Stephanie Paiva Sanderson and Sharon Beesley of BeesMont Law in Hamilton look at recent regulatory and legislative developments
Bermuda’s recent legislative and regulatory developments continue to attract investors to the jurisdiction and maintain Bermuda’s reputation as a leading blue chip offshore financial centre.
EU Solvency II Equivalence
Bermuda achieved coveted “third-country equivalence” with the EU Solvency II rules in 2016 which provides a strong endorsement of Bermuda’s robust, mature and proficient regulatory environment as one of only two non-EU countries awarded third country solvency equivalence. This equivalence ensures that Bermuda’s commercial (re)insurers and insurance groups are not disadvantaged when competing for and writing business in the EU. Similarly, in the United States, the National Association of Insurance Commissioners (NAIC) has designated Bermuda a ‘qualified’ jurisdiction. These achievements are a major endorsement for Bermuda’s regulator, the Bermuda Monetary Authority.
Bermuda remains at the forefront of transparency and global compliance standards through recent developments in this field. Bermuda is an early adopter of the OECD’s Common Reporting Standard (CRS) which means that financial institutions in Bermuda have been required to comply with the CRS regime from January 1 , 2016.
In April 2016, Bermuda became the 33rd signatory of the Multilateral Competent Authority Agreement for Country-by-Country (CbC) reporting which is a component of the OECD’s Base Erosion and Profit Shifting (BEPS) Project. Multinational groups based in Bermuda which satisfy the criteria requiring submission of a CbC report will need to collect and submit information for fiscal years starting on or after January 1, 2016.
Under Bermuda company law, director and officer registers as well as shareholder registers are accessible to the public at a company’s registered office. However, due to recent amendments to Bermuda’s company legislation Bermuda companies are now required to also file current director information with the Registrar of Companies to be held in a central database that will be open to the public.
Limited Liability Companies Law
The Limited Liability Company Act (LLC Act) was recently passed introducing the limited liability company (LLC) vehicle for the first time in Bermuda. The Bermuda LLC Act is modelled carefully on Delaware legislation and is more closely aligned with Delaware law than similar legislation in other offshore jurisdictions. The introduction of the LLC is significant given the enormous amount of US business and investment there is in Bermuda and the introduction of the LLC framework was a direct response to the requests from US stakeholders for such a vehicle.
The LLC is a hybrid entity which merges characteristics of both the limited partnership and a company limited by shares. It is a very flexible vehicle which provides a useful alternative structuring option to complement the existing choice of vehicles in Bermuda. The LLC is an ideal 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 and is a familiar vehicle for US clients to utilise.
Bermuda’s Limited Partnership legislation was extensively updated in 2015 and further fine-tuned in 2016. These amendments have benefitted Bermuda’s asset management sector and improved the jurisdiction’s product offering. The recent changes grant partnerships additional rights enjoyed by exempted companies. The changes include greater flexibility for internal governance, conversion to and from exempted limited companies, establishment of a register of charges for partnerships with separate legal personality, continuance and discontinuance procedures.
Rights of Third Parties
The Contracts (Rights of Third Parties) Act 2016 (Rights of Third Parties Act) was recently brought into force in Bermuda. The Rights of Third Parties Act was largely modelled on the UK equivalent and it allows parties to vary the common law doctrine of “privity of contract” such that third parties may enjoy the benefits and enforce the provisions of a contract if the third party is expressly identified in the contract and the contract expressly provides that the third party may enforce the contract’s terms. The Rights of Third Parties Act provides certain restrictions and specific contracts which are excluded from conferring rights on third parties such as, for example, promissory notes.
The Rights of Third Parties Act will be appealing to the investment funds industry (where fund documents regularly include indemnities in favour of third parties), third party service providers, advisors and consultants. Indemnification and exculpation provisions of agreements can, pursuant to the Rights of Third Parties Act, be enforced directly by third parties.
Bermuda Continues to Lead at the Forefront of International Business
Bermuda remains at the forefront of international business and continues to meet the needs of the global market in a thorough and efficient way, maintaining its edge as a highly competitive offshore jurisdiction whose doors are open for business for those looking for a quality substantive jurisdiction.
Stephanie Paiva Sanderson
About the author
Stephanie Paiva Sanderson is a Corporate Attorney at BeesMont Law and practices in all areas of corporate and commercial law. She joined BeesMont Law in 2010 and has particular expertise in investment funds, M&A, corporate re-organisations and cross-border transactions. Stephanie also advises on general corporate matters, compliance, corporate governance and regulatory matters. Stephanie obtained her LPC with Distinction from BPP Law School in the UK. She is a current Practicing Member of the Bermuda Bar.
About the author
Sharon Beesley is a co-founder of the BeesMont Group and CEO of BeesMont Law Limited. She has a LLM from Cambridge University and BA (Hons) from the University of Westminster and worked for Linklaters in their London and Hong Offices for 8 years. Sharon practices in all areas of corporate law with particular expertise in investment funds, structured finance, joint venture structures and mergers and acquisitions. Over the last 24 years in Bermuda Sharon has developed a recognised investment fund practice, particularly with respect to infrastructure and alternative fund strategies. She has also advised on a wide range of corporate transactions including mergers and acquisitions and general corporate governance issues. Sharon was admitted as a Solicitor in England and Wales and Hong Kong and was called to the Bermuda Bar in 1993.