In order to preserve its reputation as a well-regarded and desired domicile for quality business, Bermuda has committed to implementing international standards to combat money laundering and terrorist financing, and to enhance transparency. Over the last year Bermuda has taken various steps to meet these standards, many of which place additional regulatory obligations on companies and partnerships registered in Bermuda, to vet and disclose information about their beneficial owners.

In addition to the need for compliance with international transparency standards, as set forth by the Financial Action Task Force and the Organisation for Economic Co-operation and Development (OECD), Bermuda signed the UK Exchange of Notes Agreement in 2016 in respect of exchanges of beneficial ownership data and the development of a central registry. The action being taken to broaden our beneficial ownership regime is therefore also being taken to ensure fulfilment of obligations pursuant to this agreement.

A beneficial owner in this context is an 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 thereof, or where no such individual(s) exist or can be identified, any individual or individuals who control a company by other means (e.g. by having right to appoint or remove a majority of the board of directors of a company), or if no such individual or individuals exist or can be identified, the individual who holds the position of senior manager of the company.

Transparency, in respect of beneficial owners, will be achieved by implementation of new, and amendment of existing, legislation and regulation which is intended to enhance Bermuda's existing beneficial ownership regime by:

  • implementing comprehensive filing on specified beneficial owners of all companies (including limited liability companies);
  • requiring notification of a change in beneficial ownership to be filed with the Bermuda Monetary Authority (BMA);
  • expanding the disclosure requirements to include other types of controllers other than members with voting rights.

The current regulatory regime requires that beneficial ownership information is disclosed to the BMA at the time of incorporation of a company, or formation of a limited liability company or partnership, and in many instances the permission of the BMA is required before the issue of, or transfer of shares or securities in a Bermuda registered company (although there are exceptions to this requirement). In addition, local companies are required to make annual filings of shareholdings to verify that those companies continue to meet the requirement for beneficial ownership to be at least 60% resident/Bermudian, with the balance of beneficial ownership being able to be held by a non-resident/foreigner. The information provided to the BMA is held in a central register, together with information on any subsequent issuance or transfer of shares or change of members. The new regime does not therefore introduce new concepts, instead it extends the existing regulatory position to ensure compliance with the international standards for transparency.

Whilst much of the legislation required to effect the change to the beneficial ownership regime in Bermuda has received royal assent, it is not yet operative and there is further legislation being consulted upon that will ensure that the international transparency standards are met, for example the BMA is currently undergoing consultation on proposed changes to the Exchange Control Act 1972 and related regulations, which governs the issue and transfer of shares and other securities by Bermuda registered companies. We anticipate that the legislation will become operative during the course of 2018, once the necessary guidance required to assist with interpretation and implementation of the legislation has been produced.

So what does this mean for you?

Companies registered in Bermuda will need to ensure that they comply with the updated beneficial ownership regulation, taking reasonable steps to identify and maintain a register of their beneficial owners and filing information regarding beneficial owners with the BMA. Where a corporate service provider (CSP) is engaged by the company, the company will need to comply with such requirements as the CSP may specify in order for it to meet its obligations to obtain, vet and file beneficial ownership information.

Failure to comply with the beneficial ownership regulation can lead to a fine of up to $5,000, and knowingly providing false information to the BMA can lead to a fine of up to $50,000.

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.