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Bermuda ranked #1 for multinational operations

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Kariem Abdellatif, head of Mercator (Photograph supplied)

Bermuda is the best place for multinationals to operate based on cost and speed of operation, a new report reveals.

The island ranked ahead of second-placed Luxembourg and third-ranked Germany based on data compiled by entity portfolio management organisation Mercator by Citco in its Mercator Entity Management Report 2022.

The island was ranked 19th overall by Mercator in 2021.

Bermuda, Luxembourg and Germany were found to have an ideal combination of low-cost levels and competitive timelines and are well regarded as global financial centres, with competitive legal markets and long established corporate governance processes, Mercator said.

The organisation, which serves multinational corporations in more than 170 jurisdictions from its headquarters in Vilnius, said the report provides invaluable insight into the global management of a multinational’s entities.

The data in the report is drawn directly from Entica, the proprietary entity portfolio management technology platform of Mercator, which individually records all the activities that clients undertake when managing their entity portfolios.

As such, Mercator said, it is uniquely positioned to analyse data on a highly detailed level; unlike survey-driven reports, this analysis is specific to the entities of multinational companies.

Mercator said it is the pioneer of entity portfolio management, an industry that sits at the intersection of traditional governance services, legal technology offerings and operational support services for overseas entities. Its clients are the general counsel of multinational companies.

It said the key factors that led Bermuda to be ranked first are:

•An ideal combination of cost levels and time to complete tasks

•Availability of electronic filings for all corporate-related actions

•Service providers can act as a company secretary, which streamlines activity

•E-signatures are widely acceptable both internally and by authorities

•Only a limited, prescribed list of corporate changes require registration with authorities, allowing many changes to be implemented by internal decisions

•Companies are allowed to waive preparation and approval of financial statements

Kariem Abdellatif, head of Mercator, said: “There are two reasons why Bermuda has jumped from 19th place overall in 2021 to first place in 2022.

“Firstly, the fees for entity-related tasks have slightly reduced from last year – signifying increasing competition from legal services providers on pricing.

“Secondly, the nature of the tasks completed by entities based in Bermuda changed significantly from 2021 -- from costly, complex tasks such as board of director/shareholder decisions, ultimate beneficial owner/statutory registers and tax-related services to quicker, less costly activities such as provision of information.

“The reason for this could be that 2021 was a year in which many entity directors caught-up on regulatory factors and required corporate changes after a period of severely reduced activity in 2020, which has in turn resulted in a less complex year of information exchange in Bermuda in 2022.

“Such a dramatic change also signifies that the adoption of electronic filings and e-signatures is progressing in Bermuda at a faster pace than other global financial centres.”

Mercator said Mauritius, Malaysia and Bermuda all enjoy low cost levels, while Kazakhstan, the People’s Republic of China and Qatar are the most expensive per activity.

The organisation said overall costs in any jurisdiction are influenced by four factors: how many specialised legal and company secretarial support services there are – as a range of providers helps to reduce costs; whether the jurisdiction requires documents to be in the local language, which can add additional costs for the translation and legalisation of bilingual documents; the nuances specific to different types of companies and industries; and whether the jurisdiction has a centralised or decentralised corporate governance model.

The report showed that more flexible company regulations introduced to fit working from home arrangements during the pandemic took effect over the past year as multinationals used digitised processes to work faster and reduce the costs of managing their legal entities.

Europe is now the cheapest region for multinationals to base entities due to the permitting of new digital filing processes, and the ongoing implementation of the EU Digitalisation Directive.

A key finding by Mercator is that multinationals reduced time spent on managing legal entities by 17 per cent in the last year, with many countries across regions adopting e-signatures, virtual meetings, and online notarisations and filings.

Asia-Pacific remains the quickest region to operate as it had already implemented many of these digital processes prior to the pandemic – and refined them further since last year.

The fastest jurisdiction is Luxembourg, while Nigeria is the slowest.

Overall, local requirements are a key determinant in speed of execution, Mercator said. The majority of the bottom 20 jurisdictions do not have the option for online filings, with corporate change still needing to be filed in physical paper form. Many of these jurisdictions also require bilingual documents, with translation to local languages further extending the time to complete activities.

The People’s Republic of China, South Korea, and Taiwan are the lowest ranked countries according to the study.

Mr Abdellatif said: ““The global management of a multinational’s entities has never been more important as in-house legal and corporate secretarial teams work in a challenging environment where regulations change constantly. Out of the turmoil of the Covid pandemic, it is heartening to see that regulators and businesses have responded rapidly to the challenges of working in a new, remote working world.

“It is particularly impressive to see how the EU and APAC regions have committed to modernising company processes to fit this new digital age, with Bermuda winning overall from its digitisation drive.”

He added: “Of course, the purpose of this report is not to advise multinational companies on where to base entities or subsidiaries -- this is obviously dictated by necessity -- but to set expectations and provide foresight on the relative cost and time it takes to complete activities supporting their entity portfolio.”

Mercator by Citco: new report ranks Bermuda number one (Image supplied)

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Published November 01, 2022 at 7:40 am (Updated November 01, 2022 at 6:32 pm)

Bermuda ranked #1 for multinational operations

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