The traditional, and the most frequently used, method for an overseas company to establish a presence in Bermuda is to do so by incorporating a Bermuda subsidiary.

There is, however, an alternative.

Generally, as a matter of Bermuda law, an overseas company -- which means a body corporate incorporated outside Bermuda -- shall not engage in or carry on any trade or business in Bermuda. 

However, in some circumstances, it is possible for an overseas company to trade in or from within Bermuda, provided it obtains a permit (Permit) issued by the Minister of Finance (Minister) under the Companies Act 1981, as amended (Act).

As such, often overseas companies will apply for a Permit where it is not necessary or expedient to establish a new Bermuda company.

Overseas companies often apply for Permits, rather than following the more traditional method of incorporation, to form insurance branches, insurance intermediaries -- or to form a hub for such diverse uses as acquiring, developing, exploiting and licensing intellectual property outside Bermuda from within Bermuda.

The application procedure for an overseas company to obtain a Permit is relatively quick -- normally taking three to five days to complete -- and is based loosely on the procedure relating to the incorporation of an exempted company in Bermuda.

There are various specific requirements that are not generally required on an incorporation -- for example, the intention of an overseas company to apply under the Act to become a permit company ("Permit Company") must be advertised in a local newspaper and such advertisements should specify the company's name and the trade or business that it proposes to engage in or carry on in Bermuda.

The application must include the name and address of its proposed principal representative in Bermuda, who is a statutory officer required under the Act, and of its proposed local bankers (if any).

Documents required in support of the application include certified copies of the company's constitutional documents, its latest audited financial statements and, where appropriate, personal and financial references for the directors and beneficial owners of the company, which will provide the prescribed particulars of the company.

The Permit Company will be subject to such conditions as the Minister may think fit to impose and such conditions will be specified in the Permit.

For example, a Permit may require that the company have one or more directors ordinarily resident in Bermuda. A Permit Company is usually required to inform the Minister of any change in its beneficial ownership.

Any application for a Permit must also disclose the reasons for the overseas company seeking to obtain a Permit as opposed to incorporating an exempted company.

Overseas companies obtain a Permit for a number of reasons - some of the reasons given, which the Bermuda Monetary Authority has approved, include:

  • that it is more efficient for the mind and management of a company to operate outside of its home jurisdiction and in Bermuda;
  • Bermuda's favourable business and economic environment and the stable and efficient regulatory framework of Bermuda;
  • related to the above, Bermuda's reputation as a leading jurisdiction for (re)insurance business and its favourable regulatory regime. In such instances, such companies often give the reason of using their branch to source business through Bermuda;
  • Bermuda's sovereign rating; and
  • that the overseas company is required to be licensed as an insurer or insurance intermediary in more than one country, for various reasons relating to the overseas company's home jurisdiction.

An overseas company will also be required to obtain a Permit if it is deemed to be carrying on business in Bermuda either by the overseas company or on its behalf.

As a general matter, the issue of whether an overseas company requires a Permit is a question of fact to be determined in the light of those activities that are, or are intended to be, carried on by or on behalf of an overseas company, in or from within Bermuda.

Once a Permit Company has been established, it will be carrying on its business and will only be permitted to do so in the same manner as an exempted company, i.e. outside Bermuda from a place of business within Bermuda or with other exempted undertakings.

A Permit Company is also subject to many of the same provisions of the Act as an exempted company.

In addition, those Permit Companies that are registered as an insurer or as an insurance intermediary or other regulated entity in Bermuda -- either under the Insurance Act 1978, as amended, or otherwise -- will be subject to the same regulatory regime and scrutiny as exempted companies registered in the same manner.

While generally, it is more likely that an overseas company will wish to form an exempted company in Bermuda, it is worth considering establishing a Permit Company as an alternative.

Ultimately, many of the reasons for obtaining a Permit are similar to those supporting the incorporation of a subsidiary in Bermuda: to take advantage of Bermuda's favourable business and economic environment and the stable and efficient regulatory framework of Bermuda.

However, the main differentiating feature is where an overseas company considers that it is not necessary or expedient to establish a new Bermuda company.

Article first published in The Royal Gazette, June 2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.