Preface
This publication has been prepared for the assistance of those who are considering the formation of a company in an offshore jurisdiction for the conduct of business outside such jurisdiction, such as an exempted company established in Bermuda under the Companies Act, 1981 of Bermuda (the "Bermuda Act"), or an exempted company in the Cayman Islands ("Cayman") established under the Companies Act of the Cayman Islands (the "Cayman Act").
This publication does not deal with all types of companies that may be formed in either of the above jurisdictions, or with the laws and regulations which may be applicable to certain business activities. It deals principally with the more common corporate forms and activities. Certain procedures are summarised but they may require a number of intermediate steps. For the sake of convenience, certain abbreviations are used, such as referring to "governmental approvals", without specifying the particular body or its function.
This publication deals in broad terms with the requirements of each jurisdiction for the establishment and operation of a company. It is not intended to be exhaustive, but merely to provide brief details and information which we hope will be of use to our clients. We recommend that our clients seek legal advice in relation to each jurisdiction on their specific proposals before taking steps to implement them.
Before proceeding with the incorporation of a company in any of the jurisdictions, persons are advised to consult their tax, legal and other professional advisors in their respective jurisdiction.
For current listings of the government fees for each jurisdiction, please contact Conyers.
Conyers
| BERMUDA | CAYMAN |
| 1. TYPES OF COMPANIES | |
| Companies are generally incorporated with limited liability and perpetual existence. An exempted company may also take the form of a limited duration company, a company limited by guarantee, an unlimited liability company, a mutual fund company, a mutual company, or a segregated accounts company. | Companies are generally incorporated with limited liability and perpetual existence. An exempted company may also take the form of a limited duration company, a company limited by guarantee, a company limited by shares and guarantee, an unlimited liability company, and a segregated portfolio company. |
| 2. INCORPORATION APPROVALS | |
| The approval of the Bermuda Monetary Authority (the "BMA") must be obtained in connection with the issue or transfer of shares of all exempted companies. Signed Personal Declarations from each of the proposed ultimate beneficial owners of the company who will own, directly or indirectly, 10% or more will be required for submission to the BMA. The beneficial owners' identity must in all instances be disclosed. Certain business activities may require licensing or special approvals. | No governmental approval is required for the incorporation of a company. Certain business activities may require licensing or registration. |
| 3. INCORPORATION PROCEDURE | |
| An application for permission to issue shares of an exempted company, together with the appropriate declarations, is submitted to the BMA. In certain cases, where a company seeks to carry out restricted business activities the consent of the Minister of Finance must also be obtained. On receipt of such permission and, if necessary, consent, the memorandum of association is registered with the Registrar who issues a certificate of incorporation. Once all customer due diligence documentation is received, the incorporation process can generally be completed within 24 hours. | There is no requirement to publicise an intention to incorporate. A company is generally incorporated by delivery of two signed copies of the memorandum of association and articles of association, if any, to the Registrar. A proposed director of the relevant exempted company must submit to the Registrar a signed declaration to the effect that operation of the proposed exempted company will be conducted mainly outside Cayman. The incorporation process can be completed on an express basis within 24 hours. |
| 4. CONTINUATIONS AND DISCONTINUATIONS | |
| Bermuda law provides that companies may continue into, and discontinue out of, Bermuda. Procedures similar to those on incorporation of an exempted company apply to a foreign company applying to continue into Bermuda. Certain governmental approvals and creditor protection requirements apply to an exempted company applying to discontinue out of Bermuda. | Cayman law provides that companies may continue into and discontinue out of Cayman. |
| 5. BUSINESS RESTRICTIONS | |
| An exempted company may not carry on business within Bermuda except in so far as may be necessary for the carrying on of its business with persons outside Bermuda, and certain other limited activities. | An exempted company is not entitled to trade in Cayman with any person except in furtherance of business "carried on outside" Cayman unless the exempted company holds a licence to carry on business in Cayman under any applicable law and it may not offer any of its securities to the public in Cayman, unless it is listed on the Cayman Islands Stock Exchange. Shares of an exempted company may be acquired by other Cayman exempted companies, Cayman non-resident companies and exempted limited partnerships in Cayman. |
| 6. ECONOMIC SUBSTANCE | |
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Entities within the scope of the legislation ('registered entities') include exempted and local companies, permit companies, exempted and local LLCs and partnerships that elect to have separate legal personality, where those entities are carrying on a 'relevant activity'. Those registered entities which carry on as a business any one or more of the following relevant activities will be in scope and must comply with economic substance requirements:
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"Relevant entities" carrying on a "relevant activity" will need to comply with economic substance requirements in Cayman. "Relevant entities" include companies (other than domestic companies), partnerships (other than local partnerships) LLCs, LLPs, ELPs, and foreign registered companies and partnerships unless they are tax resident outside Cayman, or an investment fund, or a not-for-profit. "Relevant activities" include:
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| 7. NAMES | |
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The proposed name of the company can be reserved with the Registrar. The name reservation can usually be confirmed within 24 hours. The reservation of the name will subsist for a period of three months from the date of reservation. Thereafter, the reservation may be renewed. The Bermuda Act contains certain restrictions on names. The name of an exempted company must generally end with the word "Limited" or "Ltd". A Bermuda company can adopt a secondary name in non-Roman script. |
The proposed name of the company can be reserved with the Registrar on a monthly basis for a maximum of 3 months at a time. A small fee is payable for each month the name is reserved. The Cayman Act contains certain restrictions on names. An exempted company need not have the word "Limited" or "Ltd" at the end of its name. A company may have a dual foreign name in something other than Roman script. |
| 8. REGISTERED OFFICE | |
| Every company must have a registered office in Bermuda, the address of which is registered with the Registrar. The situation of the office is a matter of public record. A post office box cannot be used as a registered office. | Every company must have a registered office in Cayman recorded by the Registrar and published by public notice. The situation of the registered office is a matter of public record. On request, members of the public are entitled to be informed of the location of the registered office of any exempted company registered under the Cayman Act. A post office box cannot be used as a registered office. |
| 9. DIRECTORS, OFFICERS AND REPRESENTATIVES | |
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Each Bermuda exempted company is required to have at least one director and a secretary. A secretary of an exempted company may be an individual or a company. A director of an exempted company may be an individual or any type of legal person (including any company or association or body of persons, whether corporate or unincorporate). For practical reasons, it is most common for the office of director to be filled by an individual or a company. To satisfy the residency requirement contained in the Companies Act, the secretary or one of the directors must be ordinarily resident in Bermuda. Alternatively, a company may satisfy the residency requirement by appointing either an individual or a company to act as its resident representative in Bermuda. |
The minimum number of directors of a Cayman company is one. There is no requirement that any of the directors be resident in Cayman. Corporate directors are permitted. An exempted company may in its articles provide that a director must hold at least one share in the company. An exempted company must have such officers as are prescribed by its articles. |
| 10. SHAREHOLDERS | |
| An exempted company must have at least one shareholder. Nominee shareholders are permitted. The names of all shareholders of an exempted company must be maintained in a register of members. The register of members of an exempted company must generally be kept at its registered office and, except in the case of a mutual fund company, is open to public inspection. | An exempted company must have at least one shareholder. Nominee shareholders are permitted. The names of all shareholders of an exempted company must be maintained in a register of members. The register of members of an exempted company need not be kept at the registered office, and need not be available for inspection by the public or any governmental authority, save in the case of a notice or order under the Tax Information Authority Act. |
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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.
