company law

Who is caught

The instruments indexed here combine Bermuda's general company law with several specialist regimes administered by the Registrar of Companies and the Bermuda Monetary Authority (BMA). What brings a person within scope depends on the instrument: incorporation or registration in Bermuda, carrying on a regulated activity, or dealing in controlled assets.

General company law

• Companies Act 1981: Applies broadly to local companies, exempted companies, overseas (permit) companies, mutual companies and mutual fund companies, and reaches company directors and officers, liquidators, and beneficial owners of companies.
• Winding-up: The Companies (Winding-Up) Rules 1982 apply to companies in court-supervised or voluntary winding up, together with liquidators, provisional liquidators, special managers, creditors, contributories, petitioners, the Official Receiver and the Registrar of Companies.

Corporate service providers

The Corporate Service Provider Business Act 2012 catches any person carrying on corporate service provider (CSP) business in or from within Bermuda for profit. Defined activities include company and partnership formation, nominee services, registered office and administrative or secretarial services, acting as director, officer or secretary, and resident representative functions.

Exchange control and specialist structures

• Exchange control: The Exchange Control Act 1972 and Regulations 1973 reach dealings in gold, foreign currency and securities, cross-border payments, and the issue and transfer of securities, catching authorised dealers, exempted and permit companies, partnerships, trustees, and residents and non-residents dealing in controlled assets.
• Segregated accounts companies: The Segregated Accounts Companies Act 2000 applies to companies engaged in insurance business, or any other company with the Minister's approval, that register as segregated accounts companies, including limited liability companies operating segregated accounts.
• Incorporated segregated accounts: BMA guidance addresses Incorporated Segregated Accounts Companies (ISACs) and their Incorporated Segregated Accounts (ISAs) used for insurance and hybrid structures.

Sources: Corporate Service Provider Business Act 2012 · Segregated Accounts Companies Act 2000 · Companies (Winding-Up) Rules 1982 · Companies Act 1981 · Exchange Control Regulations 1973 · Exchange Control Act 1972 · CSP Business Act 2012 - Guidance Notes: Information for Prospective Applicants (March 2020) · Guidance Notes for Incorporated Segregated Accounts Company Structures (Insurance and Hybrid Structures) (December 2020)

Key duties

The continuing obligations fall into two main groups: general company-law duties under the Companies Act 1981, and licensing and prudential duties under the CSP regime. The recurring dated filings sit with CSPs and with exempt persons.

Company-law obligations

• Beneficial ownership: Under Part VIA of the Companies Act 1981, companies must identify their beneficial owners, keep beneficial ownership information current, maintain a beneficial ownership register, and file beneficial ownership information with the BMA, complying with any related compliance measures or notices.
• Registers and accounts: Companies must keep a register of members and a register of directors and officers available for inspection, keep proper books of account, and lay financial statements before the general meeting, subject to audit requirements unless waived.
• Licensing and fees: Local companies must obtain a licence before carrying on business; overseas companies must obtain a permit; exempted companies must pay prescribed annual fees to remain in good standing.
• Amalgamations and mergers: Companies undertaking an amalgamation or merger must file the agreement and related documents with the Registrar.
• Winding up: In a winding up, liquidators must meet the procedural duties in the Companies (Winding-Up) Rules 1982, including maintaining a Bermuda address for service, preparing statements of affairs and periodic accounts, calling creditor and member meetings, and paying unclaimed money into the companies liquidation account.

CSP licensing and prudential duties

• Licence: A person must hold a BMA licence (unlimited or limited) before carrying on CSP business; applicants file the CSP application form with prescribed fees, a business plan and controller and senior executive questionnaires.
• Annual certificate of compliance: Every licensed CSP undertaking must deliver a certificate of compliance to the BMA within four months of its financial year end, confirming conduct in accordance with the minimum licensing criteria and Codes of Practice.
• Physical presence: Licensed undertakings must maintain a physical presence in Bermuda and be directed and managed from Bermuda.
• Governance and insurance: Undertakings must implement corporate governance policies appropriate to their nature, scale, complexity and risk profile, ensure the business is directed and overseen by an appropriate number of individuals and non-executive directors, and maintain appropriate insurance cover.
• Returns and client funds: Licensees must submit prudential and other annual returns unless exempted or modified, and keep client funds separate from their own.
• Controller notifications: Licensees must notify the BMA of new or increased control by a shareholder controller and of changes of controller or officer.
• Limited-licence permission: Limited licensees must obtain the BMA's prior permission before forming a company or partnership, or altering a register of members by transfer or issue of shares or interests, unless expressly not required by law.
• Gatekeeper checks: CSPs maintaining registers must not register certain share transfers, partner changes or LLC member admissions unless the required beneficial ownership notifications have first been made to the Controller of Foreign Exchange or the Authority.

Exchange control and other filings

• Controller permissions: Under the Exchange Control Regulations 1973, permission of the Controller of Foreign Exchange is required for most cross-border payments and for the issue or transfer of securities, unless a general permission applies; permit companies must keep beneficial ownership information (10% or greater threshold) up to date.
• Exempt-person declaration: A CSP relying on a conditional exemption must file an annual declaration with the BMA on or before 31 March confirming it continues to qualify and complies with its conditions.
• Segregated accounts companies: Registered SACs must disclose their status to counterparties, appoint a segregated account representative, apportion assets and liabilities to the correct account, maintain accounts and registers per account, and pay prescribed fees (for LLCs operating segregated accounts, $295 per account capped at $1,180, due by 31 January).
• Conversions: Entities converting from one legal structure to another must obtain the BMA's consent, submitting the application with the prescribed fee and full pre- and post-conversion ownership information.

Sources: Corporate Service Provider Business (Beneficial Ownership) Regulations 2017 · Corporate Service Provider Business Exemption Order 2015 · Corporate Service Provider Business Amendment Act 2014 · Corporate Service Provider Business Act 2012 · Segregated Accounts Companies Act 2000 · Companies (Winding-Up) Rules 1982 · Companies Act 1981 · Exchange Control Regulations 1973 · CSP Business Act 2012 - Guidance Notes: Information for Prospective Applicants (March 2020) · Corporate Service Provider Business Amendment Act 2017 · Notice - Conversion of Structures (2016-12-23) · Appendix V - Certificate of Compliance (Corporate Service Provider Business Act 2012)

Exemptions and carve-outs

The instruments provide exemptions chiefly in the CSP and exchange control regimes.

CSP licensing exemptions

• Fund administrators: Persons licensed under the Fund Administration Provider Business Act 2019 providing registrar and transfer services connected to their fund administration business.
• Intra-group providers: Companies carrying on CSP business only for members of their own company group (parent, subsidiaries and affiliates).
• Sole director service companies: Companies whose activities are limited to providing director services, owned by a single shareholder controller who is the sole employee providing those services.
• Insurance managers: Insurance managers providing CSP business only to licensed insurers, competent authority licensed insurers, or parent companies of insurers licensed under the Insurance Act 1978.

These exemptions may be made subject to conditions imposed by the BMA, and an exempt person must re-notify or seek licensing if its exempt status changes.

Company and exchange control carve-outs

• Overseas mutual funds: Under the Companies Act 1981, overseas companies must obtain a permit to carry on business unless exempted as a mutual fund.
• Audit waiver: The requirement to have financial statements audited may be waived, as provided in the Companies Act 1981.
• Exchange control general permissions: General permissions remove the need for case-by-case approval for many securities transactions, including issue and transfer of listed equity securities and of non-equity securities to or from non-residents, and certain nominee, existing-holder and affiliated-company transfers, subject to notification conditions and continued compliance with the Companies Act 1981 Third Schedule Bermudian ownership requirements.

Sources: Corporate Service Provider Business Exemption Order 2015 · Companies Act 1981 · Corporate Service Provider Business Act 2012 - Exemption Notification · Response to Industry Comments - Corporate Service Providers Business Act 2012 Code of Practice (2015-03-04) · Notice to the Public - Exchange Control Act 1972 (2005-06-01)

Enforcement and penalties

Enforcement powers are concentrated in the CSP Act and the Exchange Control Act. The Companies Act instruments indexed here are enforced primarily through the winding-up process rather than fixed monetary penalties.

CSP enforcement

• Unlicensed activity: Carrying on CSP business without a licence is a criminal offence, punishable on summary conviction by a fine up to $25,000 or one year imprisonment, and on indictment by a fine up to $100,000 or five years imprisonment.
• Late certificate of compliance: Failure to deliver the annual certificate of compliance exposes the undertaking to a civil penalty of up to $5,000 for each week or part week of default under section 46(2) of the Act.
• False application information: Knowingly or recklessly providing false or misleading information in a CSP licence application is an offence carrying fines up to $50,000 and/or imprisonment up to four years on indictment.
• Supervisory powers: The BMA may impose civil penalties, issue public censures, make prohibition orders, seek injunctions, issue warning and decision notices, and conduct investigations, with a right of appeal to the Appeal Tribunal under prescribed time limits.

Exchange control offences

• Breach of regulations: Contravention can attract criminal penalties (fines up to $5,000 or two years imprisonment on indictment, or larger multiples of the value involved), civil penalties up to $25,000, and forfeiture of the property concerned.
• Obstruction: Obstructing a person exercising search or evidence-detention powers under sections 3 or 4 of the Exchange Control Act 1972 is a summary offence punishable by a fine of $1,000 or three months imprisonment, or both.

AML/ATF penalties

Because CSPs are designated AML/ATF regulated financial institutions, non-compliance with the underlying AML/ATF regulations can attract fines up to $50,000 on summary conviction, up to $750,000 and/or two years imprisonment on indictment, or BMA penalties up to $10 million.

Winding up as enforcement

The BMA has successfully petitioned the Supreme Court to wind up companies for breaches, including of the Companies Act 1981 (for example, failure to maintain a registered office under sections 62 and 130), with the court ordering winding up and appointing liquidators.

Sources: Corporate Service Provider Business Appeal Tribunal Regulations 2013 · Corporate Service Provider Business Act 2012 · Exchange Control Act 1972 · Guidance Notes for AML/ATF Regulated Financial Institutions 2022 - Annex VI: Sector-Specific Guidance Notes (SSGN) for Corporate Service Provider (CSP) Business · Notice - Code of Practice Consultation Paper (2014-09-15) · Appendix I - CSP Application (Corporate Service Provider Licence) · Notice - Winding up - British Steamship Protection and Indemnity (Bermuda) Limited (2023-02-27) · Notice - Winding up - Greins Global (2021-04-20) · Winding Up - British Steamship Protection and Indemnity (Bermuda) Limited (2023-02-27) · Appendix V - Certificate of Compliance (Corporate Service Provider Business Act 2012)