Demerger Rules in The Bahamas

How Bahamas Companies Can Split Into Separate Entities

By: Domingo Díaz de la Guardia

In 2023, The Bahamas updated its International Business Companies Act by passing an amendment (No. 2 of 2023) that allows companies to split into separate entities, a process called a “demerger.” This means one company can break into two or more companies, allowing businesses to restructure in a new way. Here’s a simple overview of how it works, and the key rules companies must follow:

What the Law Allows

A company can split into multiple new companies. The original company can either continue as one of the resulting entities or it can be replaced entirely by the new companies.

Who Can Demerge

Any international business company in The Bahamas can use this process. However, certain regulated companies (like banks, insurance companies, or investment firms) need written approval from their regulators before splitting.

Plan of Demerger

The company’s directors must prepare a detailed plan explaining how the split will happen. This plan lists which parts of the business (assets, debts, and other responsibilities) will go to each new company and any other steps needed to complete the split. The directors also have to declare that the demerger is in the company’s best interest and that the company will be able to pay its bills throughout the process.

Shareholder Approval

Shareholders must approve the demerger plan before it can happen. Before the vote, shareholders receive information explaining the plan, including what each new company will look like and how their own shares will be affected. Shareholders who do not agree with the plan have the right to “dissent” and demand payment for their shares instead of going along with the split.

Filing and Registration

If the plan is approved, the company submits the required documents to the Registrar of Companies (the government office that handles company registrations) to officially complete the demerger. This filing includes the demerger plan, incorporation documents for the new companies, and a statement from the directors confirming all legal requirements were met and that the company stayed solvent during the process. The Registrar will then formally register the new companies and update the original company’s records to show it has split into the new entities.

After the Split

Once the demerger is complete, each new company takes ownership of its assigned part of the business (as outlined in the plan). They also take on the debts, contracts, and obligations that go with that part. The original company’s shareholders will now hold shares in the new companies unless specified otherwise in the Demerger Plan. Any ongoing legal actions involving the original company can continue against the appropriate new company after the split. If the original company held any special licenses (for example, a banking or insurance license), those licenses do not automatically transfer to the new companies without permission from the relevant authority.

For more information on this topic, contact us at bd@icazalaw.com.