Jeremy Leese of MJM in Hamilton looks at the latest changes to Bermudian legislation
Bermuda continues to introduce new, or amend existing, legislation designed to attract more investors to use the jurisdiction as an offshore financial centre. The latest legislative changes are described and considered below.
1 The Investment Funds Amendment Act 2013
The Investment Funds Amendment Act 2013 (the ‘Amendment’) introduced changes to Bermuda’s Investment Funds Act 2006 (IFA), the legislation which provides the regulatory framework for the formation and management of investment funds in Bermuda. The Amendment’s objective is to increase the attractiveness of Bermuda fund formation to sophisticated investors and onshore funds lawyers and fund managers. The Amendment is evidence of the way in which the Bermuda Government, the Bermuda Monetary Authority (the independent regulator of the financial services industry in Bermuda) (the ‘BMA’), and the funds industry is working together to develop innovative products designed to re-energise this sector in the jurisdiction.
Qualified new and existing investment funds formed in Bermuda now have the option to register with the BMA in one of two new exempted fund categories, Class A Exempt Funds or Class B Exempt Funds. These new exempted funds will be exempted from the requirement to be authorised pursuant to the provisions of the IFA, with the end result that they will be deemed to be registered as qualified funds, but not regulated by the BMA. These new classifications will give those forming Bermuda incorporated funds expeditious access to the market, as well as regulatory certainty, as Class A Exempt Funds need no regulatory approvals to launch and begin operations and Class B Exempt Funds need only minimal regulatory sign-off.
The Class A Exempt Funds evidence a major innovation in the Bermuda offshore funds arena as they can effectively be set up and launched within only one business day and require no prior regulatory approvals. Documentation is minimal, with the BMA’s regulatory approach being geared towards self-certification by the fund operator and the delivery of an offering memorandum. In order to be registered as a Class A Exempt Fund, there are pre-qualification criteria to be satisfied. Class B Exempt Funds are aimed at fund operators who meet all of the eligibility requirements of the Class A Exempt Funds, save for the fact that their investment managers fail to meet such pre-qualification criteria. Funds, which fall within the ambit of registration as Class B Exempt Funds have to apply to the BMA.
The new classes of fund illustrate a welcome simplification of the procedure for setting up and operating institutional and sophisticated investor funds. This signals a move in Bermuda towards offering tailored products created to satisfy the needs of today’s sophisticated fund industry, to encourage greater use of Bermuda. These classes of funds are user friendly, easy and quick to register, with low start up and ongoing costs, which should prove attractive, when allied to the other benefits of doing business in Bermuda, to those who form and manage offshore investment funds.
2 Companies Amendment Act 2013
Recent statutory amendments, introduced by the Companies Amendment Act 2013, mean that Bermuda companies listed on appointed stock exchanges are no longer required to file prospectuses in Bermuda. Previously, a Bermuda company listed on an appointed stock exchange (which covers many of the world’s major stock exchanges) had to file with the Registrar of Companies in Bermuda a copy, signed by or on behalf of all directors of the company, of any prospectus that had to be filed under the rules of that stock exchange (or pursuant to the rules of the relevant regulator in such jurisdiction). The new legislation abolishes the requirement to also file such prospectus in Bermuda. Furthermore, where the rules of the stock exchange (or of the relevant regulator in such jurisdiction) do not require publication and filing of a prospectus at all, there is no requirement to file anything in Bermuda either.
This amendment’s aim is to avoid duplication of regulation and increase the ease of doing business for those seeking to use Bermuda entities to list on the leading stock exchanges around the world. Provided that a listed Bermuda company complies with the requirements of the exchange on which its shares are listed, it no longer needs to be concerned with Bermuda’s prospectus filing requirements set out in the Companies Act. Such amendment is part of a continuing process of revisions to Bermuda corporate law that seek to keep the solid foundations that have served the jurisdiction well for so long, whilst exhibiting renewed flexibility in adapting to the changing demands of international business.
3 Companies Amendment Act 2014
The Companies Amendment Act 2014 introduced new provisions with regard to the ability of local and exempt companies to acquire land in Bermuda. It should be noted that consent is still required from the Minister of Economic Development in relation to corporate landholding; however, the Minister’s decision will be guided by the provisions of the legislation and the accompanying policy.
Under the previous legislation, exempted companies were only able to acquire land by way of a lease or tenancy agreement. The recent changes allow for them to purchase land in Bermuda outright for both commercial purposes as well as residential, subject to the Minister’s consent and to the other provisos set out in the policy. However, the residential property pool in which businesses can purchase from are those properties that are already available to what is known as “restricted persons” – that is, people that do not possess Bermudian status. Companies are restricted from renting the properties in the market or to third parties. The intention behind this rule is for the properties to be purchased and used for accommodation or recreational facilities for employees or corporate hospitality. Local and exempted companies can now hold commercial property if it is to be used specifically for business purposes. They are required to set out what the property will be used for in their application for consent from the Minister.
These changes are milestones for the economic development of Bermuda as a competitive offshore jurisdiction. The changes create a more enticing environment for exempted companies looking for longevity in their association with Bermuda.
About the author
Jeremy’s practice focuses on corporate finance, mergers and acquisitions, corporate reorganisations and restructurings, banking and international real estate finance, structured finance, as well as regulatory and legislative compliance.
After qualification with a magic circle firm in the UK, Jeremy practised corporate law in the UK for four years before moving in 1999 to one of the leading offshore law firms and working in their Bermuda, Hong Kong, Jersey and British Virgin Islands offices. After a spell heading the corporate and commercial team at a firm in Anguilla, Jeremy returned to Bermuda as a senior associate with MJM in August 2012.
As a result of his extensive experience, Jeremy has been recognised by the Practical Law Company (PLC) M&A Handbook as a leader in BVI M&A and structured finance transactions.