Notice to the Public - Exchange Control Act 1972 (2005-06-01)

Summary

This notice from the Bermuda Monetary Authority sets out general permissions under the Exchange Control Act 1972 and its Regulations for the issue and transfer of securities of Bermuda companies involving non-residents. It replaces the need for case-by-case approval in many common scenarios, while still requiring approval or notification in others.

Non-insurance companies (Part I)

• Listed equity: If a company's Equity Securities are listed on an Appointed Stock Exchange, general permission covers issue and transfer of any of its securities to or from non-residents for as long as the listing continues.
• Unlisted, non-equity securities: General permission covers issue and transfer of securities other than Equity Securities to or from non-residents.
• Unlisted equity securities: Prior Authority approval is required for issuing or transferring Equity Securities to non-residents, except for specified exempt cases (nominee transfers with no change in beneficial ownership, transfers among existing holders below set ownership thresholds, and transfers between affiliated companies).
• Charges over securities: General permission is given for granting a charge or security interest over securities of a Bermuda exempted company to a licensed bank or lending institution in an Approved Jurisdiction, and for subsequent transfer on enforcement of that charge.

Insurance companies (Part II)

• Listed equity: Same permission as Part I applies while Equity Securities remain listed on an Appointed Stock Exchange.
• Unlisted, non-equity securities: General permission covers issue and transfer of non-equity securities to or from non-residents.
• Unlisted equity securities: Prior Authority approval is required for issuing or transferring Equity Securities to non-residents, except where the transfer keeps an existing holder's stake below 5% or below 20%, as applicable.

Conditions applying to all permissions

• Notification requirement: For issues or transfers relying on paragraphs 3, 7, or the charge provision in paragraph 4, the company must notify the Authority in writing prior to, or as soon as practicable after, the transaction; breach can result in exclusion from the general permission.
• Bermudian ownership: Local companies must continue to meet the Third Schedule requirements of the Companies Act 1981, including maintaining at least 60% beneficial ownership by Bermudians, except where section 114B applies.
• No override of other law: These permissions do not affect obligations under other legislation or policy, including Ministry of Finance policy on Bermudian share ownership and controller/shareholder notification requirements under the Trusts (Regulation of Trust Business) Act 2001, Investment Business Act 2003, and Banks and Deposit Companies Act 1999.
• Revocable: The Authority states the permissions in the notice are subject to change at any time.

Key obligations

• Companies relying on the conditional general permissions in paragraphs 3, 7, or 4 must notify the Authority in writing prior to, or as soon as practicable after, the relevant issue or transfer of securities.
• Bermuda companies falling outside the general permission thresholds for Equity Securities must apply to the Authority for prior approval before issuing or transferring Equity Securities to non-residents.
• Local companies involved in an issue or transfer of Equity Securities to non-Bermudians must ensure ongoing compliance with the Third Schedule to the Companies Act 1981, including maintaining at least 60% Bermudian beneficial ownership, except as permitted under section 114B.
• Companies must continue to comply with separate controller, shareholder controller, or notification requirements under the Trusts (Regulation of Trust Business) Act 2001, Investment Business Act 2003, and Banks and Deposit Companies Act 1999, which are unaffected by this notice.

Applies to

Bermuda companies (local and exempted), companies registered under the Insurance Act 1978, licensed banks and other licensed lending institutions in an Approved Jurisdiction

Deadlines

• prior to or as soon as practicable after the issue or transfer: Written notification to the Authority required for issues/transfers relying on the conditional general permissions in paragraphs 3, 7, and the charge provision in paragraph 4.