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Govt. now looking at joint venture agreements to curb rent-a-citizen scheme – Director of Local Content Secretariat
Director of the Secretariat, Dr. Martin Pertab
Kaieteur News-The Guyanese government is increasing its scrutiny of joint venture agreements between local and foreign companies to address the persistent issue of rent-a-citizen schemes and fronting in the oil and gas sector.
Director of the Local Content Secretariat, Dr. Martin Pertab, revealed during the Energy Perspectives Podcast that some joint-venture agreements limit the local partner’s decision-making authority, undermining the principle of beneficial ownership.
The Local Content Act currently features 40 areas for services carved out for Guyanese businesses including rentals, supply of goods, accounting, catering and welding. Foreign companies wanting to operate within those areas are required to partner with local firms. However, the law stipulates that the Guyanese partner must have 51% or more beneficial ownership, among other benefits. Since the enactment of the law back in 2021, the Secretariat has observed foreign companies finding new ways to flout this law in order to gain access to the 40 areas of services set aside for Guyanese businesses.
“So, in some cases…some of the agreement in favor of the foreign counterpart, would be like, you know, one you can’t sell the share, two you can’t make any decision without our input, though we own 49%. When you look at it that is not beneficial ownership. How can you have more than 51% of the shares, and yet you can make decision by yourself, without the 49% you know, shareholders,” Dr. Pertab explained.
He emphasised that agreements failing to meet the beneficial ownership criteria are flagged for revision. Dr. Pertab also noted that the Secretariat also reviews financial statements to corroborate ownership claims.
“You can’t say to us that the local beneficiary owns the company, yet they can’t make any decision by themselves…the local are the owners. Yet they can’t for example, sell their shares. You know those are things that must be satisfied or must be met, if we are talking about the beneficial ownership aspect of companies,” the Director noted.
On November 5, 2024, Kaieteur News reported that Minister of Natural Resources Vickram Bharrat disclosed that foreign companies operating in the oil and gas sector continue to find new ways to sidestep Guyana’s Local Content law. The minister was speaking at the Private Sector Commission’s second annual Local Content Forum. He addressed the escalating tactics some companies are employing to meet local content requirements on paper while continuing to channel the benefits outside Guyana, through deceptive practices. The minister talked about how certain companies use strategies such as “rent-a-citizen” or “fronting,” where foreign entities rely on locals as superficial fronts to comply with local ownership laws. Minister Bharrat said that while his ministry, through the Local Content Secretariat always get feedback and/ complaints about new mechanisms foreign companies use to flout the local content requirements – the foreign companies have grown more sophisticated in their methods.
According to him, the companies are evolving from the “blatant” use of front men to tactics like creating shell companies and partnerships with newly naturalised citizens. “So, there are different methods now, naturalization of people who’ve been in Guyana and making them partners, establishment of shell companies with no assets or no liquidity,” Minister Bharrat said.
(Govt. now looking at joint venture agreements to curb rent-a-citizen scheme)
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