Vanuatu, formerly New Hebrides, is an independent republic located in the southwestern Pacific Ocean. It consists of a chain of 13 principal and many smaller islands located 800 kilometres west of Fiji and 2,250 kilometres east of Australia. The islands extend from north to south for 640 kilometres and have a total area of 12,200 square kilometres. Port Vila, the capital of Vanuatu with some 30,000 inhabitants, is situated on the south-west side of the island Esfate and is the seat of government and contains the country’s major financial, retails, education, industrial and tourist facilities.
The total population is estimated at 198,176, of which some 95% are a Melanesian race who call themselves “Ni-Vanuatu”, meaning “the people of our land”. The remainder of the population consists of Europeans, other Pacific Islanders and Asians. English and French are the official languages of the country, while Bislama (local pidgin) is the national language. Vanuatu has a literacy factor of about 53%. The climate of the group varies from tropical in the northern extremities to sub-tropical in the south. The average midday temperature in Port Vila is 29”C in summer and 25”C in winter.
The British and French who settled in the New Hebrides in the 19th century, agreed in 1906 to an Anglo-French Condominium (The London Convention of 20th October 1906) and declared the New Hebrides "a region of joint interest". After 74 years of joint administration, Vanuatu attained independence on 30 July 1980, a constitution was adopted and the Republic of Vanuatu came into effect.
Vanuatu is a parliamentary democracy, the head of state is the President elected for a period of five years. The position is mainly titular and has very few executive powers. Executive power is vested in the Prime Minister and the Council of Ministers. The legislature consists of a unicameral, 52 member parliament, for which general elections are held every four years.
Vanuatu's economy has a dual nature, with a small, but highly developed urban business sector (retail trading, large plantations and ranches, manufacturing, banking and shipping services and the tourism industry) and a much larger, agricultural sector. The domestic exports include coconut products, cocoa, beef and veal, coffee, timber and some vegetables. The principle imports are food and beverages, building materials, fuel, oil, vehicles, transport equipment and consumer goods. The local currency is the Vatu (VT), which is rather stable, the current exchange rate is US$1 = VT147.
Vanuatu’s Constitution states that, until otherwise provided by Parliament, pre-Independence British and French laws shall continue to the extent that they are not expressly revoked or are incompatible with the independent status of the Republic.
The statutory framework for the operation of the offshore Financial Centre comprises the Companies Act (based on English Law), the International Companies Act, and the Banking, Insurance, Stamp Duties and Trust Companies Regulations.
The types of entities used in Vanuatu include international companies, exempted companies, trusts and local companies. The first three entities are designed for offshore use and the fourth, local company entity, is for those wishing to trade within Vanuatu.
International companies are governed by the International Companies Act No. 32 of 1992. Salient points of the act are as follows:
- An international company does not have the concept of authorised capital.
- An international company may be limited by shares, guarantee, or both.
- An international company must have a Registered office and a Registered agent in Vanuatu.
- To register, the company must lodge with the Commission only its Constitution, which is the Act’s equivalent of a Memorandum and Articles of Association. The constitution is signed by the incorporator(s) who can appoint the first directors to the company after incorporation.
- An international company can be established within 24 hours.
- The name of an international company may be in any language, as long as the Commission is provided with a certified translation into English or French.
- Names requiring consent or licence: bank, buildings society, insurance, assurance, reinsurance, fund management, investment fund, trust, trustees, finance or their foreign language equivalents.
- An International Company may utilise a broad range of internationally accepted abbreviated words as suffixes to denote their limited liability.
- The company may issue shares with or without par value, preferred or bearer shares. There is no requirement to issue share certificates.
- The company can have a single shareholder and a single director who need not be resident in Vanuatu and can be natural persons or bodies corporate.
- There is no need to disclose the names of the directors, shareholders or beneficial owners to anyone.
- An international company does not need to hold an Annual General Meeting or file Annual Returns.
- Meetings may be held anywhere in the world.
- An international company can operate a bank account in Vanuatu, but cannot carry on business in Vanuatu, trade within Vanuatu or own real estate there.
- An international company is automatically exempt from stamp, duty exchange control and taxation in any manner in Vanuatu for a period of 20 years following registration.
- Minimum annual government tax/licence fee is USD 300.
- An International Company may not undertake the business of banking, insurance, assurance, reinsurance, fund management, the management of collective investment schemes or the rendering of investment advice, or any other activity that would suggest an association with banking or insurance industries.
The Companies Act [CAP. 191] provides for the registration of Exempted companies with the following features:
- Standard authorised share capital is USD 10,000.
- An exempted company must have a Registered office, registered agent and a Secretary (Secretarial company) in Vanuatu.
- To incorporate an exempted company, a Memorandum and Articles of Association must be signed by one or more natural or juridical persons, acting as Subscribers, and submitted to the authorities. After incorporation, the shares are transferred to the shareholders
- There must be at least two shareholders, natural persons or bodies corporate, Vanuatu residents or not
- An Exempt Company must have the word "Limited" in its name.
- Directors of an exempted company can be either natural person or body corporate, a minimum of one director is required, at least one director must be resident in Vanuatu. An alternate director resident in Vanuatu also fulfils this requirement.
- The board of directors of every exempted company must hold at least one meeting in Vanuatu in each calendar year.
- Exempted companies must file annual returns, but are not required to be audited unless it holds a bank, trust or insurance licence.
- Domestic taxation is not payable on the net chargeable profits of Exempt companies.
- Minimum annual licence fee is USD 450.
Banking in Vanuatu is regulated by the Banking Act [CAP. 63] of Vanuatu, which differentiates between banks carrying on business within Vanuatu ("local banks") and those which carry on business outside Vanuatu ("exempted banks"). Exempted banks are prohibited from doing business within Vanuatu other than with other exempted companies or in the furtherance of business carried on outside Vanuatu.
The features of an exempted bank:
- the bank must be incorporated as an exempted company in Vanuatu;
- the word "bank" or some derivation must be included in its name;
- the minimum paid up capital required is USD150,000 or foreign currency equivalent;
- there is no requirement to hold a deposit in a Vanuatu bank. However, the company may hold bank accounts in a Vanuatu bank - in any currency;
- there is a high degree of confidentiality in respect of an exempted company;
- there is no requirement to submit detailed statistical returns;
- there is a requirement for a registered office, one director to be a Vanuatu resident and one Directors meeting to be held in Vanuatu each year. If necessary, nominee directors can be used;
- issuing government licence fee is USD 5,000
- annual government renewal fee is USD 5,000
There are two types of licence:
1. Financial Institution Licence
This type of licence covers any company whose business includes accepting deposits (which may be withdrawn or repaid on demand, after a fixed period or after notice) and the employment of those deposits by lending or any other means. A financial institution licence thus permits merchant banking business such as the arranging or discounting of loans, either as principal or agent.
2. Banking licence
This type of licence gives the licensee the rights of a financial institution with the additional power of accepting deposits of money withdrawable by cheque.
Although most exempt banks incorporated in Vanuatu have the right to offer current account facilities, most do not. Rather, they operate as financial institutions. However, the choice of a “bank” as opposed to a “financial institution” licence confers the right (and the requirement) to use the word “Bank” or some derivation thereof in the company name.
Legislative Requirements applied to exempted banks:
- While the head office of the company may be outside of Vanuatu, there must be a designated "principal office” in Vanuatu (registered office provided by the registered agent). There must also be an authorised agent of the company resident in Vanuatu.
- The Commission must be informed of the particulars of any change in the memorandum or articles of association of the company and of any reconstruction or sale of the company.
- Audited financial statements, as well as an annual return of the company, must be submitted to the Commission every year.
In addition to legislative requirements, banking licences are usually issued with the following restrictions:
1.The company will not accept deposits from the general public;
2.The company will provide to the Commission a list of persons from whom it does intend to take deposits;
3.The company will be limited to carrying on banking business with such persons or such other persons as may be notified to the Commission; and
4.The company will provide quarterly management and operational reports to the Commission.
Every bank must, at each annual general meeting, appoint an independent auditor.
Auditors must be members of bodies of accountants established in Vanuatu, or in any British Commonwealth country. Furthermore the auditors must be recognised by the Minister of Finance in Vanuatu.
In order to start incorporation and apply for a licence the following issues must be complied with or provided:
1. When the beneficial owner of the offshore bank is a recognised and reputable international bank or financial institution, the paid-up capital can be minimal, say US$10,000, and a licence would be issued if management is shown to be responsible.
2. In other circumstances the Government's policy is more conservative and the following requirements must normally be complied with and provided:
(a) a minimum paid-up capital of US$150,000 or its equivalent (the fact of payment must be confirmed by auditors);
(b) evidence that the day-to-day managers of the bank have full banking knowledge and experience;
(c) there must be local directors of the bank and an undertaking that such directors will be kept fully informed as to the ongoing management and affairs of the offshore bank;
(d) a written undertaking from the promoters of the offshore bank that its activities will be strictly of an in-house nature and that the bank will not solicit monies from the general public for withdrawal by chequing accounts;
(e) Names, addresses and contact points for the beneficial owners, directors and/or managers of the Bank and certificates as to character and that none have police records;
(f) As many available references as can be obtained in relation to the experience and character of the applicant and in the event that the owner or manager is a corporation, details of the latest set of accounts of that corporation. References from Solicitors, Accountants, Bankers or persons of standing are acceptable.
(g) An independent certified Statement of Net Worth, while not essential, should also be provided.
(i) Name of proposed Auditors of the Bank;
(j) Business plan.
The applicant must also be ready to provide any other information upon request.