THE LEGAL PILLARS OF BUSINESS

Jamaica 2018 | EXECUTIVE GUIDE | REVIEW: LEGAL

DunnCox outlines Jamaica's legal landscape and provides key information for prospective investors.

In 2017, Jamaica topped all Caribbean countries when it was voted best in the region for doing business according to Forbes magazine. In the World Bank Group's flagship report, Doing Business 2018, which compares business regulation for domestic firms in 190 economies, Jamaica is the highest ranked Caribbean country for its ease of doing business.

Vital to the island's success in cultivating an attractive business environment is its sound legal infrastructure and framework. This article seeks to acquaint investors with Jamaica's legal landscape and highlight information that may be useful when considering Jamaica as a destination to do business.

Sources of Law

Jamaican law is historically based on English common law and, in some respects, bears close resemblance to legal systems in developed countries such as Australia, the US, and Canada. The three main sources of law in Jamaica are the constitution, common law, and statutory legislation.

Jamaica's (written) constitution is the supreme law of the land and establishes fundamental human rights reflecting many principles contained in the European Convention of Human Rights, the United Nations Declaration on Human Rights, and the American Convention on Human Rights.

Jamaican parliamentary lawmakers have shown keen awareness of international business trends and, as a result, continue to be proactive and inclusive when drafting and enacting new laws. According to the World Bank's report, legal indicators continue to dominate countries' least-reformed areas. The report says that, “Legal reforms are typically slow to advance, mainly because they require long-term political commitments, substantial resources, and close collaboration between multiple regulatory agencies and rulemaking institutions." Jamaica has made great strides in these areas and continues to reinforce the country's legal framework. For example, new legislation enables the creation and registration of security interests in personal property, similar to UCC filings in the US, and insolvency laws have recently undergone changes that are reflective of contemporary views on balancing the interests of debtors and creditors.

Jamaica's independent judiciary includes a dedicated Commercial Court division along with a final appellate court, the United Kingdom Judicial Committee of the Privy Council (“the Privy Council"). These pillars of law all form the backbone of Jamaica's legal system.

Company Law

Jamaica's company laws facilitate a variety of business structures from sole proprietorships to publicly traded companies that give an investor flexibility when deciding on a particular structure that works best for the venture. There are two basic structures to choose from; a registered business or an incorporated company. The registration process for businesses is uncomplicated and inexpensive, and there are no requirements to disclose business accounting information to the Registrar in the Office of Registered Companies. Registered businesses include sole traders and partnerships that generally have unlimited liability, making them less favorable among large investors, but may be attractive for small and medium-sized ventures. However, newly passed legislation will make it possible for partners in a partnership to benefit from limited liability and separate legal identity once the law comes into effect.

The limited liability incorporated company is the preferred vehicle of trade, as it is a legal body separate in law from its owners or shareholders. The most widely used company structures among foreign investors are the company limited by shares incorporated in Jamaica and the branch of an overseas company incorporated outside of Jamaica.

The company limited by shares, as the name suggests, limits shareholder liability to the amount of share capital invested in the company. Incorporation consists of the completion of a single form that is accompanied by the articles of incorporation, also known as the company's constitution. The registration and incorporation process were recently updated to reduce red tape and facilitate the coordination of public agencies. As a result, incorporations can now be processed in less than a week.

Companies are required to have specific information included in the articles of incorporation such as the registered office of the company situated in Jamaica, and the maximum number and classes of shares. Nonetheless, a company has a fair amount of freedom when drafting its provisions to suit its specific needs.
Companies incorporated under Jamaican law are not required to declare or distribute dividends to shareholders. Dividend declarations and payments are discretionary. However, if dividends are to be declared, the company must do so in accordance with its articles of incorporation as well as the Companies Act of Jamaica.
The branch of an overseas company incorporated outside of Jamaica can be registered in Jamaica upon providing the authorities with: (i) a certified copy of the charter, statutes or articles of the foreign company; (ii) a list and particulars thereof of the directors, members, and any beneficial owners of the company; and (iii) particulars of a local representative authorized to receive service of process and notices on behalf of the company. Once all documents have been prepared, registration can be done within five business days.
In general, an overseas company is required to produce a balance sheet and a profit and loss statement to the authorities every year.

Property

All companies whether incorporated in Jamaica or overseas are capable of owning lands and property in Jamaica. When purchasing property, it is important to consider any approvals and consents that may be required depending on the location and intended use of the property. This may include any restrictive covenants endorsed on the title and, if necessary, the request of any modification of the covenants as they may affect the use of the property.

The key features in property sale and purchase transactions include a signed sale agreement, payment of stamp duty (which is at the time of writing 4% of the property value and is usually agreed to be shared equally between buyer and seller), and the transfer of title (seller being solely responsible for transfer tax which is at the time of writing is 5% of property value). Fees for professional advice and services would also need to be factored into the cost.

Labor Relations

Subject to certain exceptions, foreign nationals are generally required to have a work permit from the Ministry of Labour and Social Security to work in the country. This requirement should be met prior to arrival in Jamaica.
There are certain types of rights and protection of employees governed by statute. This includes maternity leave; minimum days for vacation or sick leave; and termination or redundancy rights.

Jamaica has comprehensive legislation on sexual harassment on its horizon. However, the law as it currently stands mainly deals with sexual offences such as sexual assault and rape. Nonetheless, definitive company policy on interactions among employees, which may fall within the realms of sexual harassment, is strongly advised to protect companies and their employees against harmful publicity and potential litigation.

Workers' rights by means of statute also includes a prescription of the minimum wage payable. The national minimum wage at the time of writing is JMD6,200 (approximately USD50) per week.

Intellectual Property

With Jamaica being a member of the World Intellectual Property Organization, its intellectual property laws and infrastructure are harmonized with modern international standards. The Jamaica Intellectual Property Office is responsible for administering intellectual property rights in Jamaica in accordance with relevant legislation.

Depending on the particular venture that an investor embarks upon, intellectual property rights may be a significant consideration when doing business, especially in a foreign jurisdiction. Recent cases have shown how important it is to properly protect one's intellectual property and how costly it can be if not done.
There is a real expectation that there will be new legislation in the area of internet protocols and data protection that is likely to be based on European tenets of risk-based data protection regimes. With existing laws such as the Cybercrimes Act, the Jamaican government has shown a willingness and preparedness to future proof the country's legal infrastructure with regard to technology to encourage economic activity and growth.

Litigation

Most commercial claims are first brought to the Jamaican Commercial Court Division, which is a dedicated division of the Supreme Court of Judicature of Jamaica for parties involved in litigation claims for at least one JMD1 million. This court has been successful in the adjudication of commercial litigation matters and has provided companies with experienced commercial judges, efficient and timely processing of cases, and an effective mandatory mediation stage of the proceedings. The Privy Council offers an option of redress for parties who may have been unsuccessful in litigating matters at the level of the Jamaican Court of Appeal. Privy Council cases are primarily heard in London, UK and the judgments are enforceable in Jamaica.

Investor Incentives

There are various governmental and parliamentary initiatives that have been instituted to encourage foreign direct investment and economic growth in Jamaica. Legislation such as the Special Economic Zones Act provides investors in specific industries with a wide range of tax and duty concessions such as a maximum corporate tax rate of 12.5%. A popular industry that is poised to benefit from the special economic zones (SEZs) regime is the business process outsourcing industry.

Another notable incentive regime is the Omnibus Incentive Regime (Omnibus Regime). This includes a Fiscal Incentives (Miscellaneous Provisions) Act that seeks to reduce corporate income tax rates for small and medium size businesses. Other incentives under the Omnibus Regime offer general lowering of customs tariff rates; stamp duty exemptions on raw materials and non-consumer goods; and income tax relief for approved large-scale and pioneer industries projects. Another incentive specific to the domestic economy that offers company tax reliefs is the Junior Market of the Jamaica Stock Exchange. If a company lists on the Junior Market, it benefits from a 10-year tax break where it is exempt from paying 100% of corporate income tax for the first five years of being listed, and 50% of its corporate income tax for the following five years.

It must be noted that incentives under the SEZ regime and Omnibus Regime are mutually exclusive. Depending on the framework that best suits a company's business model, the company has the option to choose. However, once registered under the SEZ, companies will not be able to benefit from the incentives under the Omnibus Regime.

Jamaica has long recognized the importance of sound and modern laws that are pivotal for a healthy business environment. It is no coincidence that Jamaica has been ranked the best in the Caribbean for doing business.

Dunncox