| Criteria | Score
(4-0) | Rationale |
| Laws on VC/PE fund formation and operation | 2 | Trinidad has a very basic framework created by the Venture Capital Act of 1994, very slightly amended in 2004. The act requires pre-approval by a government agency, which remains unstaffed. It does not allow for closed-end funds, instead assuming that all investments are "evergreen." It also does not provide for dividends, and exit strategies are unclear. However, it's entirely voluntary, and nobody has to comply with or register under it. Thus, fund managers choosing not to be under it, such as Dynamic Equity, are not subject to any law on fund formation or operation. Instead, it is registered as an "investment adviser" under the 1995 Securities Industry Act (December 2006 interview; Dynamic Equity website). |
| Tax treatment of VC/PE funds & investments | 3 | Dividends are tax-exempt for local investors (after one year) and there is no capital gains tax; this obviates concerns about pass-through laws. An issue for foreign investors is a withholding tax of up to 15% on dividend remittances, but Trinidad has double tax treaties that would negate that for recipients in most relevant countries. Tax incentives are available for funds registered under the VC Act. (Dynamic Equity website; December 2006 interview). |
| Protection of minority shareholder rights | 3 | The Companies Act of 1995 provides some rights, such as disclosure of directors and substantial shareholders, the right to attend meetings and vote, and the right to fair notice, including on votes to sell, lease or transfer substantial company assets, and the right to an equitable buy-out in the latter circumstances. The law is based on Canadian regulations and jurisprudence and is similar to that in Commonwealth countries. Issues can also be dealt with in shareholders' agreements, which are enforceable in courts. (December 2006 interview; Eastern Caribbean Securities Exchange). |
| Restrictions on institutional investors (pension funds, insurance firms) investing in VC/PE | 2 | Pension fund and insurance companies can make equity investments with certain restrictions, as long as the firms and funds in question are registered with the local securities commission. (December 2006 interview; Dynamic Equity website). |
| Protection of intellectual property rights | 3 | EIU Risk Briefing score. Trinidad and Tobago overhauled its intellectual property rights (IPR) in the mid-1990s, signing the Trade Related Aspects of Intellectual Property (TRIPS) agreement, as well as a bilateral agreement with the US concerning IPR. Following the passage of supporting legislation in the late-1990s, the country's protection of IPR is now considered to be TRIPS-plus and comparable to standards in the US. However, enforcement has been lax in some areas, particularly concerning the copyright of music CDs and film DVDs, and prosecutions for piracy have been rare. An amendment to the 1997 Copyright Law, to reduce the burden of proof for prosecutors, has been submitted and–if passed–would make it easier for law enforcers to clamp down on sales of pirated CDs and DVDs. Protection of IPR is also a concern in other sectors, with many companies delaying the registration of goods and services. |
| Bankruptcy procedures/creditors' rights/partner liability in cases of an invested company's bankruptcy | 2 | Creditors have the strongest rights in Latin American and Caribbean region, with no automatic stay on assets, secured creditors paid first, and restrictions on reorganization (IDB, 2005). Bankruptcy reform is currently under discussion, but companies do currently undergo court-ordered restructuring, enter receivership, etc (December 2006 interview). Information on partner liability is unavailable. |
| Capital markets development and feasibility of exits (ie, local IPOs) | 2 | Average of three EIU Risk Briefing scores. The stockmarket is undeveloped, with 30 or so firms listed and relatively little trading. Still, the financial sector is comparatively well developed by very modest Caribbean standards, and local IPOs are easily undertaken. From end-2005 regional interests can invest or list on the Trinidad exchange and Trinidadians can invest in the region under the CARICOM Single Market and Economy program. (December 2006 interview; US Country Commercial Guide 2006; Business Trinidad and Tobago 2005). |
| Registration/reserve requirements on inward investments | 4 | Trinidad has no reserve requirement or exchange controls. There are no registration requirements for private companies. Public companies have to report foreign ownership in excess of a certain percentage to the Central Bank, but there are no restrictions. (December 2006 interview; LatinFinance 2005; US Country Commercial Guide 2006). |
| Corporate governance requirements | 2 | The authorities recognize the Companies Act of 1995 as incomplete, but proposals to adopt more stringent standards, a formalized set of codes, and improve monitoring and enforcement not yet been acted upon. However, corporate governance practices are held to be fairly good even in the absence of stronger regulation. (December 2006 interview; Eastern Caribbean Securities Exchange). |
| Strength of the judicial system | 2 | EIU Risk Briefing score. The judicial system in Trinidad and Tobago until recently escaped the problems of ingrained politicization, a lack of accountability and unequal treatment of foreign business interests that have undermined judiciaries elsewhere in Latin America. However, a combination of inadequate resources and internal inefficiency has resulted in a huge backlog of cases, which have affected the business community as well as individuals. Procedural reform is in progress to speed up legal processes, as well as the upgrading of administrative equipment to improve court efficiency. Private sector businesses should consider alternative forms of dispute resolution (ADR) to try and solve commercial disagreements in place of litigation, or for major disputes a provision for overseas arbitration to be written into the initial contract rules. In all cases of dispute, and also for routine purposes, local legal expertise is essential. |
| Perceived corruption | 1 | EIU Risk Briefing score. Corruption in Trinidad and Tobago undermines the business environment, by diverting resources, which also damages the rule of law. With the energy boom boosting government income, business groups and individuals have increasingly sought to influence political decisions. The government has demonstrated concern for its public procurement regime, appointing a committee to prepare a White Paper on proposed reforms to government procedures. The paper concluded that deficiencies existed in the legal and regulatory framework; under current practices, the state’s role is confined to the tender stage, rather than monitoring project implementation. It recommended measures to improve the transparency of public procurement and enhance the accountability of public officials. Even though the White Paper formed part of Mr Manning’s budget presentation in October 2005, the accompanying legislation has not been passed by parliament. The government is expected to remain committed to improving regulation and pursuing legal action against those accused of corrupt dealings. However, any concrete improvement will take time. |
| Quality of local accounting industry/use of international standards | 4 | Local accounting standards follow international ones. International accounting firms are present. (December 2006 interview; US County Commercial Guide 2006). |