Bermuda: Bermuda Enhances Its Beneficial Ownership Regime

Last Updated: 11 July 2018
Article by Jonathan Betts and Natalie Neto

Bermuda has extended the scope of its existing legal requirements relating to disclosure of beneficial owners of corporate and legal entities in order to meet international transparency standards as recommended by the Financial Action Task Force and the Organisation for Economic Co- Operation and Development.

The intent of the amendments is to ensure that adequate and accurate information concerning beneficial owners of Bermuda companies, limited liability companies and partnerships is accessible to the regulator and law enforcement agencies and is updated on a timely basis. This had led to requirement for companies and partnerships to establish and maintain a beneficial ownership register at their registered office.

Although similar requirements were introduced in respect of Bermuda limited liability companies and partnerships, this guide deals with the requirements in respect of Bermuda companies as a result of amendments made to the Bermuda Companies Act, 1981 (the "Act").

What do companies need to do?

Unless falling within one of the exemptions below, a company must take "reasonable steps" to identify and record in the beneficial ownership register certain 'minimum required information' (as set forth in the Act) in respect of any individual who is a beneficial owner of the company and all relevant legal entities (each known as a "registrable person") that exist in relation to the company.

A "relevant legal entity" ("RLE") in relation to a company means an entity which is incorporated, formed or registered (including by way of continuance) in Bermuda or elsewhere and any legal arrangement (which includes a trust, partnership or other arrangement) which would be a beneficial owner if it were an individual.

Reasonable steps include issuing a notice to any known beneficial owners, RLEs or any person that the company has reasonable cause to believe is a registrable person. Such notice must require a person to whom it is addressed within 30 days to either state whether they are a beneficial owner or RLE, or to confirm/correct any minimum required information included in the notice and supply any missing information. A company is entitled to rely, without further enquiry, on the responses to such notices sent in good faith by it unless the company has reasonable cause to believe that such response is misleading or false.

What companies are in scope?

The following companies (or any subsidiaries of such companies) are exempted from the requirement to keep and maintain a beneficial ownership register:

  • a company whose shares are listed on the Bermuda stock exchange or an appointed stock exchange;
  • a closed-ended investment vehicle managed or administered by a person licensed under the Investment Business Act 2003 or the Investment Funds Act 2006 or registered, authorised or licensed by a foreign regulator recognised by the Bermuda Monetary Authority ("BMA");
  • a permit company;
  • a financial institution (as defined in the Bermuda Monetary Authority Act 1969); and
  • any other type of company or entity that is exempted by the Minister of Finance or any order made by him.

Who is a beneficial owner?

For the purposes of the Act, beneficial owner means (i) any individual or individuals who own or control more than 25% of the shares, voting rights or interests in the company through direct or indirect ownership; or (ii) if no such individual or individuals exist or can be identified, any individual or individuals who control a company by other means; or (iii) if no such individual or individuals exist or can be identified, the individual who holds the position of senior manager of the company.

Maintenance of the Beneficial Ownership Register

A company's beneficial ownership register must be maintained at its registered office. The beneficial ownership register must be updated in the event that a registrable person ceases to be such, or if any other change occurs which causes the minimum required information in respect of a registrable person to be incorrect or incomplete, in either case, as soon as practicable after the company is notified of such change but in any event within 14 days thereafter. Unless the company has already been provided with the minimum required information relating to the change, companies who become aware of a change must provide notice in writing to enable confirmation and verification of the minimum required information within 30 days and may update the beneficial ownership register only once such confirmation/verification is received.

Filing beneficial ownership information with the Regulator

Minimum required information in respect of the individual beneficial owners of a company is required to be filed with the BMA, which will maintain a central register of beneficial owners. For new companies, this information will be provided with the initial application to the BMA for consent for persons to become shareholders of the new company. Notification of any changes of beneficial ownership of a company must be given to the BMA as soon as possible and in any event no later than 14 days after the company has become aware or has been notified of the change.

Imposing Restrictions

If a company is unable to keep its beneficial ownership register up to date due to a person failing, without reasonable cause, to provide the company with the information required, then the company, if permitted under its bye-laws, can ultimately impose restrictions on the relevant shares by issuing a notice and following the procedure set forth in the Act. If a company's bye-laws do not contain this provision, a company may apply to court for an order directing that the shares be subject to such restrictions. The effect of imposing restrictions with respect to a relevant interest includes, but is not limited to, making any transfer of shares void, restricting voting rights and preventing payments being made by the company with respect to those shares.

Non-Compliance

There are significant penalties for non-compliance with the beneficial ownership regime. If a company is guilty of an offence due to non-compliance, and it is proved that the offence was committed with the consent or connivance of an officer of the company, such officer is also guilty of the same offence and subject to same penalties as the company itself. Offences may incur criminal and civil liability and fines range from BM$5,000 for non-compliance and BM$50,000 for knowingly providing false information. It is a defence for companies and officers to show that they took reasonable steps to identify beneficial owners for the purposes of the legislation.

The key legislative amendments were brought into operation on 23 March 2018 and require companies and partnerships to establish the beneficial ownership register and make the necessary filings within six months. Further guidance on the form of the beneficial ownership register, notices to be issued under the amended legislation and the process for making filings is expected shortly. Companies should be taking steps now to identify registrable persons in advance of release of this guidance. Taylors will issue a further advisory once this guidance is issued.

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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