Explanatory Note – Beneficial Ownership Regime Legislative Proposals (2017-09-06)

Summary

This is a joint explanatory note from Bermuda's Ministry of Finance, Ministry of Economic Development and the Bermuda Monetary Authority, issued for public consultation on draft legislation that would overhaul Bermuda's beneficial ownership disclosure regime. It attaches draft Bills (Beneficial Ownership Amendments Act 2017, Exchange Control Amendment Act 2017) and draft Exchange Control Amendment Regulations 2017, and explains the policy intent behind them. The changes are intended to align Bermuda with FATF and OECD transparency standards and with the UK beneficial ownership data-exchange arrangement.

• Scope of BO identification: Companies and LLCs would generally need to identify up to 100% of their beneficial owners (no minimum ownership threshold in the definition), with mandatory register inclusion and BMA filing required for any BO holding 10% or more.
• BO register: Every company would have to establish and maintain a beneficial ownership register containing prescribed minimum information (name, address, nationality, date of birth, or equivalent entity details), including senior managers where no individual BO is identified.
• Notices to beneficial owners: Companies would be required to issue written notices to identified or suspected beneficial owners and relevant legal entities, who must respond within one month confirming or correcting information.
• Filing with BMA: Initial BO information would need to be filed with the BMA, and subsequent changes in BO of 10% or more would need to be filed within 14 days of the triggering change, subject to duplicate-filing relief where information is already filed under the Exchange Control regime.
• Exemptions: Proposed exemptions cover companies listed on approved stock exchanges (and their wholly-owned subsidiaries), publicly-available investment funds meeting OECD criteria, and closed-ended funds using a licensed corporate service provider.
• Civil penalties: The draft Exchange Control Amendment Regulations would empower the Controller to impose civil penalties of up to $10,000 per failure to file, update or notify beneficial ownership information, with a right of appeal to the Supreme Court; other regulatory fee/penalty amounts under regulation 50 would also be increased.
• Transitional update: Existing companies would have to update or verify their current beneficial ownership information within 60 days of the regulations coming into operation, in a form directed by the Controller.

As a consultation document, none of these requirements are yet in force; they represent draft legislative proposals on which industry comment was invited, with actual commencement to be fixed later by the Minister of Finance via Gazette notice. Guidance on implementation (e.g. on risk-based approaches to sub-10% owners) was also flagged as forthcoming.

Key obligations

• Under the proposed regime, companies and LLCs would need to take reasonable steps to identify beneficial owners and, if none are identified, keep a record of the steps taken
• Companies would need to establish and maintain a beneficial ownership register containing the prescribed minimum required information for each registrable person
• Companies would need to issue written notices to identified or suspected beneficial owners and relevant legal entities, and recipients would need to respond within one month
• Companies would need to file initial beneficial ownership information with the BMA, generally within 14 days following initial registration where a CSP is used
• Companies would need to file information on subsequent changes in beneficial ownership of 10% or more within 14 days of the triggering change
• Existing companies would need to update or verify current beneficial ownership information within 60 days of the regulations' commencement
• Persons failing to comply with filing, updating or notification requirements would be liable to a civil penalty of up to $10,000 per failure
• Interested parties were invited to submit comments on the draft Bills and Regulations to the BMA or Ministry of Economic Development by 17 September 2017

Applies to

companies, limited liability companies (LLCs), corporate service providers, investment funds, closed-ended investment vehicles, beneficial owners and relevant legal entities in ownership chains

Deadlines

• 17 September 2017: Deadline for industry and interested parties to submit comments on the draft Bills and Regulations to the BMA or Ministry of Economic Development
• not later than 14 days following initial registration or entry into Bermuda: Proposed deadline for filing initial beneficial ownership information with the BMA where a licensed CSP is used
• within 14 days following a change of ownership/control or notification of a change: Proposed deadline for filing changes in beneficial ownership of 10% or more with the BMA
• within one month of receipt of notice: Proposed deadline for a person given a beneficial ownership notice to confirm, correct or supply required information
• not later than 60 days after the date of coming into operation of the Exchange Control Amendment (No. 2) Regulations 2017 (or such other period as the Minister may direct): Proposed transitional deadline for existing companies to update or verify current beneficial ownership information
• such day as the Minister of Finance may by notice in the Gazette appoint: Proposed commencement date(s) for the Exchange Control Amendment (No. 2) Regulations 2017, which may differ by provision

Related documents

• This document amends Companies Act 1981
• This document amends Exchange Control Regulations 1973