second year onwards. Procedure 7 Company Seal Time to complete: 2 Cost to complete: 30 Comment: A proof of seal has to be provided at the time of filing the first annual income statement. The seal is required from every company according to Art. 26 of the Companies Act. Seals are locally manufactured and can usually be obtained within 2-3 days for $30-35. 54 Dealing with Construction Permits in the Bahamas The table below summarizes the procedures, time, and costs to build a warehouse in the Bahamas. BUILDING A WAREHOUSE Date as of: January 2009 Estimated Warehouse Value: City: Nassau Registration Requirements: No: Procedure Time to complete Cost to complete 1 Request and obtain "approval in principle" (planning permission) with the 30 days no charge Town Planning Committee 2 Request and obtain building permit at the Building Control Unit of the 120 days BSD 3,850 Ministry of Works 3 Obtain plumbing certificate 1 day no charge 4 * Request electrical certificate 1 day no charge 5 * Receive inspection for electrical certificate 1 day no charge 6 * Obtain electrical certificate 1 day no charge 7 Receive inspection - floor 1 day no charge 8 Receive inspection - walls 1 day no charge 9 Receive inspection - roof 1 day no charge 10 Receive final inspection 1 day no charge 11 Obtain occupancy permit 2 days no charge 12 Request electrical service 1 day no charge 13 Receive electrical inspection 1 day no charge 14 Obtain electrical service 16 days BSD 41,000 15 Request water and sewage 1 day no charge 55 16 * Receive water and sewage inspection 1 day no charge 17 * Obtain water and sewage service 16 days BSD 2,784 18 * Obtain telephone service 16 days BSD 150 * Takes place simultaneously with another procedure. 56 Procedure 1 Request and obtain "approval in principle" (planning permission) with the Town Planning Committee Time to complete: 30 days Cost to complete: no charge This approval is not a pre-requisite for the building permit but most constructors would Comment: still want to obtain it in advance to make sure that their project is viable/acceptable in terms of town planning. Only the following documents have to be attached: plot and location plan, not proof of ownership needed at this point. The Committee that examines the proposal meets only every other week. The Committee members represent the different interest groups that are interested in building process. The Committee agenda is prepared by the Department of Physical Planning; The Committee also hears complaints and addresses grievances. Procedure 2 Request and obtain building permit at the Building Control Unit of the Ministry of Works Time to complete: 120 days Cost to complete: BSD 3,850 The cost of the permit is a function of the surface of the construction (over 10,000 sq ft = Comment: USD 25 per 100 sq ft + 10% of the total, thus 25 * 140 + (25 *140 * 10%) = 3,500 + 350 = LCU 3,850). The permit also has to go again to the Town Planning Department to approve the zoning. The Development Control Unit estimates 90 to 120 days. Buildings Regulation Art. 4. (1) "Subject to the provisions of this Act, no person shall commence or carry on, or cause or procure to be commenced or carried on, any building operation save under and in accordance with the conditions of a valid building permit and in accordance with the provisions of this Act and any rules and the Building Code.". The status of the application can be checked online (http://65.198.211.69/mopwuserlogin/PreguntaPage.htm) Procedure 3 Obtain plumbing certificate Time to complete: 1 day Cost to complete: no charge Licensed plumber hired by BuildCo approves the plumbing works. After this is completed Comment: BuildCo must take the official form to the Ministry of Works Procedure 4 Request electrical certificate Time to complete: 1 day Cost to complete: no charge Comment: Procedure 5 Receive inspection for electrical certificate Time to complete: 1 day Cost to complete: no charge 57 Comment: Procedure 6 Obtain electrical certificate Time to complete: 1 day Cost to complete: no charge Comment: Procedure 7 Receive inspection - floor Time to complete: 1 day Cost to complete: no charge Comment: Procedure 8 Receive inspection - walls Time to complete: 1 day Cost to complete: no charge Comment: Procedure 9 Receive inspection - roof Time to complete: 1 day Cost to complete: no charge Comment: Procedure 10 Receive final inspection Time to complete: 1 day Cost to complete: no charge Comment: Procedure 11 Obtain occupancy permit Time to complete: 2 days Cost to complete: no charge 58 Comment: Procedure 12 Request electrical service Time to complete: 1 day Cost to complete: no charge Comment: Procedure 13 Receive electrical inspection Time to complete: 1 day Cost to complete: no charge Comment: Procedure 14 Obtain electrical service Time to complete: 16 days Cost to complete: BSD 41,000 Cost estimate is LCU 30,000 for overhead connection, plus LCU 5,000 for the Comment: transformer and a LCU 6,000 security deposit (only returned with 3% interest when contract with Bahamas Electric Corporation is terminated). Procedure 15 Request water and sewage Time to complete: 1 day Cost to complete: no charge Comment: Procedure 16 Receive water and sewage inspection Time to complete: 1 day Cost to complete: no charge Comment: Procedure 17 Obtain water and sewage service Time to complete: 16 days Cost to complete: BSD 2,784 59 Bahamas Water and Sewerage Corporation will conduct the works to connect the meter to Comment: the main. BuildCo must hire a licensed plumber to connect from the meter to the building. Cost includes labor, connection fee and meter. Procedure 18 Obtain telephone service Time to complete: 16 days Cost to complete: BSD 150 Comment: 60 Employing Workers in the Bahamas Employing workers indices are based on responses to survey questions. The table below shows these responses in the Bahamas. Employing Workers Indicators (2009) Answer Score 0.0 Difficulty of hiring index (0-100) Are fixed-term contracts prohibited for permanent tasks? No 0 What is the maximum duration of fixed-term contracts (including renewals)? (in months) No limit 0.0 What is the ratio of mandated minimum wage to the average value added per worker? 0.24 0.00 40.0 Difficulty of redundancy index (0-10) Is the termination of workers due to redundancy legally authorized? Yes 0 Must the employer notify a third party before terminating one redundant worker? Yes 1 Does the employer need the approval of a third party to terminate one redundant worker? No 0 Must the employer notify a third party before terminating a group of 9 redundant workers? Yes 1 Does the employer need the approval of a third party to terminate a group of 9 redundant No 0 workers? Is there a retraining or reassignment obligation before an employer can make a worker No 0 redundant? Are there priority rules applying to redundancies? Yes 1 Are there priority rules applying to re-employment? Yes 1 26.0 Redundancy costs (weeks of salary) What is the notice period for redundancy dismissal after 20 years of continuous 2.0 employment? (weeks of salary) What is the severance pay for redundancy dismissal after 20 years of employment? (weeks of 24.0 salary) What is the legally mandated penalty for redundancy dismissal? (weeks of salary) 0.0 13.3 Rigidity of employment index (0-100) 0.0 Rigidity of hours index (0-100) Can the workweek extend to 50 hours (including overtime) for 2 months per year to Yes 0 respond to a seasonal increase in production? 61 What is the maximum number of working days per week? 6 0 Are there restrictions on night work and do these apply when continuous operations are No 0.00 economically necessary? Are there restrictions on "weekly holiday" work and do these apply when continuous No 0.00 operations are economically necessary? What is the paid annual vacation (in working days) for an employee with 20 years of 15 0 service? Note: The first three indices measure how difficult it is to hire a new worker, how rigid the regulations are on working hours, and how difficult it is to dismiss a redundant worker. Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The overall Rigidity of Employment Index is an average of the three indices. 62 Registering Property in the Bahamas This topic examines the steps, time, and cost involved in registering property in the Bahamas. STANDARDIZED PROPERTY Property Value: 1,145,330.80 City: Nassau Registration Requirements: No: Procedure Time to complete Cost to complete 1 Notarization of affidavits of witnesses to signatures of 1 day B$30-B$50 conveyance 2 * Lawyer or his clerk checks for encumbrances at the 1 - 2 months 2.5% of property value Registry of records (regarding any mortgages on the (simultaneous with property). Procedures 3, 4, and 5) 3 * Lawyer checks for judgments against the property at the 1 day (simultaneous no cost Supreme Court with Procedures 2, 4 and 5) 4 * Lawyer checks for other companies using the same property 1 day (simultaneous no cost at the Company Registrar. with Procedures 2,3 and 5) 5 * Real property tax status enquiry with the Valuation office of 1 day (simultaneous no cost the Ministry of Finance. with Procedure 2, 3, and 4) 6 Payment of Stamp Duty 1 day 10% of property value 7 Lodge the conveyance for recording at registry of records 1 day B$4.5 per page * Takes place simultaneously with another procedure. 63 Procedure 1 Notarization of affidavits of witnesses to signatures of conveyance Time to complete: 1 day Cost to complete: B$30-B$50 Comment: This procedure is not required by law, but is done in practice by the registrar general as part of the registration documents. Any licensed notary public can do it but in most cases lawyers also have the notary public license. Procedure 2 Lawyer or his clerk checks for encumbrances at the Registry of records (regarding any mortgages on the property). Time to complete: 1 - 2 months (simultaneous with Procedures 3, 4, and 5) Cost to complete: 2.5% of property value Comment: Searches can be carried out by the Registry staff if the date only 3 months back. Otherwise all searches are done by search clerks. The fee for the search is currently $10 an hour. The Land Registry is being computerized and many deeds have already been scanned (up to 1997). Therefore, the search is still done manually, but in the future this will be done online. Procedure 3 Lawyer checks for judgments against the property at the Supreme Court Time to complete: 1 day (simultaneous with Procedures 2, 4 and 5) Cost to complete: no cost Comment: This search is conducted to check if there are any judgments regarding the property ­ Any charge on the judgment is levied on your estate. Procedure 4 Lawyer checks for other companies using the same property at the Company Registrar. Time to complete: 1 day (simultaneous with Procedures 2,3 and 5) Cost to complete: no cost Comment: This is only done if the property is owned by a company. The lawyer would also check in the Articles of Association filed at the registry of a former company who (names of the registered directors) would be authorized to sign the conveyance from the seller's side. This is also a new measure of caution introduced under the new money laundering laws introduced after September 11. Procedure 5 Real property tax status enquiry with the Valuation office of the Ministry of Finance. Time to complete: 1 day (simultaneous with Procedure 2, 3, and 4) Cost to complete: no cost Comment: Although not required by law, it is common for the lawyer to also check if real property taxes on the property are current as they are a first charge on the property; and (2) a discharge of any mortgage granted by the seller to be evidenced prior to a new 64 conveyance being recorded. If the seller hasn't paid them in the past, the new owner will inherit the taxes. In addition to this procedure, the buyer's lawyer might also chose to make an inquiry with utility companies (water, electricity and phone/cable). Such inquiry could be conducted within 2 weeks. Procedure 6 Payment of Stamp Duty Time to complete: 1 day Cost to complete: 10% of property value Comment: Stamp duty is payable as a percent of the value of the property. Paid at the Public Treasury. The rates for stamp duty are as follows: Stamp duty is payable as a percent of the value of the property. The rates of stamp duty applicable to deeds of conveyance, assignments or transfers of realty are as follows: · When the amount or value does not exceed $20,000, the rate is 2%. · Exceeding $20,000, but not exceeding $50,000, the rate is 4%. · Exceeding $50,000, but not exceeding $100,000, the rate is 6%. · Exceeding $100,000, but not exceeding $250,000, the rate is 8%. · Exceeding $250,000, the rate is 10%. Procedure 7 Lodge the conveyance for recording at registry of records Time to complete: 1 day Cost to complete: B$4.5 per page Comment: 65 Getting Credit in the Bahamas The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in the Bahamas. Getting Credit Indicators (2009) Indicator score Private credit Public credit Private bureau coverage (% of adults) 0 bureau registry Are data on both firms and individuals distributed? No No 0 Are both positive and negative data distributed? No No 0 Does the registry distribute credit information from retailers, trade No No 0 creditors or utility companies as well as financial institutions? Are more than 2 years of historical credit information distributed? No No 0 Is data on all loans below 1% of income per capita distributed? No No 0 Is it guaranteed by law that borrowers can inspect their data in the No No 0 largest credit registry? Coverage 0.0 0.0 Number of individuals 0 0 Number of firms 0 0 Strength of legal rights index (0-10) 9 Can any business use movable assets as collateral while keeping possession of the assets; and any financial Yes institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of revolving movable Yes assets, without requiring a specific description of the secured assets ? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without Yes requiring a specific description of the secured assets ? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, Yes proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations Yes and debts can be secured by stating a maximum amount rather than a specific amount between the parties ? Is a collateral registry in operation, that is unified geographically and by asset type, as well as indexed by the Yes grantor's name of a security right ? Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? Yes Do secured creditors have absolute priority to their collateral in bankruptcy procedures? No 66 During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? Yes Does the law authorize parties to agree on out of court enforcement? Yes 67 Protecting Investors in the Bahamas The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in the Bahamas. Protecting Investors Data (2009) Indicator Extent of disclosure index (0-10) 2 1 What corporate body provides legally sufficient approval for the transaction? (0-3; see notes) 0 Immediate disclosure to the public and/or shareholders (0-2; see notes) 0 Disclosures in published periodic filings (0-2; see notes) 1 Disclosures by Mr. James to board of directors (0-2; see notes) 0 Requirement that an external body review the transaction before it takes place (0=no, 1=yes) Extent of director liability index (0-10) 5 1 Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company. (0-2; see notes) 1 Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors) liable for damage to the company. (0-2; see notes) 0 Whether a court can void the transaction upon a successful claim by a shareholder plaintiff (0-2; see notes) 1 Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff (0=no, 1=yes) 1 Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff (0=no, 1=yes) 0 Whether fines and imprisonment can be applied against Mr. James (0=no, 1=yes) 1 Shareholder plaintiff's ability to sue directly or derivatively for damage the transaction causes to the company (0-1; see notes) Ease of shareholder suits index (0-10) 7 3 Documents available to the plaintiff from the defendant and witnesses during trial (0-4; see notes) 2 Ability of plaintiffs to directly question the defendant and witnesses during trial (0-2; see notes) 1 Plaintiff can request categories of documents from the defendant without identifying specific ones (0=no, 1=yes) 0 Shareholders owning 10% or less of Buyer's shares can request an inspector investigate the transaction (0=no, 1=yes) 68 1 Level of proof required for civil suits is lower than that for criminal cases (0=no, 1=yes) 0 Shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit (0=no, 1=yes) Strength of investor protection index (0-10) 4.7 Notes: Extent of Disclosure Index What corporate body provides legally sufficient approval for the transaction? 0=CEO or managing director alone; 1=shareholders or board of directors vote and Mr. James can vote; 2=board of directors votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote Immediate disclosure to the public and/or shareholders 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures in published periodic filings 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures by Mr. James to board of directors 0=none; 1=existence of a conflict without any specifics; 2= full disclosure of all material facts Director Liability Index Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company 0= Mr. James is not liable or liable only if he acted fraudulently or in bad faith; 1= Mr. James is liable if he influenced the approval or was negligent; 2= Mr. James is liable if the transaction was unfair, oppressive or prejudicial to minority shareholders Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors) liable for for damage to the company 0=members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1=liable for negligence in the approval of the transaction; 2=liable if the transaction is unfair, oppressive, or prejudicial to minority shareholders Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0=rescission is unavailable or available only in case of Seller's fraud or bad faith; 1=available when the transaction is oppressive or prejudicial to minority shareholders; 2=available when the transaction is unfair or entails a conflict of interest Shareholder plaintiffs' ability to sue directly or derivatively for damage the transaction causes to the company 0=not available; 1=direct or derivative suit available for shareholders holding 10% of share capital or less Shareholder Suits Index Documents available to the plaintiff from the defendant and witnesses during trail Score 1 each for (1) information that the defendant has indicated he intends to rely on for his defense; (2) information that directly proves specific facts in the plaintiff's claim; (3) any information that is relevant to the subject matter of the claim; and (4) any information that may lead to the discovery of relevant information. Ability of plaintiffs to directly question the defendant and witnesses during trial 0=no; 1=yes, with prior approval by the court of the questions posed; 2=yes, without prior approval 69 Paying Taxes in the Bahamas The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in the Bahamas, as well as measures of administrative burden in paying taxes. Tax or mandatory Payments Notes on Time Statutory tax Tax Totaltax rate Notes on contribution (number) Payments (hours) rate base (% profit) TTR Vehicle tax 1 $100-350 variable 0.01 Fuel tax 1 27.5% + 7% diesel fuel 1.16 Stamp on all Fuels Property tax 1 1 and 2% market value 1.62 of property Stamp duty 1 10.0% sale price 5.05 Social security 12 48 5.4% gross salaries 6.09 contributions Business license fee 1 10 1.5% or turnover or 33.05 $500,000 flat fee (whichever is greater) Totals 17 58 47.0 Notes: a) data not collected b) VAT is not included in the total tax rate because it is a tax levied on consumers c) very small amount d) included in other taxes e) Withheld tax f) electronic filling available g) paid jointly with another tax Name of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. When there is more than one statutory tax rate, the one applicable to TaxpayerCo is reported. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. 70 Trading Across Borders in the Bahamas These tables list the procedures necessary to import and exports a standardized cargo of goods in the Bahamas. The documents required to export and import the goods are also shown. Nature of Export Procedures (2009) Duration (days) US$ Cost Documents preparation 7 300 Customs clearance and technical control 3 130 Ports and terminal handling 4 200 Inland transportation and handling 2 300 Totals 16 930 Nature of Import Procedures (2009) Duration (days) US$ Cost Documents preparation 7 300 Customs clearance and technical control 3 130 Ports and terminal handling 2 650 Inland transportation and handling 1 300 Totals 13 1380 Export Bill of lading Cargo release order Commercial invoice Customs export declaration Packing list Import Bill of lading Cargo release order Commercial invoice Packing list Certificate of origin 71 Enforcing Contracts in the Bahamas This topic looks at the efficiency of contract enforcement in the Bahamas. Nature of Procedure (2009) Indicator Procedures (number) 49 Time (days) 427 Filing and service 7.0 Trial and judgment 240.0 Enforcement of judgment 180.0 Cost (% of claim)* 28.90 Attorney cost (% of claim) 18.0 Court cost (% of claim) 2.9 Enforcement Cost (% of claim) 8.0 Court information: Nassau Supreme Court of the Commonwealth of the Bahamas * Claim assumed to be equivalent to 200% of income per capita. 72 73 74