Consultation Paper - Proposed Amendments to the Exchange Control Act 1972 and Exchange Control Regulations 1973 (2018-02-01)

Summary

This is a joint Ministry of Finance and Bermuda Monetary Authority consultation paper proposing amendments to the Exchange Control Act 1972 and the Exchange Control Regulations 1973. It seeks industry feedback on changes designed to strengthen beneficial ownership disclosure under the exchange control regime, aligning it with recent beneficial ownership amendments to the Companies Act 1981 and the Limited Liability Companies Act 2016, and with FATF/OECD transparency standards. The paper attaches draft amendment Regulations and a draft Bill for comment.

• Expanded beneficial ownership definition: Adopts a FATF-aligned definition of beneficial owner (10% or more ownership/control of voting or non-voting securities or interests, or, failing that, persons exercising control by other means, or senior managers) for exchange control purposes.
• New filing duties: Draft regulations would require companies to file minimum required beneficial ownership information with the Exchange Controller on formation, issue or transfer of securities, and on any change of beneficial owner, generally within 14 days.
• Corporate service provider conditions: Revises regulation 25A so that general permissions for companies registered at the office of an unlimited-licence corporate service provider are conditioned on beneficial ownership filing requirements.
• Controller's enhanced powers: Proposes new powers for the Controller to request information and reports from any person subject to the Regulations, and to issue guidance on matters of material significance to beneficial ownership.
• Civil penalties: Proposes new civil penalty powers, with contraventions subject to a penalty not exceeding 25,000 dollars as prescribed, plus related procedures and rights of appeal.
• Transitional update requirement: Draft transitional provision would require existing companies to update or verify their minimum required beneficial ownership information within six months of the commencement date, subject to possible extension by the Minister.

No changes are proposed to the existing 10% permission threshold for voting shares transferred or issued to non-residents, but the paper clarifies and extends disclosure obligations to non-voting shares/interests and to controllers who are not registered shareholders. Similar changes are anticipated for partnership legislation. As a consultation document, none of the proposed regulatory or statutory amendments are yet in force.

Key obligations

• If enacted, companies would need to file minimum required beneficial ownership information with the Exchange Controller within 14 days of issuing securities at formation, continuation or conversion
• If enacted, companies would need to notify the Controller and file updated beneficial owner information within 14 days of any change in beneficial ownership (direct or indirect) of securities or voting rights
• If enacted, existing companies would need to update or verify their minimum required beneficial ownership information with the Controller within six months of the commencement date
• If enacted, persons served with a notice under new regulation 46A would need to provide the Controller with requested information or reports and promptly disclose facts of material significance to beneficial ownership
• Industry stakeholders were invited to submit comments on the proposed amendments to policy@bma.bm by 21 February 2018

Applies to

companies registered under the Companies Act 1981 subject to exchange control, companies with foreign (non-resident) owners, corporate service providers, particularly those holding an unlimited licence under the Corporate Service Provider Business Act 2012, limited liability companies (contemplated for similar future changes), partnerships (contemplated for similar future changes)

Deadlines

• 21st February 2018: Deadline for industry to submit comments on the consultation paper to policy@bma.bm
• not later than 14 days: Proposed deadline for companies to file or update minimum required beneficial ownership information following issue, transfer or change of beneficial ownership, under the draft Regulations
• within six months of the commencement date: Proposed transitional period for existing companies to update or verify minimum required beneficial ownership information under the draft Regulations

Related documents

• This document amends Exchange Control Regulations 1973
• This document amends Exchange Control Act 1972