Bermuda's desire to stimulate business growth and ensure that the jurisdiction continues to be globally competitive has been clearly demonstrated by recent steps taken to update the island's legal framework by adopting a wide range of new partnership and corporate legislation.
A summary of some of the key developments is set out below.
Added flexibility for partnerships
Following a significant consultation exercise, there has been a suite of changes to the partnership regime to, among other things, clarify partner responsibilities and provide useful flexibility to permit partnerships to relocate to and from Bermuda and to convert to companies and vica-versa. For example:
- partnerships established in certain jurisdictions may be registered in Bermuda by way of continuation or discontinue from Bermuda to such jurisdictions;
- an exempted partnership which has elected to have separate legal personality may convert to an exempted company with minimum disruption;
- an extension of the list of "safe harbour" activities that a limited partner can carry out without taking part in the management of a limited partnership;
- providing that a general partner shall at all times act in good faith and in the interests of the limited partnership (unless there is an express agreement to the contrary) and that a limited partner does not owe any fiduciary duties to the limited partnership or to any other partner when exercising its rights or performing its obligations under the partnership agreement.
New LLC vehicle
A new LLC Act has introduced limited liability companies (LLCs), hybrid entities commonly used in the US for private-equity funds and other asset-management structures, to the Bermuda corporate product range. The legislation is closely modelled on Delaware law and is expected to appeal to US clients and counsel who will be very familiar with LLCs.
Introduction of third party rights legislation
The Contracts (Rights of Third Parties) Act 2016 now enables persons who are not parties to a contract to benefit from and enforce the terms of such contract. The adoption of this new legislation will be of particular interest to those involved in the funds space, for example investment managers and third party service providers who may not be party to certain fund agreements but may be impacted by their terms.
Cape Town Convention
The adoption of the Bermuda International Interests in Mobile Equipment (Cape Town Convention) Act 2016 brings the island's aviation sector in line with global standards by giving Bermuda clients access to the same international standards for registration of sale contracts, security interests and legal remedies for financing default that have become accepted practice for aircraft and aircraft-engine financing globally.
These developments have been welcomed by practitioners as a positive move to keep Bermuda firmly up-to-date with changing international demands.
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