• Choose your Coordinates Wisely -- Establishing a Business in Bermuda
  • August 14, 2006 | Author: Kerri K. Rance
  • Law Firm: Cox Hallett Wilkinson - Hamilton Office
  • Bermuda is a leading offshore international financial centre with a reputation for the high quality of business transacted on and from the island.  Modern company, trust, banking, insurance and other related laws have made Bermuda an attractive jurisdiction to establish international business.  The island enjoys political and economic stability and offers a sophisticated legal system and a highly developed and technically advanced infrastructure.

     

    The Companies Act 1981 (the “Act”) is the principal statute governing the incorporation and administration of companies in Bermuda.  The Act draws a distinction between local and exempted companies. A local company is at least 60% beneficially owned by Bermudians and is entitled to conduct business in Bermuda whereas exempted companies must be at least 80% beneficially owned by non-Bermudians and may be 100% foreign owned. Exempted companies are prohibited from doing business in Bermuda except to the extent that they are so authorized by their constitutional documents and have been granted a licence by the Minister of Finance (the “Minister”) to do so.  Exempted companies may however freely carry on their business outside Bermuda from a principle place of business in Bermuda or with other exempted companies.

     

    Incorporating an Exempted Company

     

    The most common and straightforward method of incorporation is by registration.  An exempted company may be incorporated solely for the purpose of owning and operating an aircraft and indeed this is a customary practice.

     

    All incorporation applications must be made to the Bermuda Monetary Authority (“BMA”) with the relevant supporting documentation.  An application for incorporation of an exempted company by registration will include the name of the proposed company, the nature of its intended business and the proposed ownership of the company. 

     

    Any individual who is to hold more than 5% of the beneficial ownership of the company must submit a personal declaration with the application.  Where the proposed owner is a private company, it must provide audited financial statements, a list of its shareholders and a personal declaration from each of its shareholders with a beneficial ownership of 5% or more. 

     

    The Memorandum of Association will state the initial share capital of the company, the liability of shareholders (limited or unlimited), the objects/business purpose and any additional powers conferred on the company.

     

    The minimum share capital must be US$12,000 (or equivalent in a currency other than Bermuda dollars) and all shares must be subscribed and allotted although there is no legal requirement that they be paid up.  The company may have only one shareholder or any number of shareholders.  In addition the company must have:

     

    ·          a minimum of two directors ordinarily resident in Bermuda; or

    ·          a secretary who is ordinarily resident in Bermuda and a director who is ordinarily resident in Bermuda; or

    ·          a secretary who is ordinarily resident in Bermuda and a resident representative; or

    ·          in the case of a company, the shares of which are listed on an appointed stock exchange, a resident representative.

     

    Each company must maintain a registered office in Bermuda.  A company’s financial records can be kept outside Bermuda as long as quarterly accounts are kept in Bermuda.  Other than for insurance companies there is no requirement for accounts or other financial information to be filed in Bermuda.

     

    Generally incorporation of an exempt company by this method can be accomplished with 1 - 3 days. However, where special consent of the Minister is required, the expected length of time for incorporation extends to 3 – 5 days.

     

    The Memorandum of Association and any charges granted and registered over the company’s assets appear on the public file maintained by the Registrar of Companies.  In addition, each company must maintain a register of shareholders and a register of officers & directors, both of which are open to inspection by the public.  Also, if a company offers it shares for sale to the public, the prospectus must be filed with the Registrar of Companies

     

    Taxation of Exempted Companies

     

    The Bermuda Government does not impose tax on profits, income, capital gains or the transfer of shares.  Further the Minister is authorized to give an assurance that in the event of there being enacted any legislation imposing tax that such taxes will not apply to an exempted company until 2016.