Jamaica was recently ranked by the World Bank’s “Doing Business Index” as #6 in the world for ease of starting a business. Foreign entities seeking to do business in Jamaica may wonder whether it is necessary to incorporate or register a company on the island. The answer is, sometimes.
When is Registration Required?
There are circumstances in which registration of a company in Jamaica will be definitely required. Here are a few examples:
- All overseas companies that establish a place of business within Jamaica must, within one month of such establishment, register with the Registrar of Companies.
- If a company is to be a developer or occupant under the Special Economic Zones Act, it must be a company limited by shares incorporated or registered in Jamaica under the Companies Act.
- If a company is to apply to the Cannabis Licensing Authority for a license to handle ganja, it must be registered with the Companies Office of Jamaica with ‘substantial’ ownership and control by persons ‘ordinarily resident’ in Jamaica.
- If a foreign company wishes to apply for a work permit for an employee being sent to work in Jamaica, the foreign employer must register in Jamaica if no existing Jamaican company is willing to sponsor the work permit application.
However, Jamaican law does not generally require registration if a foreign company merely supplies goods or services to a Jamaican person or entity, and does not establish a place of business in Jamaica.
Nonetheless, as a matter of practice, such a foreign company may find itself compelled to register, especially if it transacts with government entities. For example, the Public Sector Procurement Guidelines states that a foreign entity must have a Tax Compliance Certificate (TCC) before it can be awarded a government contract. On approaching the tax authorities, a foreign company may be told that in order to get a TCC, it must first register a place of business in Jamaica. This is not always correct. The government policy appears to be that for a one-off government contract of short duration, a foreign company with no previous commercial activity in Jamaica may be permitted to get its tax registrations and clearances, and the TCC itself, without registering a place of business in Jamaica. This makes sense. A company may wish to sell goods or services to the Jamaican government, and yet not wish to establish a Jamaican place of business. Goods can be shipped from overseas, and today’s technologies permit many services to be delivered remotely.
However, unfortunately, the modified procedure for tax clearance letters and TCC approval for overseas companies with a short term goods or services government contract is haphazardly applied by the relevant agencies. There needs to be a universal policy in this regard, which all the relevant agencies should apply.
Mode of Registration
There are two options for formally establishing a Jamaican presence:
- Registering a place of business (i.e. a branch) of the overseas company in Jamaica; or
- Incorporating a new Jamaican company.
There are pros and cons of each choice.
Most importantly, a company incorporated in Jamaica is a separate legal person from its parent company or individual shareholders, who are therefore not generally responsible for the Jamaican company’s debts or other liabilities. Only in rare circumstances, involving some fraud or sham, have the courts allowed the “piercing of the corporate veil” to hold shareholders liable for a company’s actions. Therefore, for “ring-fencing” of Jamaican liabilities, incorporation of a separate Jamaican company appears preferable.
On the other hand, there are reasons why a foreign company may find it simpler and more convenient to register a branch in Jamaica. For example, the foreign company may not want to contend with the additional constitutional documents, administration and governance of a new entity.
Forms of Corporate Entities
If the decision is taken to incorporate a new Jamaican company, the investor should be aware that in Jamaica, currently there is generally only one form of corporate entity used by businesses – the company limited by shares. This is expected to change in the not-too-distant future, because the Partnership (Limited) Act (PLA) and Partnership (General) Act (PGA), which were passed in 2017, will provide for the establishment of partnership entities with separate legal personality and limited liability for some or all of the partners involved. The PLA and the PGA are not yet in force, however, once they are brought into effect, the corporate forms available for businesses in Jamaica should be diversified.
It is natural for foreign companies to feel some trepidation when starting business a new country, even one, like Jamaica, which is highly ranked for ease of entrance. This anxiety can be mitigated by a knowledge of the basic facts and the services of good corporate advisors.