Bermuda - Company Incorporation

Company Type	Time to Incorporate	Cost
Exempt	3-5 days	£5820

Company Name

The first step in the registration procedure is the reservation of a name with the Registrar of Companies, your company name can be reserved, up to three months prior to incorporation.

Minimum Share Capital

The minimum authorised and issued capital of a Bermuda company is $12,000 or, the equivalent amount in another currency.

Public Record

In Bermuda the following documents are of public record:

• Notices of the registered office
• Memorandum of association
• Certificate of incorporation
• Register of charges
• Register of shareholders
• Register of directors and officers

Disclosure

A personal declaration for shareholders greater than 5% of the outstanding share capital is required to be completed for submission to the Bermuda Monetary Authority.

Annual Audit

The requirements for the appointment of an auditor and audited financial statements may be waived if all the shareholders and directors agree that there shall be no auditor or audited financial statements.

Filing of Accounts

A Bermuda exempted company is not generally required to file accounts with the Registrar.

The types of Companies that may be incorporated in Bermuda

Bermuda companies fall into two principal categories: companies incorporated by Bermudans to trade primarily in Bermuda and companies incorporated by non-Bermudans for the purpose of conducting business outside Bermuda.

Companies falling into this category are known as exempted companies and are so called because they are exempted from those provisions of Bermuda law which stipulate that at least 60% of the equity must be beneficially owned by Bermudans.

In general terms, the Companies Act restricts an exempted company from conducting business in Bermuda.

Procedure for the incorporation of Exempted Companies in Bermuda

• The first step in the registration procedure is the reservation of a name with the Registrar of Companies
• The application to incorporate a company is then submitted to the Bermuda Monetary Authority
• The application will supply the name of the proposed company, the nature of its intended business and the proposed ownership of the company
• Approval is sought from the Authority for the intended beneficial ownership, details of which are confidential.
• Personal Declarations signed by the beneficial owners of 5% or more of the voting shares of the company must be supplied, unless the owners are already sufficiently well known to the Authority or are public companies listed on the stock exchange.
• The Memorandum of Association of the company is submitted to the Registrar. The Memorandum will state, amongst other things: the share capital of the company and its division into shares of a specified par value; whether the liability of the shareholders is limited or unlimited; the objects of the company and any powers additional to those conferred by law. The Memorandum can specify the period, if any, fixed for the duration of the company, or the event, if any, upon which the company is to be dissolved.
• The consent of the Minister of Finance is required only in respect of companies which engage in restricted activities, e.g. investment business; trust business, mutual fund business, deposit taking and money services. The Minister will require information that demonstrates that the company has adequate knowledge and experience available to it. Where the consent of the Minister is required, the time needed is usually two to three days from the date that the Authority has received all necessary information.

Organisation

The company will receive an exchange control designation from the Authority and will on the date on which the Memorandum of Association is filed with the Register of Companies have made the first payment of the annual government fee.

The signatories to the Memorandum are the provisional directors of the company who act as such until the first board of directors is elected. The provisional directors will have subscribed to the bylaws of the company (which govern the company’s internal organisation, management and administration), will allot the share capital and will convene the statutory meeting, which is deemed to be the first annual general meeting of the shareholders of the company.

At the statutory meeting, the shareholders will confirm the bylaws, elect the first board of directors and appoint auditors. The first board of directors meets immediately following its election for the purposes of, amongst other things, electing the company’s officers for the ensuing year, fixing the company’s financial year end, opening bank accounts, establishing the company’s registered office and dealing with other matters necessary to put the company in a position to commence business.

Taxation

In Bermuda there are no taxes on profits, income or dividends, nor is there any capital gains tax, estate duty or death duty.

The Bermuda Government has enacted legislation under which the Minister is authorised to give an assurance to an exempted company that 'in the event of there being enacted in these Islands any legislation imposing tax computed on profits or income or computed on any capital asset, gain or appreciation, then the imposition of any such tax shall not be applicable to such entities or any of their operations'.

The only tax imposed on an exempted company is an annual government fee, the first payment of which is made immediately upon incorporation and subsequent payments of which are made in January of each year.

Annual government fees are payable as follows where the assessable capital is:

The fee for the year of incorporation is reduced by 50% if the company is incorporated after 31 August.

Share Capital

The authorised share capital of a company may be increased by resolution of the shareholders in general meeting if authorised by the company’s bylaws. Subject to observing the prescribed procedures, a company may reduce its share capital to an amount not less than its prescribed minimum share capital. Any exempted company may, if so authorised by its bylaws and the shareholders in general meeting, divide its shares into several classes and attach thereto any preferential, deferred, or special rights, privileges or conditions; consolidate and divide its share capital; subdivide its share capital; make provision for the issue and allotment of nonvoting shares; cancel authorised but unissued shares; and change its currency denomination. In addition, a company may issue preference shares which, if authorised by its bylaws, are redeemable at the option of the company and which, if authorised by its Memorandum, are redeemable at the option of the holder. Further, the Companies Act confers on a company, if so authorised by its Memorandum or bylaws, the power to purchase its own shares. It is also clear that a subsidiary has the power to purchase shares of its parent.

Ordinarily, where a person is acquiring or is proposing to acquire shares in a company, it is not lawful for the company or any of its subsidiaries to give financial assistance, directly or indirectly, to that person for the purpose of that acquisition before, or at the same time as, the acquisition takes place, or to offset his liabilities after the event. However, this rule is relaxed if there are reasonable grounds for believing that the company is, and would after the giving of such financial assistance, still be able to pay its liabilities as they become due. In addition, the rule may be relaxed in certain other situations, subject to meeting tests set out in the Companies Act.

Companies are prohibited from issuing bearer shares. It is not possible to have shares with no par value.

The Minister is empowered to make regulations enabling title to securities to be evidenced and transferred without a written instrument. Paperless trading is also permissible when transfers are effected through any mechanism required or permitted by a stock exchange which has been approved by the Minister.

Directors

The business of a company is managed by its board of directors and the first board of directors is elected at the statutory meeting of the shareholders. The term of office of a director generally runs from one annual general meeting to the next; however, the bylaws may provide for longer terms and retirement by rotation.

Any individual may be appointed an alternate director by, or in accordance with, a resolution of the shareholders, or by a director in such manner as may be provided in the bylaws. An alternate director has all the rights and powers of a director except that he cannot attend or vote at a meeting otherwise than in the absence of the director to whom he has been appointed an alternate. The shareholders may, at any general meeting, increase the maximum number of directors and, if provided for in the bylaws, fill, or authorise the directors to fill, any vacancies created. Should a vacancy occur on the board, the remaining directors may fill such a vacancy. Directors, upon written request deposited at the registered office of the company, are entitled to receive notice of any general meeting of the company, and to attend and be heard at any such meeting.

Subject to contrary provisions in the company’s bylaws, the shareholders of a company may, at a special general meeting convened for that purpose, remove a director and appoint another person in his place.

The Companies Act requires that an exempted company have two individuals, ordinarily resident in Bermuda, who serve either:

• One as secretary and one as resident representative, or
• One as secretary and one as director, or
• Both as directors of that company.

The resident representative has prescribed duties and obligations under the Companies Act.

Board and shareholder meetings may be held by telephone. The Board may also act by unanimous written resolution.

The duties of a company’s officers which term includes directors have been codified in the Companies Act and are broadly reflective of the position at common law. Every officer, in exercising his powers and discharging his duties, must:

• Act honestly and in good faith with a view to the best interests of the company.
• Exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

A company is permitted, either by contract or in its bylaws, to indemnify its officers against, or to exempt them from, any liability attaching to them by reason of their office, other than in respect of fraud or dishonesty. A company may purchase and maintain insurance for the benefit of its officers. The Amendment Act clarifies the Bermuda law position, by permitting the indemnification of directors and officers in circumstances where there have been allegations of fraud and dishonesty. Specifically, under Bermuda law, a company is permitted to advance monies to an officer or auditor of a company for the cost of defending any civil or criminal action involving allegations of fraud or dishonesty against that officer or auditor on condition that such officer must repay the advance if the allegations are proved.

Officers

Every company must have either a President and a Vice-President, or a Chairman and a Deputy Chairman. These officers are elected as soon as practicable after the annual general meeting. In addition, a company must have a secretary and may appoint a resident representative. Other officers, such as a treasurer and an assistant secretary are optional.