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Bermuda broadens beneficial ownership regime

Josephine Noddings of Appleby

Bermuda is taking steps to preserve its reputation as a well-regarded and desired domicile for quality business by committing to implement international standards of transparency in order to support the global fight against money laundering and terrorist financing.

Over the last year, Bermuda has taken various steps to extend the existing regulatory position in order to meet these transparency standards as set forth by the Financial Action Task Force and the Organisation for Economic Co-operation and Development.

The measures being taken to broaden our beneficial ownership regime are also being driven by Bermuda’s signing of the UK Exchange of Notes Agreement in 2016 in respect of exchanges of beneficial ownership data and the development of a central registry. The new regime will ensure the fulfilment of the island’s obligations pursuant to this agreement.

While the new regulatory regime does not introduce new concepts, it does place additional regulatory obligations on companies and partnerships registered in Bermuda to vet and disclose information about their beneficial owners.

A beneficial owner in this context is an individual or individuals who own or control more than 25 per cent of the shares, voting rights or interests in a 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 (eg, by having a 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 the implementation of new, and the amendment of existing, legislation and regulations that 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.

• And 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. Additionally, in many instances, the permission of the BMA is required before the issue of, or transfer of, shares or securities in a Bermudian-registered company (although there are exceptions to this requirement).

Local companies are also required to make annual filings of shareholdings to verify that those companies continue to meet the requirement that beneficial ownership be at least 60 per cent 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.

While much of the legislation required to effect change to the beneficial ownership regime in Bermuda has received Royal Assent and became operative on March 23, 2018, there is further legislation being tabled and consulted upon that will ensure that international transparency standards are met.

We anticipate that, where not already operative, such 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.

Companies registered in Bermuda will need to ensure that they comply with the updated beneficial ownership regulations, 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 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 beneficial ownership regulations 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.

Attorney Josephine Noddings is an associate and a member of the corporate team 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