Bermuda has a longstanding reputation as a high-quality jurisdiction in which to domicile an offshore fund, whether as a stand-alone vehicle or the now-familiar master/feeder structure.

What follows is an overview of some recent changes, current developments and those anticipated in the near future, all of which are intended to ensure that this reputation is preserved.

After collaboration between the Bermuda Government, Bermuda Monetary Authority (BMA) and industry stakeholders, a 2013 amendment to the Investment Funds Act 2006 introduced two new classes of exempt funds: the Class A Exempt Fund (Class A Fund) and Class B Exempt Fund (Class B Fund).

The defining features of a Class A Fund are light touch regulation and speed to market. Subject to certain eligibility requirements (broadly experienced/high value investors with a manager licensed in a recognised jurisdiction or with $100 million of assets under management) the fund can be launched immediately upon filing with the BMA.

If the Class A Fund qualifications surrounding the investment manager are not met, a Class B Fund may be appropriate. Class B Funds also benefit from a less onerous regulatory regime, although an application to the BMA is required.

Bermuda is one of the few jurisdictions where legislation permits the appointment of managing trustees. A managing trustee, who may be an investment manager, may be appointed as co-trustee with another trustee (often referred to as a custodian or administrative trustee). This enables the trust instrument to provide the managing trustee with exclusive control over management of the fund’s investments with the administrative trustee not liable for the acts or omissions of the managing trustee.

During 2014, Bermuda introduced a regime to provide for reservation of powers in trusts. In a unit trust investment fund context, Bermuda’s reserved powers regime enables investment and other powers to be reserved or granted to an investment manager without the investment manager being regarded as a trustee. The legislation provides that the trustee shall not be liable for a breach of trust simply because it implemented the directions of the person (e.g. the investment manager) to whom the powers have been reserved or granted.

Bermuda’s managing trustee and reserved powers regimes enable investment managers, respectively as managing trustees or as non-trustee power-holders, to make and implement investment and other decisions quickly without having to persuade a licensed trustee or co-trustee that the transaction is in the interests of the unitholders.

Amendments to Bermuda’s partnership law (Partnership Amendments) came into force in December 2015. The Partnership Amendments include an extension to, and clarification of, the safe harbour provisions of the Limited Partnership Act 1883 by setting out a more comprehensive description of the specific acts that do not amount to engaging in the conduct of the business of a limited partnership so as to avoid a limited partner incurring liability. Partnerships are now also able to convert into companies and companies into partnerships.

On March 28, 2016 the Bermuda Contracts (Rights of Third Parties) Act 2016 became operative. The legislation allows persons who are not a party to a contract to enforce its terms. Of particular interest from a funds perspective is that fund documentation that often contain indemnities in favour of third parties, such as investment management agreements, can now be enforced directly by such third parties.

The Companies Act 1981 has been amended to provide for the requirement that a Register of Directors of Bermuda companies must be lodged with the Registrar of Companies, where it will be publicly available for inspection.

The Register of Directors must contain the following information with respect to each director of a Bermuda company:

• An individual, his present first name, surname and address; or

• A company, its name and the address of its registered office.

Although an additional requirement, it is not as onerous as some of those found in other offshore jurisdictions where there is a requirement to be registered or licensed with a governing body, in some instances pay certain yearly fees, and thereafter be subject to extensive disclosure and regulatory requirements.

Legislation, drawing upon Delaware law, has been approved by MPs in Bermuda to introduce limited liability companies (LLCs). Such vehicles would be broadly similar to Delaware LLCs and therefore familiar to those who currently operate in the asset management space. The Bermuda LLC should allow for consistency across the constitutional documents of onshore and offshore vehicles within a fund structure.

Additionally, the European Securities and Markets Authority (ESMA) intend to assess certain non-EU countries, inclusive of Bermuda, for their eligibility to be extended the Alternative Investment Fund Managers Directive Passport. Such recognition would enable the managers of Bermuda funds to market their funds and services throughout Europe without the need to undergo further approvals in each member state. Bermuda is dedicated to working together with ESMA to show that it is deserving of such recognition.

It is evident that Bermuda is committed to further developing its status as a high quality jurisdiction for funds, which is good news for investors and fund managers alike.

Lawyer Max Tetlow is an Associate within the Corporate Department and lawyer Ashley Fife is a Senior Associate in the Private Client and Trusts Department at Appleby. A copy of this column is available on the firm’s web site at www.applebyglobal.com.

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.