Barbados is renowned as a commercial entrepôt with a vibrant ecosystem for a myriad of businesses. This, undoubtedly, is a positive paradigm. Yet it might be passé in describing our chronicle. With a new disposition – towards earning global distinction – Barbados is augmenting its value propositions and looking to actively reposition itself as a hub for growth and innovation.
Two strategies have proven invaluable to progress. The first: the embrace of technological advancements. The second: the formation of strategic alliances. These strategies, combined, are building Barbados – a nation now awash with both talent and innovation. While valued, perhaps, for their pecuniary potential, these strategies are leading us to a future of promise.
Like Barbados, the Barbados Stock Exchange (BSE) has embraced a global focus. This began with our corporate demutualization – which was the strategic reorganization, in December 2015, of our legal structure. Thereafter we launched our International Securities Market (ISM) which has positioned us, truly, as a global exchange.
Procuring ‘exchange recognitions’ is our contemporary focus and an incremental step towards building global credibility. With a handful of markets strategically identified – including Canada, the United Kingdom (UK) and the United States (US) for starters – the BSE is poised to become an exchange of consequence; a development that will redound to the benefit of Barbados.
Our efforts, thankfully, have been met with success. As such, we are pleased to report that we are now duly designated as a ‘Recognised Stock Exchange’ by Her Majesty’s Revenue and Customs (HMRC). This designation was achieved on 2 April 2019, and was conferred, in the UK, under Section 1005 of the Income Tax Act (2007).
A material implication has arisen as a result: for securities residing in any of our markets, the HMRC definition of either ‘listed’ or ‘not listed’ will apply for the purposes of legislation in the U.K. This will certainly be a boon for our markets. Additionally, securities will still retain their inherent coverage under securities legislation in Barbados.
HMRC’s designation is highly strategic, and has enabled us to offer:
- eligibility for BSE-listed securities to be included in both UK pension funds and UK Individuals Savings Accounts (ISAs);
- the potential for inheritance tax allowances to accrue to UK holders of BSE-listed securities;
- and holders of satisfying BSE-listed debt securities to avail of the Quoted Eurobond Exemption (QEE) – a mechanism that ensures an exemption from withholding taxes on distributions.
Further, while the benefits above are outlined for investors, there are, of course, clear benefits for issuers (whether local, regional or international in origin):
- Listing securities on the BSE’s HMRC recognised markets can provide market eligibility for them to be offered directly, or as part of a packaged offering, to the gamut of investors resident in the UK;
- Companies looking to finance acquisitions can use the BSE’s HMRC- recognised markets for structured finance transactions. We envision a growth in the use of special purpose vehicles (SPVs), which are subsidiary – bankruptcy-remote – corporate entities that can be used for either risk sharing, securitizations, property sales or asset transfers.
- By lending funds through the BSE’s HMRC-recognised markets, UK companies can enhance their access to global capital. This is largely due to the fact that international investors can receive interest payments without deduction as a result of availing themselves of the QEE.
The BSE intends – by the end of 2020 – to secure similar designations in Canada and the US. Though the benefits derived will be similar to HMRC’s, they will accrue, instead, to investors resident in Canada and the US respectively.
The Barbados Opportunity
Barbados is a land of sea and sun with the timeless allure of sensational living. While patently the trappings of the cursory glance, they can obscure, on occasion, our commercial propositions. The BSE’s proposition is decidedly clear: by becoming a platform with global connectivity, the exchange can transform into a confluence for capital. This is a proposition of appreciable significance that has thankfully appealed to Barbados’ international business and financial services (IBFS) sector. Support from this sector will be critically important and will be an asset that contributes to Barbados’ perennial reputation as a trusted jurisdiction for capital accretion.
Digital assets are a focus in the medium-term. These are instruments that utilize the blockchain – a game-changing innovation with practical applications. A particular digital asset is burgeoning with appeal: security tokens. While vanguard in nature, the BSE views security tokens as fit for purpose as they are analogous, in substance, to contemporary securities: namely equities, debt and investment products. The BSE is intrigued by the promise of these instruments. In fact, we have already devised both Rules and Guidance for their eventual adoption as market instruments. All that remains is the procurement of the (right) technology that will facilitate their trading for market participants.
The BSE is committed to its transformative development and is thankful for the support from a cadre of stakeholders. Not only has this empowered us to redefine our purpose; it has positioned us to grow as Barbados’ cabochon – forever to be remembered as the gem of the Caribbean.