The number of companies incorporated in Bermuda every year is evidence of the number of individuals who recognise the benefit of doing business in Bermuda and the value of a Bermudian company. The vast majority of these companies are created in the same way -- through incorporation under the Companies Act, 1981.

The process of incorporation in Bermuda is remarkably simple and easy to achieve, provided that the beneficial owners incorporating the company meet the Government's requirements for financial stability and reliability and the proposed purpose of the company is permitted.

One of the first decisions for the individuals incorporating a company is to determine what name to give the company. Once this has been decided, the proposed name is submitted to the Registrar of Companies for reservation.

The Registrar will review the name to determine whether it is too similar to that of an existing company, or if the name is inappropriate. If the name meets with no objections, it is reserved for a three-month period. During that period, no other company can be incorporated with the same name.

Most law firms, during their initial consultation with the client, will provide an incorporation questionnaire to assist the individual in determining the appropriate company structure. Bermuda has a number of different forms of companies that individuals incorporating may choose from.

The most common are the local and the exempted company. A local company is permitted to conduct business in Bermuda and must be at least 60 percent owned and controlled by Bermudians. An exempt company has no requirement for Bermudian ownership or control -- in fact, Bermudian ownership is limited -- and conducts its business outside of Bermuda from a place of business within Bermuda.

Most exempted and local companies are generally formed as limited liability companies. A limited liability company requires the shareholders to pay, or be liable to pay, the amount of the authorised share capital to the company.

The minimum authorised share capital of a company incorporated in Bermuda is $12,000. No upper limit is set. The annual Government fees for companies are based on the size of the company's authorised capital; the higher the capital, the higher the annual fee.

Most companies are able to manage quite nicely with the minimum authorised capital, particularly small local businesses owned by a small number of investors. Once the individual incorporating the company has decided on the authorised share capital of the company, he or she must then decide on the number of shares to be authorised and the par value, or face value, of each of those shares.

A list of the objects of the company is then prepared, based on the purpose for incorporating the company. The objects of a company are guidelines as to what activities or business the new company may be engaged in.

The individuals applying to incorporate a local company must publish in a local newspaper a notice detailing the company name, the identity of the applicant for the incorporation of the company, and the objects of the company. Exempted company incorporations do not require such an advertisement.

Once the company structure is set, the objects drafted and the advertisement placed (if necessary), the application for incorporation is submitted to the Bermuda Monetary Authority and the Registrar of Companies.

The application must contain information regarding the beneficial owners of the proposed company, the objects of the company and the company's share structure. A personal declaration providing background information on all of the proposed beneficial owners must be submitted along with the application.

The application and the character of the beneficial owners are then reviewed and, if they are approved, the Minister of Finance grants his consent, after which the Registrar of Companies produces a certificate of incorporation.

Once the company is incorporated, organisational minutes are prepared, appointing the company's officers and directors, ensuring that the shares are subscribed for and that all other matters, such as the appointment of bankers and the creation of bank accounts, are dealt with.

Upon completion of these steps, the process of incorporation is complete. The company is up and running and is able to conduct business on its own as an entity separate and distinct in law from the individuals who incorporated it.

N.B.

This is the exact same Law Matters supplement that ran in The Royal Gazette on 20th September, 2000. However do the printing problems that affected the quality of the print, it was pulled from the circulation and did not appear again until the 9th October, 2000.