Explanatory Memorandum for Corporate Service Provider Business Act 2011

Summary

This is an explanatory memorandum accompanying the Bermuda Monetary Authority's consultation on the proposed Corporate Service Provider Business Act 2011. It explains the rationale and key features of the draft Bill, which would create a licensing and prudential oversight regime for corporate service providers (CSPs), mirroring the Authority's existing powers over investment business and trustees.

• Definition and scope: Section 8 defines corporate service provider to cover both company/partnership formation and provision of administrative and secretarial services; the Minister may extend or limit the scope.
• Professional director exclusion: A person acting solely as a professional Director providing only their own director services is excluded from the Bill.
• Licensing requirement and offence: Section 8 would make it an offence to carry on CSP activities without a licence; the Bill is expected to come into force in January 2012, with existing operators given 12 months from commencement to become licensed.
• Exemptions: Section 9 allows exemption of certain activities or persons, with the Authority considering exemptions for already-licensed entities servicing their own clients and for CSPs servicing only members of their own corporate group.
• Fees: Section 13 proposes fees prescribed under the Bermuda Monetary Authority Act 1969, with a proposed flat fee of $20 per entity serviced by the CSP, set out in the Second Schedule.
• Minimum licensing criteria: The First Schedule sets minimum criteria for licensees, with criterion 5 underpinning the Bill's core regulatory concept.
• New enforcement powers: The Bill would introduce civil penalties, public censure, prohibition orders and injunctive powers, which the Authority intends to extend to its other regulatory Acts within six months.
• Exchange control changes: Proposed transitional amendments to the Exchange Control Act 1972 and Regulations 1973 would give deemed consent for share issuances and transfers by companies administered by licensed CSPs, via either an expanded General Permission or a Controller exemption.
• Consequential amendments: Related amendments are proposed to the Companies Act 1981, Companies (Forms) Rules 1982, the Exempted Partnerships Act 1992 and the Limited Partnership Act 1883 to reflect a revised registration process.

The memorandum invites public comment on the draft Bill, to be sent to the Authority's policy email address; it does not itself impose binding obligations but sets out what will apply once the Bill is enacted.

Key obligations

• Once enacted, entities carrying on corporate service provider activities without a licence would commit an offence under Section 8
• Entities already carrying on CSP activities when the Act commences would be required to become licensed within 12 months (transitional provision)
• Licensees would be required to meet the minimum criteria set out in the First Schedule, including criterion 5
• Licensees would be liable to pay a proposed fee of $20 per entity serviced, under Section 13 and the Second Schedule
• Interested parties are invited to submit comments on the Bill to policy@bma.bm

Applies to

corporate service providers, professional directors, licensed investment business entities, trustees, companies administered by licensed corporate service providers, exempted partnerships, limited partnerships

Deadlines

• January 2012: Expected date the Corporate Service Provider Business Act 2011 would come into force
• 12 months from commencement: Transitional period for entities already carrying on CSP activities to become licensed
• unspecified: Deadline for submitting comments on the draft Bill to policy@bma.bm is not stated in the text