Companies involved in e-commerce will have to inform the authorities if they become aware of any illegal activity on their networks under a new code of conduct to be introduced Government.

And any business that flouts the new mandatory code will face fines or could even be struck off the official registration which will give an official seal of approval to Bermuda's e-companies.

The code -- which relates to all electronic transactions by companies carrying on business in Bermuda -- states that any company either directly or indirectly involved in an activity which is against the law must remove any offensive material right away and notify the Ministry of Telecommunications and E-commerce about the offence.

The stringent code, which is enforceable by law, has been devised by Government to make sure that the blossoming electronic commerce trade is well regulated.

The code is an extension of the Electronic Transactions Act, which came into effect on October 4, 1999 and was initially revealed by the Government in the Throne Speech in November.

The Electronic Transactions Act was one of the first laws passed in the world that dealt specifically with the complexities of international e-commerce.

It sets out the legal principles of e-commerce and the processing of business to business and business to consumer transactions which is worth billions of dollars every year.

The act is also a living act, which can be changed as time goes by or as need be by the Ministry.

With the passing of the Electronic Transactions Act, the E-Commerce Advisory Board was set up and one of their first tasks is to set guidelines for the code.

Another area targeted by the code is obscene material on the net, and special guidelines are set out on how to deal with complaints about any abuses.

The codes of conduct will be applied to both e-commerce service providers and their intermediaries.

The code acknowledges that intermediaries may merely provide a conduit and not know what actual material is kept on electronic records.

But it clearly states that the intermediary will be held responsible if they become aware of any illegal goings on.

In this case they have to report the offence, naming the person or company responsible and remove the material from their site.

The code of conduct may also relate to the types of services and customers provided on the web, as well as the types of information held on a site.

Minister of Telecommunications and E-commerce Renee Webb said last week the new code, which is enforceable by law, will cover anyone engaging in e-commerce.

"We are at the forefront of e-commerce legislation,'' she said. "Bermuda was the second country in the world to implement legislation, and we are keeping ourselves ahead of the game.'' Although the Electronic Transactions Act is a live law, and can be altered without going through the house, Ms Webb will table the code when it is ready.