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The launch of a Bermuda business

This week is the latest in the Bermuda Investment Primer Series, Chapter 2, Part 4 — Stocks and the Launch of a Bermuda Business.

The family ownership of Mamazina's Pizzarina (our hypothetical company) decide to incorporate their fast-growing pizza business. The continued viability of operating as an informal proprietorship is fading as management hierarchy blurs — too many people telling each other what to do; the major contributors to the business's success are very concerned that their legal claim to a piece of this pie is not a sure thing; cash flow for expansion has strained family resources — increasing credit line limit at a local bank is not guaranteed.

They will need additional capital infusions from new investors sooner rather than later, but first, the business has to become a real, legally legitimate entity.

Readers, for those of you just scrolling, allow me to fill you in. The investing process is explained simply by using a parallel narrative of a hypothetical Bermuda pizza business to demonstrate that — in order for an investor to choose an investment, an entity must first exist in the commercial environment. In this series, the focus is solely on entities that have corporate shareholder ownership. Yes, there are other investment structures: master limited partnerships, sole traders, private-equity structures, municipal organisations, trusts, foundations, etc. Generally, however, small investors start with purchasing well-known local or global corporate stock.

The parallel narrative also includes vignette pieces based upon managing a business to success. After all, if the new business does not get off the ground from vision to viability, there won't be an opportunity to issue stock to the original shareholders and later, to the general public.

Where does publicly-traded stock come from? Generally, from corporate entities “going public” by issuing stock in a much touted initial public offering to the public that can then be bought / sold and traded freely in public capital markets investing domain.

Public stock usually starts in original form as privately owned (or held as it is referred to in investing terms). We know that just about every single business organisation first started with an idea that grew into a tiny microbusiness, owned by just a few people, privately, that became so successful, upward growth exploded exponentially, and the rest is history. Millions upon millions own the following publicly-traded stocks.

Amazing examples include publicly traded companies such as: Apple — started in his parent's garage by Steve Jobs and Steve Wozniak: Microsoft, an idea conceived by Bill Gates and Paul Allen; Facebook, launched while at Harvard by Mark Zuckerberg, Eduardo Saverin, Andrew McCollum, Dustin Moskovitz, and Chris Hughes; FedEx started with an economics research paper by student Frederick Smith while at Yale. Lore has it that Mr Smith received an average grade — implication that such a expeditious delivery idea was not feasible; and Google, the largest search engine in the world derived from a research PhD project put together by Larry Page and Sergey Brin at Stanford University. As of mid-2015, Google reported employing more than 57,000 people worldwide.

At the other end of the success spectrum is where the very tiny Bermudian Pizzarina business stands today — on the verge of incorporation. Are the owners planning for future expansion that just might include “going public?” We shall see!

We focus on some major incorporation points from the Bermuda Companies Act 1981** (consolidated and more than 200 pages). The MamaZina Pizzarina corporate attorney will be charged with complete attention to all pertinent details.

Part 2 — Incorporation of Companies, pages 41-53

• Trademark name must be registered.

• Company formation can be limited by share amounts or guarantee. A special report on these concepts will be developed for a future article.

• The company memorandum states the amount of share capital contributed and the percentage allocations to members.

• The company byelaws are defined by the original subscribers (and local law). They regulate the transfer of shares and the registration of estate representatives of deceased shareholders;

• The keeping of its accounts, books, minutes, and availability to the members;

• An audit of the accounts of the company once at least in every year — the very same process (on a much smaller scale) as that of auditing Bermuda Government accounts. Those little IOU notes in the Pizzeria cash drawer? No dipping in the company till (borrowing) allowed of any type without the consent of the members.

• The duties of the secretary.

• The number of members to constitute a quorum vote at any general meeting.

• What kind of members, how company contracts are authorised.

• Allotment and transfer of shares, dividends, duties, functions, remuneration, voting rights and restrictions, conduct of its affairs, and defined good corporate governance, and many more items.

Part 6 — Management and Administration, pages 73-99

This section defines the shareholder list, director election, voting rights, protection against corruption, prohibition of loans to directors without approval, insurance of, exemption and indemnification and liability of officers, minority shareholder protections, bankruptcy provisions and winding up.

Incorporation costs are real and necessary when weighed carefully against the tedious process and cost of managing a solvent profitable company; the ambition to succeed; financial security for the family; a continuing legacy for the children, grandchildren and related parties; protection from creditors; and an enduring financial contribution to the community in jobs and related benefits.

Finally, whether an incorporated company remains a private concern within a family or opens its doors to everyone in the general public who wants to have ownership of shares in its success, the Bermuda Companies Act 1981 Compendium regulations is a necessary and vital component for its formation, good corporate governance, and continued operations.

We covered just a few of the regulations in the space permitted, but many more will be added over time at the website in the Bermuda Investment Primer Series section

Martha Harris Myron CPA PFS JSM: Masters of Law — International Tax and Financial Services, Pondstraddler Life Financial Perspectives for Bermuda islanders with multinational families and international connections on the Great Atlantic Pond. Contact:


The Bermuda Companies Act 1981 (Consolidated) courtesy of Conyers, Dill & Pearman, Bermuda

Bermuda Laws Online at

Humble beginnings: FedEx started as an idea presented in a paper by Fred Smith, who heads the global logistics firm today

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Published February 11, 2017 at 8:00 am (Updated February 11, 2017 at 12:37 am)

The launch of a Bermuda business

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