Sharon Beesley, co-founder of the BeesMont Group and CEO of BeesMont Law, outlines to Rani Mehta Bermuda’s attributes as a location for structuring energy and infrastructure M&A deals
What role do Bermuda companies and law have in facilitating acquisitions in the energy and infrastructure sectors in North and Latin America?
As a tax neutral jurisdiction, Bermuda offers an ideal domicile for international energy and infrastructure companies to locate a holding company for acquisitions. Funds may be moved into Bermuda, retained in Bermuda, and moved out of Bermuda without interest or capital gains tax, or currency controls.
Bermuda has a variety of vehicles which can be used depending on the needs of a specific transaction, including consortium private investment companies, which have lower annual government fees than standard companies and also allow for the payment of dividends on a cash flow solvency basis only and the return of capital without the usual share capital maintenance restrictions.
Moreover, Bermuda is at the forefront of the international tax transparency drive being one of the early adopters of the common reporting standard [CRS] developed by the Organisation for Economic Cooperation and Development [OECD] as well as signing up to both the US and UK FATCA [Foreign Account Tax Compliance Act] regimes.
What attributes does Bermuda have which separate it from other offshore jurisdictions in the context of facilitating energy and infrastructure M&A?
Bermuda is an English common law jurisdiction, which has had a a Westminster political system since the seventeenth century with an appellate recourse to the Privy Council and a specialist court (the Commercial Court, a division of the Supreme Court) which follows the UK's overriding objective of justice for commercial parties. Bermuda has a sophisticated commercial support infrastructure, including accounting, legal and corporate finance professionals.
Furthermore, Bermuda is a substance jurisdiction as a major insurance/reinsurance centre with a blue-chip reputation and secure infrastructure to name a few more of its attributes. Bermuda is also one of seven jurisdictions deemed qualified by the US National Association of Insurance Commissioners (NAIC) and recently achieved full equivalency under Europe's Solvency II regulator for insurers which puts Bermuda's commercial re/insurers on an equal footing with the EU markets and gives the EU access to Bermuda market capacity and claims-paying record.
The Bermuda Monetary Authority (BMA) has a well-deserved reputation with its risk-based pragmatic approach to regulation, which is appropriate for our sophisticated markets environment yet compliant with international standards. The BMA is a full member of IOSCO [International Organisation of Securities Commissions], a member of the group of International Finance Centre Supervisors [GIFCS] and a founding member of IAIS [International Association of Insurance Supervisors].
The BSX [Bermuda Stock Exchange] is recognised by the US Securities and Exchange Commission as a designated offshore securities market; by the UK Financial Conduct Authority as a designated investment exchange; by the UK HM Revenue & Customs as a recognised stock exchange; and by Canada's Ministry of Finance as a designated exchange.
Are there any legislation/regulatory changes enacted in the last 12 months or that are being considered that will affect how energy and infrastructure M&A transactions are completed?
Bermuda is constantly reviewing its legislation to ensure it keeps pace with global developments but there were no specifics changes in the last 12 months which would benefit energy and infrastructure M&A transactions.
More generally in the last 12 months, Bermuda has amended its partnership legislation to allow for conversion of a Bermuda exempted company to an exempted limited partnership. Further changes are proposed with respect to (inter alia) the relocation of a partnership to Bermuda and to create a safe harbour to enable LPs to investigate, approve or be advised as to the financial or business affairs of the LP without losing the protection as a limited partner.
Within the energy and infrastructure area, in which sub sectors (mining, oil and gas, power) have you seen the most activity in the past 12-18 months?
Bermuda is home to a number of multinational mining and natural resource holding companies. Many of these companies are engaged in divestitures of non-core assets as they battle the challenges of a down cycle in the resource sector. Also we have seen some M&A activity amongst these energy and infrastructure groups.
In which countries in Latin America have you seen the most activity in terms of energy and infrastructure M&A in the past 12-18 months?
None, but in 2016 we advised on the acquisition by the South African Sibanye Gold of Aquarius Platinum.
Given the opportunity what one change would you make to Bermudian company registration or M&A regulation to make the process easier for investors?
Until a few years ago Bermuda only allowed for a business combination by way of an amalgamation but now also allows for an acquisition by way of merger which provides greater flexibility in M&A transactions.
Bermuda has entered into 41 tax information sharing agreements over the last few years though it has held one with the USA since 1986, which is possibly one of the world's first such agreements.. While these are helpful in establishing Bermuda as a premier off-shore jurisdiction, multi-national companies may wish to utilise a jurisdiction with actual tax treaties. Conversely we have seen infrastructure investment in India using a Mauritian vehicle for double tax treaty benefits which in turn is owned by a Bermuda investment company, which is the vehicle for investors given the reputation and security of Bermuda.
Previously published by IFLR1000
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