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Local companies ‘must be controlled by Bermudians’

The Bar Council has won its legal battle against a private law firm which it says safeguards the principle that companies based in Bermuda must be controlled by Bermudians.

Lawyer Richard Horseman welcomed the Court of Appeal's ruling, but pointed out it was subject to the exception of the Minister granting a company a licence to operate outside the 60/40 rule.

“It's a very important ruling and reinforces the principle that local companies operating in Bermuda have to be controlled by Bermudians,” Mr Horseman, who recently stepped down as president of the Bermuda Bar Association, said.

The civil case began in June 2016 when the Bar Council refused to grant and issue a certificate of recognition to a newly formed firm called Walkers Bermuda Limited for “public policy reasons”.

Walkers Bermuda was incorporated as a local firm in October 2015 by Kevin Taylor, who has Bermudian status and owned 99 of the shares, while his wife, Rachael Barrit owned the remaining share.

The Bar Council argued that the commercial arrangement between Walkers Bermuda and global law firm, Walkers Global, contravened the Companies Act 1981 and “the reality of the arrangement will be that company will be so beholden to Walkers Global that the latter is effectively in control of the Bermuda company”.

Walkers Bermuda took the matter to the Supreme Court where Chief Justice Ian Kawaley ruled that as the shares were held by a Bermudian who was entitled to exercise the voting rights in respect of the shares, then the company was controlled by Bermudians. Mr Justice Kawaley ruled: “The appeal is allowed on the grounds that the proposed arrangements regulating the proposed operation of Walkers Bermuda as a professional corporation under the Bermuda Bar Act are not contrary to section 114 of the Companies Act and/or public policy.”

The judgment prompted the Bar Council to take the matter to the Court of Appeal, which delivered its judgment on Friday.

In its ruling the appeal judges said that it had to look at control overall and not just focus on the share ownership and rights.

President of the Appeal Bench, Sir Scott Baker, added: “I have no doubt that when the 1981 Act speaks of control by Bermudians, it covers both corporate and commercial control.

“I have had more difficulty in deciding whether Walkers Bermuda passed the correct test. The Bar Council held it did not, and I have ultimately concluded that the Bar Council was right. I can see no basis for interfering with the Bar Council's decision as I can detect no error in their decision letter.”

Mr Horseman told The Royal Gazette that the ruling had potentially wide ranging ramifications for local companies who had a close relationship with an overseas counterpart as the ruling did not just apply to law firms.

He added: “To have our decision vindicated was certainly satisfying.

“This has been an ongoing issue for a long time.

“The Bar Council has done a substantial amount of work in considering the issue and there is still more work to be done. The Council may need to look at developing further regulations to address this issue for the future.

“The judgment is probably not the end of this issue; other applications are going to come forward.

“The Bar Council's primary concern is to ensure that if a firm is set up here; that is part of a bigger global corporation, then the work is not going to get shipped out of Bermuda.

“We want to keep the practice of Bermuda law in Bermuda.”

Horseman hails work of council

Outgoing president of the Bermuda Bar Association Richard Horseman has hailed the work of his council in fighting the Walkers Bermuda case.

He told The Royal Gazette the successful legal challenge to the Court of Appeal had taken up a great deal of time for many members of the Bar Council.

Mr Horseman, who spent two years at the helm, said he also believed the Bar Council had made great progress in the area of conditional fee arrangements.

“I'm still hopeful that progress will be made in this area,” he said. “The Government's stance that there is no compelling reason for this are just nonsensical to me. There are compelling reasons because it would give people who might not get access to justice the potential to be able to take cases to the court.

“Eventually it will happen, sooner or later, and the Bar Council has provided Government with a framework for how this can be done. A lot of people deserve credit for that.”

Mr Horseman lamented not being able to make more progress updating the professional code of conduct for lawyers.

“There is a steady stream of complaints against lawyers,” he said. “It's important to maintain confidence in the legal system and there is a system where these complaints can be processed. But this is one of the areas I could not get to; I would have liked to have made more progress with regards to an updated code of conduct.”

Welcomes ruling: lawyer Richard Horseman

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Published May 17, 2017 at 9:00 am (Updated May 17, 2017 at 8:13 am)

Local companies ‘must be controlled by Bermudians’

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