Proposed law introduces ticket offenses, strengthens enforcement
In an attempt to stamp out the practice of fronting, a new Trade and Business Licensing Bill would require companies that apply for renewal of their licenses to submit a statement of effective control and beneficial ownership.
The measure aims to prevent the use of agreements or instruments to circumvent the statutes of the Local Companies (Control) Law which prescribe that locally operating businesses have to be at least 60 percent Caymanian owned, unless they are exempt.
Companies already have to submit an annual return and a shareholder return to renew their business licenses as a matter of Trade and Business Licensing Board policy. Under the proposed law, applicants would also have to present a statement confirming that the effective control and benefit of the company is not in any way altered from the return of shareholdings.
This return includes the number and par value of each class of shares owned by both Caymanians and non-Caymanians and the voting rights attached to each class of shares.
If the bill becomes law, licensees would have to obtain the written approval of the board before any increase or decrease in shareholdings or interests can take effect. This applies also to the sale, transfer or charge of a significant interest in a company, defined as 10 percent of voting rights, dividends or distributed surplus assets.
Pension and health insurance compliance
Under the bill, which was gazetted on Oct. 31, the trade and business licensing process would become the enforcement mechanism for a range of other laws governing businesses. For instance, it is proposed that license renewal applicants be required to submit evidence that they are complying with pension and health insurance provisions, planning laws and, where necessary, that they have obtained the approval by relevant authorities to carry out their business in public places. In addition, applicants must submit evidence of Caymanian status, police clearance and a bank reference.
Anyone who knowingly provides false or misleading information, if convicted, would be liable for a fine of $5,000, a one-year prison term, or both.
The bill increases the fine for anyone operating without a license to $10,000, one-year imprisonment or both for the first offense and $20,000, two years imprisonment or both for subsequent offenses.
The Trade and Business Licensing Board currently relies on the cooperation of the Immigration Department to enforce the Trade and Business Licensing Law. If the new bill became law, trade officers would be able to request a warrant from a magistrate or justice of the peace to search the premises of anyone reasonably suspected of operating without a license. If such a warrant is granted, Department of Commerce and Investment trade officers, equipped with the rights and powers of a constable, would be allowed to enter the premises to examine or seize any documents, equipment or other evidence indicating violations of the Trade and Business Licensing Law.
The destruction or altering of such evidence is classed as a criminal offense by the bill and is subject to a $5,000 fine, one year imprisonment or both.
In the case of a conviction, anything seized would be considered forfeited and sold.
In contrast to the current law, the bill gives the board the right to suspend or revoke licenses of companies that are not in compliance with the law.
For smaller offenses, the bill introduces fixed fines that, similar to a traffic ticket, could be issued by trade officers on the spot. Such offenses would not lead to court proceedings if the fine was paid within 28 days.
The fines range from $100 for failing to display a license or failing to inform the board of a change of address, to $2,500 for obstructing trade officers or failing to answer questions relating to any register or other record when required to do so by the board.
The application of ticket offenses are seen as one way to help crack down on illegal street vendors without blocking the court system. Now, the Department of Commerce and Investment first has to obtain a summary court order before it can act.
The proposed law also provides for the creation of a five-member Appeals Tribunal, which would hear any appeals to decisions by the Trade and Business Licensing Board.
The bill would also allow the board to delegate its powers in a move that could result in the Department of Commerce and Investment making the vast majority of licensing decisions administratively. In practice, the board would then deal only with complicated or contentious matters.
The composition of the Trade and Business Licensing Board would also change under the bill and include a chairman, deputy chairman, four members from the private sector, the director of commerce and investment, the director of planning and the director of environmental health or their designates. However, the board would no longer include the chief immigration officer.
A subcommittee of the board, comprising three members, would be empowered by the bill to make expedited licensing decisions within five working days for an extra fee. The bill could be debated in the Legislative Assembly as soon as the end of this month.