Bermuda: Bermuda LLCs: A New Entity In A Familiar Form - The American Lawyer

Bermuda's Limited Liability Company Act 2016 (the Bermuda LLC Act) came into force on 1 October 2016. The legislation provides for the formation and operation of limited liability companies (LLCs), which will be familiar to those with experience of Delaware LLCs. Bermuda is now one of a small number of offshore jurisdictions offering LLCs.

The Bermuda LLC Act provides for a new form of legal entity which can be used for any lawful business or activity, including trading, asset holding, financing and investment. Except as specifically provided otherwise in the LLC agreement, a Bermuda LLC will have the capacity and power of a natural person and authority to engage in any activities in connection with the business of the LLC.

A Bermuda LLC, like its Delaware counterpart, is a hybrid entity combining characteristics of a limited partnership and a corporation. The limited liability company concept was first developed in the United States, where it has become one of the most common forms of business entity, due to its flexibility and ease of operation. The central provisions of the Bermuda LLC Act were closely modelled on the corresponding provisions of the Delaware LLC legislation, so that Bermuda LLCs will look, feel and operate much like Delaware LLCs.

A Bermuda LLC is, like a corporation, a separate legal entity and its members have limited liability. However, in common with a partnership, the affairs of a Bermuda LLC are governed by an agreement, rather than by statutorily mandated constitutional documents. This provides great flexibility, as the Bermuda LLC Act, like its Delaware counterpart, expressly provides that it is to be construed to give maximum effect to the principle of freedom of contract in relation to LLC agreements – thus allowing the LLC agreement to fully reflect the parties' intentions and eliminate many of the formal constraints applicable to corporations.

The Bermuda LLC Act provides that the debts, obligations and liabilities of a Bermuda LLC, whether arising in contract, tort or otherwise, are solely the debts, obligations and liabilities of the LLC, and no manager or member of the LLC is obligated personally for the LLC's debts, obligations or liabilities solely by reason of being a member or a manager of the LLC.

A Bermuda LLC is formed by filing a Certificate of Formation with the Bermuda Registrar of Companies. The Certificate of Formation must include the name of the LLC and its registered office in Bermuda. The Certificate of Formation may be amended or corrected by similarly filing a Certificate of Amendment or Certificate of Correction respectively. Such certificates will be effective at the time of filing or at any later time specified in the certificate.

Members are admitted on the formation of the LLC or later in accordance with the LLC agreement. Members may be admitted and receive an LLC interest without any obligation to make a contribution to the LLC or may be admitted without acquiring an LLC interest. LLC interests may be assigned in whole or in part, except as provided in the LLC agreement, and members may grant security over their LLC interests. LLC interests may also be acquired by the LLC by purchase, redemption or otherwise.

Unlike corporations and limited partnerships, Bermuda LLCs are not required to have a separation of ownership and management and can be managed by their members, so there is no need for a board of directors or a general partner. Alternatively, one or more non-member managers can be appointed if that is what the parties desire.

The LLC agreement can provide great flexibility in regulating the relationship between the members, including rules for voting and governance and the basis for distributions and for allocating profits and losses. The LLC agreement can grant voting rights to all or some members or managers or to any specified class or group of members or managers on a per capita, number, financial interest, class, group or any other basis and may provide that any member or class or group of members shall have no voting rights. Member resolutions may be passed by written consents signed by members holding the necessary number of votes.

The profits and losses of a Bermuda LLC are allocated, and distributions made, among members and among classes and groups of members in the manner provided in the LLC agreement or, if the agreement is silent, on the basis of the agreed value of contributions. A Bermuda LLC may not make distributions if there are reasonable grounds to believe that the LLC would, after payment of the distribution, be unable to pay its liabilities as they become due. A member who receives a distribution when the LLC is insolvent, without knowledge of such insolvency, will not be liable to the LLC for the amount of the distribution.

Substantial flexibility also exists in relation to the extent of the duties of members and managers to the Bermuda LLC and to each other. The Bermuda LLC Act provides that any such duties (including fiduciary duties) that would otherwise exist at law or in equity may be expanded, restricted or even eliminated by the LLC agreement (except that fraud and dishonesty cannot be permitted). Bermuda LLCs also have a broad power to indemnify members and managers (except in respect of their fraud or dishonesty) and the Bermuda LLC Act expressly permits members and managers to vote in their own self-interest.

A Bermuda LLC is bound by and entitled to enforce the LLC agreement whether or not the LLC agreement is signed by the LLC. Members, managers and assignees of LLC interests are also bound by and entitled to enforce the terms of the LLC agreement. The LLC agreement may provide for specified penalties or consequences against any non-performing member, including the subordination, reduction, forced sale or forfeiture of the defaulting member's LLC interest.

Any security interest over the assets of a Bermuda LLC can be registered in Bermuda, and such registration will ensure priority under Bermuda law over any unregistered and any subsequently registered security interests, regardless of the date of creation. This provides important certainty to lenders.

As for fundamental changes, Bermuda LLCs are extremely flexible. They are able to (i) merge or amalgamate with other Bermuda LLCs; (ii) merge or amalgamate with foreign entities; (iii) discontinue from Bermuda and continue in another jurisdiction; (iv) convert to Bermuda limited partnerships with separate legal personality and (v) convert to Bermuda corporations. In addition, such limited partnerships and corporations can convert to Bermuda LLCs, and foreign LLCs can move to Bermuda by continuing as Bermuda LLCs.

There is a defined regime in the Bermuda LLC Act for winding up and dissolving Bermuda LLCs based on the well understood corresponding regime for Bermuda corporations. A Bermuda LLC will be wound up voluntarily upon the determination of the members, the expiration of the period fixed for its duration in its LLC agreement or the occurrence of an event specified in its LLC agreement.

The Bermuda LLC is a flexible commercial vehicle designed to enable parties to more easily reflect their commercial agreement in the entity's constitution. This is achieved by providing primacy to the principle of freedom of contract. Bermuda's legal framework also allows for the ease of administration and efficient operation of Bermuda LLCs.

Drawing closely on the corresponding legislation in Delaware, the Bermuda LLC Act provides for LLCs in a form that will already be familiar to many. Although Bermuda's legislation is new, it comes with the provenance of a tried and tested model.

This article was originally published in The American Lawyer, October 2016

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions