Stephanie Paiva Sanderson and Sharon A Beesley of BeesMont Law provide an introduction to the Bermudan market
Bermuda has recently enjoyed a renewed interest in its international business sector whilst remaining the leading world risk capital centre as well as being a trail-blazer for insurance-linked securities (ILS). Bermuda will also be hosting the 35th America's Cup in 2017 which will give further Bermuda international exposure and have a positive impact on the country’s future infrastructure and economy.
Bermuda has implemented legislative and regulatory developments over the past two years which have invigorated Bermuda's high-net-worth client and asset management industries. Legislation was passed in 2013 making it easier and less expensive to set up funds in Bermuda and, as a result, Bermuda has been winning steady support and endorsements for its funds environment.
There are two new classes of exempt funds namely the Class A and Class B Exempt Funds. The Class A Exempt Fund can be established quickly and inexpensively as it only requires a notification to be filed with the regulatory authority, the Bermuda Monetary Authority (BMA). Same day incorporation as well as regulatory certainty allow funds to commence operations immediately within a highly efficient exempt fund regime. For managers wishing to establish a regulated investment fund, Bermuda offers both a sophisticated investment regime and a more protected retail fund.
Fund managers are encouraged to set up operations in Bermuda and the Bermuda Business Development Agency is active in promoting Bermuda in this regard including a “Business Concierge Service” to assist companies seeking to establish operations in Bermuda.
Bermuda is a cutting edge jurisdiction in the relatively new field of ILS, catastrophe bonds and other alternative risk transfer vehicles which hit a record $16 billion of listings on the Bermuda Stock Exchange by the end of 2014. A specified listings platform on the Bermuda Stock Exchange together with Bermuda-based sponsors, ILS investment managers and specialist service providers in Bermuda renders the jurisdiction the leader of the global ILS market in terms of creation, listing and servicing of ILS structures.
Bermuda also remains at the forefront of transparency and global compliance standards. Bermuda currently has 80 treaty partners, including 41 bilateral Tax Information Exchange Agreements (TIEAs) and 76 co-signatories of the Council of Europe’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Bermuda’s regulatory framework is constantly evolving to keep ahead of the curve and Bermuda has been on the OECD’s “White List” since 2009.
Bermuda serves on the Steering Group of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes. The OECD’s Common Reporting Standards will soon be in effect in Bermuda which is an early adopter of the regime. Bermuda is also seeking to obtain “third-country equivalence” with the EU’s Solvency II rules. These efforts demonstrate Bermuda’s commitment to being a world-leader in international business and add to Bermuda’s reputation as a sophisticated, reputable, jurisdiction in which to conduct business.
Any entity proposing to carry on business in or from within Bermuda through any corporate structure is vetted by the local service provider and the BMA in respect of direct and indirect beneficial ownership. Transfers of shares by non-Bermudians are also subject to review and/or control. Companies must seek consent to carry on business in designated areas. However, the BMA is internationally recognised as being a pragmatic regulator due to its sensible approach to the financial services sector by utilising a fit-for-purpose regulatory regime.
The current Government is very business-friendly and Bermuda welcomes foreign companies and its employees. In March 2015 the Government produced streamlined and informative policies related to work permits which resulted in new work permit categories being introduced. The new immigration policies are designed to attract business to Bermuda including business brought to the island by entrepreneurs and start-ups. The recently updated Job Makers legislation also provides for a well-defined path to permanent residency for long-term expatriate workers doing business in Bermuda.
Extensive industry-led updates made to Bermuda’s Limited Partnership Act 1902 took effect in May 2015. The amendments modernise Bermuda’s asset management sector and improve its efficiency and product offering. The updates grant partnerships more of the rights enjoyed by exempted companies under the law and serve to broaden Bermuda’s appeal as a top international financial centre for private equity and closed-ended investment funds. The changes include:
• Greater flexibility for internal governance
• Limited partnerships can convert to and from exempted limited companies
• A register of charges for partnerships with separate legal personality has been created
• Limited partnerships can continue and discontinue between Bermuda and other jurisdictions
• The existing safe harbour provisions for activities of limited partners when consulting or advising a general partner with respect to the business of the partnership have been clarified
Bermuda's legal system, which is based on the common law of England and Wales, is stable and has an excellent reputation especially in respect of commercial matters. Bermuda is a British Dependent Territory and has had a Westminster form of government since the 17th century. The Judiciary is established by the Bermuda Constitution as a separate and independent branch of Government.
The Bermuda court system is made up of the Court of Appeal, Supreme Court, Magistrates' Court and several tribunals. The Privy Council in England is the final right of appeal for certain cases. Bermuda also has a specialist Commercial Court and over the past five years very few hedge fund cases determined by it have been the subject of any appeal.
Bermuda has a long-established payroll tax system shared between the employer and the employee and an indirect tax system which includes The Revenue Act 1898 (for the collection of customs duty), property tax and company annual government fees.
All Bermuda taxes are jurisdiction based and exempted undertakings can obtain a tax exemption certificate in respect of certain taxes. It is therefore important to recognise that Bermuda is a low-tax jurisdiction with a well-established tax regime.
Bermuda’s standing as a premier jurisdiction is sustained through collaboration between industry and the Government with the aim of continuously reviewing legislation to ensure it responds to market evolution in an efficient, considered and well-regulated way.
Stephanie Paiva Sanderson
Hamilton
BeesMont Law
About the author
Stephanie Paiva Sanderson is a corporate attorney at BeesMont Law and practices in all areas of corporate and commercial law. Stephanie is primarily engaged in investment fund work, including establishment of funds and fund compliance as well as segregated account companies, mergers and acquisitions, corporate re-organisations, restructurings, and cross-border transactions. Stephanie also advises on corporate governance and regulatory matters. Stephanie joined BeesMont Law in 2010 and was called to the Bermuda Bar in 2011. She obtained her LPC with Distinction from BPP Law School in the UK.
Sharon A Beesley
Hamilton
BeesMont Law
About the author
Sharon A Beesley is a co-founder of the BeesMont Group and CEO of BeesMont Law Limited. She has a LLM from Cambridge University and BA (Hons) from the University of Westminster and worked for Linklaters in their London and Hong Offices for eight years. Sharon practices in all areas of corporate law with particular expertise in investment funds, structured finance, joint venture structures and mergers and acquisitions. Over the last 23 years in Bermuda Sharon has developed a recognised investment fund practice, particularly with respect to infrastructure and alternative fund strategies. She has also advised on a wide range of corporate transactions including mergers and acquisitions and general corporate governance issues. Sharon was admitted as a Solicitor in England and Wales and Hong Kong and was called to the Bermuda Bar in 1993.
Sharon is currently a member of the Asset Management Group, a committee of the Bermuda Business Development Agency, previously chaired a Bermuda investment funds industry committee and has served on numerous other voluntary business groups in Bermuda. Sharon is also a member of the BSX Listing Committee.