Bermuda's new Limited Liability Company (LLC) Act 2016
received assent on 27 July 2016, and will come into force in the
near future on a day to be appointed by advertisement by the
Minister of Finance.
The statute introduces a new corporate structure into Bermuda
law, the limited liability company (LLC). The LLC structure is
familiar in the fund industry. A substantial number of LLCs are
registered in Bermuda's onshore neighbour, Delaware, and under
the law of certain offshore jurisdictions. The Cayman Islands have
also recently introduced the LLC structure into Cayman law.
The Bermuda LLC Act borrows much from the structure of the LLC
as organized under Delaware law.
The LLC is a highly versatile creature, allowing for bespoke
voting rights and management authority, profit-sharing and equity
participation. The LLC may be managed by a manager, or by the
investing members. Managers may be single or multiple managers
forming a committee or committees.
This versatility makes the LLC in many respects like a Limited
Partnership. However, unlike a Limited Partnership, the LLC does
not require that at least one member have unlimited liability for
the debts of the LLC. This means, for example, that a manager may
be an LLC member or manager without facing unlimited exposure to
the liabilities of the fund.
The governance and executive administration of the affairs of
the LLC, and the rights and interrelations of members, are governed
by an LLC agreement entered into at, prior to or following
formation of the LLC. A member or manager or an assignee of an LLC
interest is bound by and entitled to enforce the LLC agreement
whether or not the member or manager or assignee executes the LLC
agreement. The LLC agreement may also provide rights to persons not
party to the LLC agreement. There are no statutory restrictions on
the provisions of the LLC agreement save that the LLC agreement
shall be governed by the law of Bermuda.
Bermuda LLCs are otherwise subject to largely the same
regime as governs Bermuda companies under the Companies Act 1981.
Bermuda LLCs may be local LLCs, owned and controlled by Bermudians,
or exempted LLCs, in which case no requirements apply regarding the
nationality or citizenship of owners and controllers. They are to
be entered on a register maintained by the Bermuda Registrar of
Companies. Exempted LLCs must have a resident representative
responsible for reporting statutory violations. The books and
records of the LLC must be maintained at the registered office
address. A register of members and a register of managers, open to
public inspection, must be maintained. Naturally, corporate
service providers will be required to undertake the same customer
due diligence into new members/ managers as they would in respect
of prospective members of a Companies Act company.
Bermuda LLCs are subject to largely the same winding up
jurisdiction of the Supreme Court as applies to Companies Act
companies, and are to be wound up very much as though they were
Companies Act companies.
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.
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