The recent amendments made to the Companies Act 1981 (the “Act”) by the Companies Amendment Act 2006 are regarded as the most significant changes to Bermuda company law in 50 years.

Notably, the minimum share capital requirement (previously $12,000 for all companies except mutual funds) has been repealed and Bermuda companies may now have unrestricted objects and the powers of a natural person. These changes have modernised the law and ensure that Bermuda remains competitive as an offshore jurisdiction for the formation of international business companies.

The amended Act also introduces simpler, more efficient company administration requirements, including electronic filings, which are aimed at reducing cost and unnecessary formalities. Existing Bermuda companies should review their bye-laws (which regulate the administration of the company) with a view to taking full advantage of the most significant changes, which are reviewed below.

New provisions have been enacted providing for the use of “electronic records” (including email and websites) for the delivery of documents. The provisions are very broad; subject to the bye-laws of a company, any requirement in the Act or the bye-laws to deliver a document to any person may be met by delivery of an electronic record in accordance with the requirements of the Act. Votes at a meeting of a company may also be communicated by electronic records.

In particular, the notice provisions in a company’s bye-laws may need to be updated to refer to these new methods of communication. Note also that delivery of electronic records to the Registrar will commence operation on a day to be appointed by the Minister of Finance and the Act provides that inspection of company records and licences at the Registrar may be facilitated by electronic record.

The Act now permits a company to acquire its own shares to be held as “treasury shares”. Previously, shares repurchased by a company were required to be cancelled. Treasury shares must be authorised by the memorandum or bye-laws of the company. The acquisition of treasury shares is subject to a solvency test and to other conditions. For example, a company may not hold all the voting shares as treasury shares. Although a company may now be entered in its register of shareholders, no rights in respect of the treasury shares may be exercised and no dividends shall be paid. Treasury shares may be held, disposed of or cancelled. These new treasury share provisions do not apply to a mutual fund.

The requirement for a company to have a common seal has been repealed. A company seal is now optional and contracts, deeds and instruments that were previously required to be executed under the seal may now be executed by alternative means, i.e. signature by persons authorised by the company, without the affixing of the seal.

The provisions regarding attestation of the use of a common seal (if one is adopted) have been clarified to state that only one signature is required. Amendment of the bye-laws will likely be necessary to take advantage of this flexibility.

The Act now permits a company to act, in lieu of a meeting of shareholders, through resolutions in writing signed by the same majority as would be required at a meeting. This replaces the previous requirement for a unanimous written resolution.

The Act imposes certain notice and circulation requirements for a resolution in writing by a majority of shareholders, which may be addressed in the bye-laws of a company. The majority written resolution procedure is not applicable to a resolution to remove an auditor or a director.

A company is no longer required to appoint officers with the specific titles of president/vice-president or chairman/deputy chairman. The provision regarding appointment of officers has been revised to provide more flexibility in the titles of officers of the company. In addition, the Act now states that officers may or may not be directors. Amendment of the bye-laws will likely be necessary to take advantage of these changes. Note that the secretary and resident representative requirements remain unchanged.

Prior to the recent amendments to the Act, there was uncertainty as to whether certain transactions, including the disposal of substantially all the assets of a company, were beyond the powers of the directors and required authorisation of the shareholders.

Some companies had addressed this concern by expressly granting this power to the Board in the bye-laws. This uncertainty has been rectified by a new provision in the Act authorising the directors of a company, subject to its bye-laws, to exercise all the powers of the company except those that are required by the Act or the bye-laws of the company to be exercised by the shareholders of the company.

The Act has retained its prohibition against indemnifying directors and officers against liability in respect of fraud or dishonesty. However, it is now certain that a company may advance monies to an officer or auditor of the company for the costs of defending any civil or criminal action involving allegations of fraud or dishonesty against the officer or auditor, on the condition that they shall repay the advance if the allegations are proved. A company that has similar provisions in its bye-laws should review the bye-laws to ensure that they reflect the language of the amended Act.

Eric Wai is a Professional Support Lawyer in the Knowledge Management Department at Appleby Hunter Bailhache. A copy of Mr. Wai’s column can be obtained on the Appleby Hunter Bailhache website 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.