company law

Who is caught

The Companies Act 1981 is Bermuda's principal companies statute, governing the formation, operation, financing, restructuring and winding up of companies. It applies broadly and is administered by the Registrar of Companies, with the Bermuda Monetary Authority (BMA) taking the lead on beneficial ownership matters. A number of specialist instruments sit alongside it for particular structures and for the businesses that service companies.

• Company types under the Companies Act: Local companies, exempted companies, overseas (permit) companies, mutual companies and mutual fund companies, together with their directors, officers, liquidators and beneficial owners.
• Segregated accounts companies: The Segregated Accounts Companies Act 2000 lets insurance-business companies, and any other company with the Minister's approval, register as segregated accounts companies (SACs) and operate ring-fenced segregated accounts; limited liability companies operating segregated accounts are also caught.
• Incorporated segregated accounts structures: BMA guidance describes Incorporated Segregated Accounts Companies (ISACs) and their Incorporated Segregated Accounts (ISAs) under the Incorporated Segregated Accounts Companies Act 2019, which are licensed as insurers and may also conduct investment fund or digital asset business.
• Corporate service providers: The Corporate Service Provider Business Act 2012 catches persons carrying on corporate service provider business (CSP business) in or from Bermuda, including 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 subjects: The Exchange Control Act 1972 and the Exchange Control Regulations 1973 apply to authorised dealers, exempted and permit companies, foreign and Bermudian controlled companies, partnerships, trustees, and residents and non-residents dealing in gold, foreign currency or securities.

The Companies (Winding-Up) Rules 1982 are procedural court rules that apply to companies subject to Bermuda court winding-up proceedings and to the liquidators, petitioners, creditors and contributories involved.

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 · Guidance Notes for Incorporated Segregated Accounts Company Structures (Insurance and Hybrid Structures) (December 2020)

Key duties

Continuing obligations differ by instrument. The clearest recurring, deadline-bearing duties fall on corporate service providers, segregated accounts companies, and companies subject to beneficial ownership and exchange control requirements.

Recurring filings and deadlines

• CSP certificate of compliance: Every licensed CSP undertaking must deliver a certificate of compliance to the BMA within four months of the end of its financial year, confirming the business was conducted in accordance with the minimum licensing criteria and Codes of Practice, under section 46 of the Corporate Service Provider Business Act 2012.
• CSP exemption declaration: A person relying on a CSP licensing exemption that is subject to conditions must file an annual declaration with the BMA on or before 31 March each year confirming continued qualification and compliance.
• SAC annual fee: A registered limited liability company operating segregated accounts must pay an annual fee of 295 dollars per segregated account, capped at 1,180 dollars in aggregate, due on or before 31 January each year.
• CSP annual returns: CSP licensees must submit prudential and other annual returns under Part 8 of the CSP Act unless exempted or modified by the Authority.

Beneficial ownership

• Companies Act register: Companies must identify their beneficial owners, keep beneficial ownership information current, maintain a beneficial ownership register, and file beneficial ownership information with the BMA under Part VIA.
• Permit company notification: A permit company must notify the Controller within 14 days where a transfer of beneficial ownership causes a beneficial owner to reach a 10% or greater threshold, and permit companies have a continuing duty under the Exchange Control Regulations 1973 to keep 10%-plus beneficial ownership information up to date.
• CSP gatekeeping: A CSP maintaining a register of members, partners or LLC members must not register share or coupon transfers, general partner changes, or LLC member admissions unless the required beneficial ownership notifications have first been made under the Exchange Control Regulations, the Limited Partnership Act 1883, the Exempted Partnerships Act 1992 or the Limited Liability Company Act 2016.

Licensing, governance and records

• Company licences and permits: Local companies need a licence to carry on business in Bermuda, overseas companies need a permit unless exempt as a mutual fund, and exempted companies must pay prescribed annual fees to stay in good standing.
• CSP licence and physical presence: CSP business requires a BMA licence (unlimited or limited class); licensees must maintain a physical presence in Bermuda, be directed and managed from Bermuda, implement corporate governance policies, maintain appropriate insurance cover, and keep client funds separate from their own.
• Limited licence permissions: Limited-licence CSPs must obtain the Authority'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.
• 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 unless waived.
• SAC duties: A SAC must file prescribed registration particulars, disclose its SAC status to counterparties, appoint and maintain a segregated account representative, and apportion assets and liabilities to the correct account with proper records for each.
• Controller notifications: CSP licensees must notify the Authority of new or increased control by a shareholder controller and of changes of controller or officer.

Winding up and conversions

• Liquidator duties: In a winding up, liquidators must maintain a Bermuda address for service (and, following the 2020 amendment, satisfy residency and credential requirements), advertise and verify petitions, prepare statements of affairs and audited accounts, call creditor and contributory meetings, pay unclaimed funds into the companies liquidation account, and follow the prescribed release procedure.
• Structure conversions: Entities converting between structures (for example exempted company to exempted limited partnership, or company to LLC) must obtain the BMA's consent, apply by letter with the prescribed fee, and supply full pre- and post-conversion ownership details and the Schedule 1 statutory documents.
• Exchange control permissions: Unless a general permission applies, the Controller's permission is required before dealing in gold or foreign currency outside an authorised dealer, making cross-border payments, or issuing or transferring securities involving non-residents; companies relying on certain general permissions for securities must notify the Authority before or as soon as practicable after the transaction.

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 · Corporate Service Provider Business Amendment Act 2017 · Appendix V - Certificate of Compliance · Notice - Conversion of Structures (2016-12-23) · Notice to the Public - Exchange Control Act 1972 (2005-06-01)

Exemptions and carve-outs

The main express carve-outs concern CSP licensing and exchange control. The Companies Act regimes themselves also distinguish among company types rather than exempting them.

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 corporate group (parent, subsidiaries and affiliates).
• Sole director service companies: Companies whose CSP activity is limited to 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 the parent companies of insurers licensed under the Insurance Act 1978.

These exemptions are set out in the Corporate Service Provider Business Exemption Order 2015 and confirmed in the Authority's response to industry comments; a person whose exemption carries conditions must file the annual declaration described above and re-notify or apply for a licence if its status changes.

Exchange control general permissions

• Listed equity: Where a company's equity securities are listed on an Appointed Stock Exchange, general permission covers issue and transfer of its securities to or from non-residents while the listing continues.
• Non-equity securities: General permission covers issue and transfer of securities other than equity securities to or from non-residents; unlisted equity securities generally still require prior Authority approval, subject to specified exempt cases and ownership thresholds.
• Charges over securities: General permission is given for granting a charge over securities of a Bermuda exempted company to a licensed bank or lending institution in an Approved Jurisdiction, and for transfer on enforcement.

Other carve-outs

• Overseas companies: Under the Companies Act 1981, overseas companies need a permit to carry on business unless exempted as a mutual fund.
• Audit waiver: Financial statements are subject to audit unless the audit requirement is waived.
• Corporate governance policy scope: The October 2013 Corporate Governance Policy for trust, investment business and investment funds licensees expressly excludes investment funds themselves and corporate service providers from its scope.

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) · Corporate Governance Policy for Trust (Regulation of Trust Business) Act 2001, Investment Business Act 2003, and Investment Funds Act 2006 (October 2013)

Enforcement and penalties

Enforcement powers and penalties are concentrated in the corporate service provider and exchange control instruments; the Companies Act 1981 itself is described here as the framework rather than a source of specific fine amounts.

CSP enforcement

• Unlicensed CSP business: Carrying on CSP business without a licence is a criminal offence, punishable by up to 25,000 dollars or one year imprisonment on summary conviction, and up to 100,000 dollars or five years on indictment.
• Late certificate of compliance: Failure to deliver the annual certificate of compliance as required exposes the undertaking to a civil penalty of up to 5,000 dollars for each week or part week of default under section 46(2).
• False information: Knowingly or recklessly providing false or misleading information in a CSP licence application is an offence under section 60, carrying fines up to 50,000 dollars and imprisonment up to four years on indictment.
• BMA disciplinary powers: The Authority may impose civil penalties, issue public censures, make prohibition orders, seek injunctions, issue warning and decision notices, and conduct investigations, including requiring production of documents and rights of entry.
• Appeals: Decisions such as licence restrictions, revocations, refusals, civil penalties, public censure, controller removals and prohibition orders may be appealed to the Appeal Tribunal, generally within 10 or 28 days depending on the decision type.

Exchange control offences

• Breach of regulations: Breach can attract criminal penalties (fines up to 5,000 dollars or two years imprisonment on indictment, or larger multiples of the value involved) or civil penalties up to 25,000 dollars, plus forfeiture of the property concerned.
• Obstruction: Obstructing a person exercising search or evidence-detention powers under sections 3 or 4 is a summary offence punishable by a fine of 1,000 dollars or three months imprisonment, or both.
• Prosecution control: No prosecution under the Exchange Control Act or its regulations may be brought without the consent of the Director of Public Prosecutions.

Winding up as enforcement

The BMA has successfully petitioned the Supreme Court to wind up companies under the Companies Act 1981 for breaches of regulatory requirements, as in the winding up of a Class 1 insurer and a Class 2 insurer whose failings included not maintaining a registered office contrary to sections 62 and 130 of the Companies Act 1981.

For CSPs designated as AML/ATF regulated financial institutions, BMA guidance notes significant civil and criminal penalties under the underlying AML regulations (fines up to 50,000 dollars on summary conviction, up to 750,000 dollars and/or two years imprisonment on indictment, or BMA penalties up to 10 million dollars).

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 · Appendix V - Certificate of Compliance · Appendix I - CSP Application (Corporate Service Provider Licence) · Winding Up - British Steamship Protection and Indemnity (Bermuda) Limited (2023-02-27) · Winding Up - Greins Global Ltd. (2021-04-20)