Stephanie Paiva Sanderson of BeesMont Law in Hamilton discusses the new LLC Act
The Limited Liability Company Act came into force on October 1 2016 and the limited liability company (LLC) vehicle is now available for the first time ever in Bermuda.
The introduction of the LLC is significant for Bermuda not least because it is a novel form of commercial vehicle for the jurisdiction. Given the substantial amount of US business and investment in Bermuda it made good commercial sense for Bermuda to introduce the LLC which was a direct result of requests from US stakeholders for such a vehicle. The Bermuda LLC legislation is modelled carefully on Delaware legislation and is more closely aligned with Delaware law than similar legislation in other offshore jurisdictions. This will assist with providing a body of jurisprudence to support the new legislation in Bermuda.
The LLC is a hybrid entity which merges characteristics of both a partnership and a company limited by shares. Under the new Bermuda LLC regime, parties are able to agree the operational and management terms applicable to it allowing for great flexibility and customisation (as with partnerships) whilst enjoying separate legal personality and limited liability of its members.
It is a very flexible vehicle which provides a noteworthy alternative structuring option to complement the existing choice of vehicles in Bermuda. The LLC is a useful business vehicle which has potential applications in a variety of areas including investment funds, asset holding, special purpose vehicles, joint ventures, general corporate transactions, venture capital and private equity structures. It will be particularly appealing to hedge fund managers and clients with structures that already or typically use Delaware LLCs. However, beyond utilisation of Bermuda LLCs in existing structures or within new structures, they may also be used as standalone vehicles (for asset holding purposes, for example).
Some key concepts of the Bermuda LLC regime include:
One of the most attractive aspects of the LLC is the ability for the parties to create a bespoke vehicle with a customised LLC agreement which can deal with elements of the structure such as, inter alia, voting and consent rights, allocations and distributions, duties to the LLC or other parties, and appointment, admission or removal of managers or members.
The new LLC regime offers Bermuda’s financial services clients additional choice and flexibility as Bermuda continues to evolve and adapt to market requirements.
Stephanie Paiva Sanderson