Bermuda companies fall into two principal categories: companies incorporated by Bermudians to trade primarily in Bermuda and companies incorporated by non-Bermudians for the purpose of conducting business outside Bermuda.
These two categories can be recognized as
- A company, trust, or individual who is a Bermudian within the meaning of the Bermuda Companies Act 1981 may incorporate a local Bermuda company to conduct business within Bermuda.
- Local companies must be controlled by Bermudians and ‘control’ is defined in the Companies Act 1981 as Bermudians holding sixty percent of the shares, and Bermudians forming sixty percent of the board of directors.
- Companies falling into this category are known as “exempted companies” and are so-called because they are exempted from the provisions of Bermuda law which stipulates having at least 60% of the equity to be beneficially owned by Bermudians. Permit companies (ie overseas companies which have received a permit to carry on business in or from within Bermuda) are addressed generally as exempted companies.
- In general terms, the Bermuda company law restricts an exempted company from carrying on business in Bermuda, except to the extent that it is so authorized by the constitutional documents and has been granted a license by the Minister of Finance (the “Minister”) who will form a view as to whether or not the granting of such a license is in the best interest of Bermuda. Having said that, there are certain activities that are expressly excluded from the requirement for a license.
- The minimum requirements to register company in Bermuda in the form of an exempted company are as: at least one shareholder who can be a natural person or corporation with no restrictions on nationality, one director who can also be a natural person or corporation with no restrictions on nationality (the shareholder can be appointed as a director at the same time), one resident representative or registered agent, and one registered office must be located in Bermuda and no minimum share capital.
Secondary business vehicles to register company in Bermuda can be enumerated as:
Companies Limited by Shares
- Companies limited by shares predominate in Bermuda as the business vehicle of choice. They are governed by the Bermuda Companies Act, 1981 (Companies Act).
- The key advantage of such a type of company is that a shareholder’s liability is limited to the amount unpaid on their shares. The company vehicle is therefore a method to engage in transactions that would otherwise expose a shareholder to liability. A company limited by shares is also an efficient vehicle for pooling capital, especially in cases where investors seek to negotiate different commercial rights among themselves.
- A Bermuda company limited by shares is permitted a great deal of flexibility in determining how the rights of different members or shareholders are regulated because a company’s constitutional documents can be tailored to build in different economic and/or voting rights among shareholders.
- The partnership is a popular vehicle for international ventures primarily because it is regarded in most jurisdictions (including the US and the UK) as fiscally transparent. As a general principle, tax is imposed at the partner level, not at the partnership level, and consequently, the tax position of one partner does not affect the position of any other partner.
Limited Liability Companies (LLCs)
- A limited liability company is a separate legal entity that, subject to the LLC agreement, has the capacity, rights, powers, and privileges of a natural person. Limited liability companies differ from companies limited by shares in that they are governed by the Bermuda Limited Liability Company Act of 2016 which provides that maximum effect is to be given to the principle of freedom of contract and to the enforceability of LLC agreements with respect to the formation and operation of an LLC.
Company Limited by Guarantee
- Under a company limited by guarantee, the liability of the company’s members will be limited by the memorandum to an amount as the members may undertake to contribute to the company’s assets in the event of it being wound up. These companies are used for charitable or “social” purposes and do not pay dividends.
Limited Duration Company
- This type of company will have a fixed duration and will automatically dissolve on the expiration of a period, or upon the occurrence of a specific event, as stated in the memorandum of association. The event may be a “simple” event (such as a fixed date) or a “complex” event (such as the death of a shareholder but subject to an extension or confirmation procedure).