1.1 Forms of Corporate/Business Organisations
The principal forms of corporate and business organisations in Bermuda are:
- exempted companies, owned by non-Bermudians and carrying on business outside Bermuda from a principal place of business in Bermuda (or within Bermuda with other exempted companies); and
- local companies requiring at least 60% ownership by Bermudians and which carry on business in Bermuda.
Both types of companies are private companies limited by shares. It is also possible to form both exempted and local limited liability companies (LLCs).
1.2 Sources of Corporate Governance Requirements
Corporate governance requirements in Bermuda are regulated by:
- statute (notably the Companies Act 1981 (the "Companies Act"), which applies to companies, and the Limited Liability Company Act 2016 (the "LLC Act"), which applies to LLCs);
- common law principles (arising from case law relating to, for example, directors' fiduciary duties);
- a company's constitutional documents, being the memorandum of association and byelaws;
- in the case of LLCs, a limited liability company agreement; and
- in the case of companies listed on the Bermuda Stock Exchange (BSX), the BSX Listing Regulations (the "Listing Regulations").
The Bermuda Monetary Authority
Further governance requirements are established by the Bermuda Monetary Authority (BMA), the regulator of the financial services sector in Bermuda.
As the principal provider of regulatory oversight, the BMA:
- supervises, regulates and inspects financial institutions operating in or from within Bermuda conducting banking, corporate service provider, digital assets, fund administration, insurance, investment, money service or trust business;
- issues Bermuda's national currency, the Bermuda Dollar which trades at a fixed exchange rate to the United States Dollar, and manages exchange control transactions;
- assists other authorities in Bermuda with the detection and prevention of financial crime; and
- advises the government and public bodies on banking and other financial and monetary matters.
The BMA's principal mandate is to develop risk-based financial regulations that apply to the supervision of entities conducting banking, corporate service provider, digital assets, fund administration, insurance, investment, money service or trust business.
The Bermuda Stock Exchange
The BSX is the world's leading offshore fully electronic securities market, offering a full range of listing and trading opportunities for international and domestic issuers of equity, debt, depositary receipts, insurance-linked securities and derivative warrants.
The BSX is supervised and regulated by the BMA under the Bermuda Stock Exchange Company Act 1992 and promotes effective corporate governance standards through the Listing Regulations. As a self-regulatory organisation, the BSX has the statutory authority to adopt rules governing the conduct of its trading members and listed insurers including enforcement through disciplinary proceedings.
The BSX is a full member of the World Federation of Exchanges and acknowledged as meeting the highest regulatory operational standards. The BSX has a light but effective regulatory environment and is not bound by the European Listings Directive or the United States Securities Exchange Commission.
1.3 Corporate Governance Requirements for Companies with Publicly Traded Shares
For companies with shares that are publicly traded on the BSX, the Listing Regulations contain certain corporate governance requirements. The extent of these will depend upon the nature of the issuer. For example, in the case of a "domestic issuer", being a local company, the Listing Regulations include mandatory provisions to be included in the company's constitution (being the bye-laws) in relation to, among other things, directors' interests and casual vacancies arising on the board of directors. Such requirements do not apply to "international issuers", being exempted companies or companies incorporated outside Bermuda, but such issuers are required, in certain cases, to inform the BSX of certain decisions of the board of directors.
The Listing Regulations do require the directors of all issuers to act in the interests of the holders of securities as a whole, particularly where the public represents only a minority of the shareholders or where securities are non-voting
Further, if the BSX considers that any contravention of the Listing Rules is due by all or any of the directors to discharge their responsibilities, it may:
- censure the relevant director(s);
- publish the fact that the directors(s) has been censured; and
- state publicly that, in its opinion, the retention of office by the director is prejudicial to the interests of investors.
2. CORPORATE GOVERNANCE CONTEXT
2.1 Key Corporate Governance Rules and Requirements
There are no official key corporate governance rules and requirements to be drawn out in Bermuda, but there are industry specific corporate governance codes (the "Industry Codes") which are issued by the BMA in its capacity as regulator
In addition to Industry Codes, the Companies Act applies to all companies in Bermuda and codifies much of the corporate governance rules in general (with special rules for mutual funds) and, as stated, the BSX Listing Regulations provide guidance to BSX listed companies.
The following represent various Industry Codes active in Bermuda.
The Insurance Code of Conduct (the "Insurance Code")
Issued by the BMA, the Insurance Code, pursuant to the powers under section 2BA of the Insurance Act 1978 (the "Insurance Act"), established duties, requirements and standards to be complied with by insurers registered under Section 4 of the Insurance Act, including the procedures and sound principles to be observed by such persons in respect of, among other things,governance, risk management and internal controls.
Originally Published by Chambers Global Practice Guide 2021
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.