By Sir Trevor Carmichael, Q.C., Principal, Chancery Chambers
For over 50 years of Barbados’ political independence, its international business sector has been transforming from an early start of single-focused corporate and trust structures, to one which, today, is part of the multi-layered and complex world of international financial and tax planning. The evolved changes have mirrored the growing development and marketing of the sector by private sector professionals, as well as government representatives. The negotiation of a set of wide-ranging double taxation treaties, combined with a steadily warmed-up international and domestic regulatory ethos, have created an ongoing need for practitioners to continually revise and provide sets of structures which are novel, creative and complex, while still being clear.
The sector has been faced, therefore, with the challenging and potentially satisfying task of finding legal structures, to accommodate the new business deals and dealings which are now presented. For example, the question of when time begins to run, for limitation purposes, in cases where a lender, facility agent or security trustee makes a claim under, or in connection with, a syndicated loan, is a matter which is taking on increased prominence. Hence, the local advisor is now required to display knowledge in regard to the operation of limitation periods, under ordinary non-syndicated loan contracts, both secured and non-secured. Such knowledge allows for the kind of defensive advice which facilitates the drafting of a safe agreement.
Similarly, debt restructuring transactions have changed significantly over the last 50 years. Capital structures in the early days were simple, operating loosely under corporate principles, requiring banks to remain supportive and be patient in the appointment of receivers; and also requiring them to make decisions in conjunction with all creditors, grounded on reliable information – and furthermore, to work collaboratively in the hope of reaching a collective view.
While this ethos prevailed merrily and satisfactorily during the era of the last decade of the 20th century, and even as far as the 2008 financial crisis, the climate thereafter has changed in terms of complexity. For today, restructuring transactions often involve publicly traded, high-yield bonds, and the granting of information on the issuer, during such a restructuring negotiation, has become a more detailed matter. The present-day advisor is therefore expected to display greater mastery in the area of confidentiality agreements.
As regards bonds, the present-day practitioner is also well served if familiarity is established with non-dilutive convertible bonds – a relatively new structure in the debt capital markets. Essentially, they allow an issuer to capture the pricing benefits of equity-linked securities, but without the share dilution which is regularly associated with convertible bonds. Within the structure, convertible bonds are issued but are cash settled on conversion, while the purchase of call options is made by the issuer – they, in turn, hedge the upside exposure under the bonds. This new method differs from the conventional structure, since the bonds and options must closely align to create a hedged structure. The present-day advisor is likely to encounter such a new modality in the now commonplace financing structures associated with international business companies operating in the Barbados environment.
The practitioner in Barbados today, therefore, is being called upon to match constantly emerging and merging corporate structures, financial vehicles, lending configurations, shareholder arrangements, custody structures and the accompanying legal documentation. The swaps and derivatives transactions of the end of the last century are now institutionalised within an association with rules and procedures, and Barbados has played a key and continuing role.
Fifty years of political independence is now easily matched with an international business milieu which remains au courant, knowledgeable and, when required, creative.