Vanuatu has in place a comprehensive legislative framework covering local and international companies incorporated in Vanuatu. These legislations are designed not only for ease of incorporation but to also provide sufficient and non onerous compliance and ease of maintenance.
Since independence, numerous pieces of legislation have been enacted to compliment and update existing laws inherited from Britain and France. Such legislations were required to enhance regulation which were lacking in specific areas of the industry.
Legislations such as the Serious Offences (Confiscation of Proceeds) Act No. 50 and the Mutual Assistance in Criminal Matters Act No. 52 were passed in 1989. These two Acts with the Prevention of Fraud Act were a start by the new nation to prevent the use of Vanuatu for fraud and illegitimate commercial purpose, to promote Vanuatu as a legitimate tax haven and to encourage foreign investments in Vanuatu.
Since the events of the late 90s and early 2000, Vanuatu began the process of moving away from being a tax haven to being an international finance centre, offering financial products to take advantage of the increasing international mobility of capital and labour. Legislations are and continually being written with this goal in mind. It is little known fact that Vanuatu has always been one of the first countries to enact laws that are inline with internationally accepted standards of an international finance centre. Vanuatu is proud of these achievements.
A few examples of note are listed below:-
– In 2002, with technical aid from the International Monetary Fund, the new International Banking Act was passed to regulate and supervise all offshore licensed banks. One of the first few countries to do so. This ensured protection of depositor’s assets and sound banking practice and qualified management are in place.
– In the same year, the Mutual Assistance In Criminal Matters Act was passed to replace Mutual Assistance in Criminal Matters Act of 1989. The aim is to regulate the provision by Vanuatu of international assistance in criminal matters in the prevention of Money Laundering of proceeds from criminal activities and terrorist funding.
– In 2005, the new Insurance Act was passed to provide for the licensing, regulation and supervision of insurance business. Again this was to promote the maintenance of efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders.
In 2010, the Company and Trust Services Providers Act was passed and currently waiting to be gazetted into law. Vanuatu will now have regulations to license and regulate service providers, whereas in the past, service providers, such as law firms and accounting practices, though licensed in their respective field of expertise, are able to provide company and trust services without being regulated as such.
This will now change. Providers of company and trust services must apply for a license to offer such services and to be regulated with a system that sets out their legal obligations as license holders. This ultimately protects users of Vanuatu financial products and further enhances the reputation of Vanuatu as a finance centre.
A new Companies Act has been drafted, with input from the industry’s stakeholders, is due to go before Parliament. Mr. Edmond R. Toka, Legal Officer of the Vanuatu Financial Services Commission, www.vfsc.vu, offers some insight into this new Act:-
“The new Companies Act that the government is proposing to replace the 1984 enactment with, though in draft form, looks promising. It eliminates the complex and cumbersome approach to formation and operation of companies. A well functioning Companies Registry to compliment the new law will eventually provide affordable accessibility to the company law. Ultimately, a significant reduction in the overall cost of doing business in Vanuatu should be the direct result.
The broad objectives of the government to introducing a new Companies Act include:
• to encourage businesses to form companies and take advantage of all the benefits the corporate form provides;
• to create a sound base for business law framework in Vanuatu which engenders confidence;
• to promote a system which ensures sound reporting mechanisms as well as accountability and transparency;
• to provide a simple and sound system which will ensure access for all to the company law;
• to create a well functioning Companies Registry to support the new legislation and provide users with a reliable, cost effective and time efficient service; and
• to provide urban and rural communities with open and affordable access to the proposed company law.
A lot of company law is based on case law – individual court cases decided over many years. The problem with this is that cases that apply to companies are difficult for business users to access and understand. The proposed new Companies Act will contain as many as possible court-decided rules which apply to companies in the Act itself and at the same time provide the courts with as much direction as possible to allow them to continue to make decisions on company law. The underlying objective of this is to reduce gaps and grey areas (if any) in the proposed new Act.
The promise this proposed law is holding out is to ultimately remove the expensive, time consuming and protracted process of incorporating a company. The approach to this is to replace the traditional Memorandum and Articles of Association with a straight forward Application Form. The Application Form will contain the essential information required by the Registrar of Companies to satisfy himself prior to accepting or declining the application to incorporate a company.
Part of this shift is to introduce a set of “Model Rules”. This replaces the traditional Memorandum and Articles of Association which only served the legally trained. The Model Rules is essentially the internal governance rules which apply to the company and by which the company operates on a daily basis. Logically therefore, the Model Rules cover such things as appointments of directors, removal and powers of officers, meeting procedures, shareholders rights and so forth. In line with the proposed Act’s objective to reduce costs and achieve simplicity, Model Rules will be attached as schedules to the proposed Act. There will be no need to get the Model Rules prepared professionally. And the Model Rules will provide both directors and shareholders with guidance for the management of the company. All types of company: private, public, single shareholder and community will be covered by the Model Rules which can be amended to meet specific needs of the company.
The end result in the proposed change to the incorporation process will make company formation much easier and cheaper. The executing agency, the Vanuatu Financial Services Commission (VFSC), will no longer undertake extensive reviews of documents at the assessment stage since simple user-friendly forms will be used. The current discretion of the Minister in the incorporation process will be removed by the proposed new Act. This effectively will expedite the process and reduce the time involved in forming a company.”
The future of Vanuatu as an International Finance Centre is bright. With changes in the regulatory regime, Vanuatu is poised to take advantage of the increasing mobility of capital and labour with the goal of capturing a slice of this market. With common sense regulation designed to avoid suffocating bureaucracy and onerous compliance, Vanuatu is poised to be a major international financial centre of the region.