Calls to speed up change to 60:40 rule
Little change has been made to the 60:40 company ownership rule after the Premier announced its reform more than a year ago, it was claimed.
David Burt pledged to revise the quota in a move designed to increase investment and boost moneymaking opportunities for Bermudians.
At the time, Mr Burt, who was also Minister of Finance, admitted the proposal would face opposition from two sides.
However, it was feared “pushback” from Progressive Labour Party supporters stalled movement on the plan.
The regulation was introduced to ensure that local companies were at least 60 per cent controlled by Bermudians.
Mr Burt announced in his 2018 Budget Statement: “We will increase access to capital for Bermudians by reforming the 60:40 rule to one that only requires 40 per cent Bermudian ownership in order to operate in the domestic economy.”
John Wight, the president of the Bermuda Chamber of Commerce, sharing his personal thoughts, said: “No major progress or changes were made since then, other than Government allowing international law firms to enter the Bermuda market.”
A Pre-Budget Report published in January stated that the PLP administration planned to relax the 60:40 rule and aimed for a “more flexible approach” to local companies seeking exemption.
Curtis Dickinson, the finance minister, said in his 2019-20 Budget Statement last week that the Government would produce guidelines for how exemptions were granted and also simplify the application process.
Mr Wight, the president and chief executive of BF&M, responded: “We will see what this means.”
He explained that an opportunity for exemption has existed under the Companies Act 1981 for “many years”.
Mr Wight added: “My belief is that if a company needs to go through the process of applying for an exemption to a rule, that doesn't provide the welcoming approach that perhaps Bermuda should be looking to adopt going forward to encourage foreign investment into Bermuda to promote competition to support Bermudian entrepreneurs who are seeking capital to start and grow their businesses.
“My own personal view is that reducing the barrier of the 60:40 rule in Hamilton should be discussed as there has been very little demand for commercial building purchases or renovations over the past ten years and this can be a way to stimulate foreign investment and create Bermudian jobs.”
Sir John Swan, the Premier of Bermuda between 1982 and 1995 who was credited for establishing the island as a major offshore financial centre, said: “60:40 is an anachronism that was put on by the so-called establishment of Bermuda when they saw what the foreigner was coming in here and doing to boost the economy and they wanted to make sure they had some control over it.
“We are living in a different world, different set of conditions, and if you don't embrace what's available, it doesn't give you many options to do very much and that's exactly where we are right now; we are in a stalemate.”
Sir John added that the deadlock applied to economic policy and immigration that could stimulate growth.
Another leading figure in the business community believed that lowering the 60 per cent ownership level would significantly widen business opportunities because “the total investor base would technically expand exponentially”.
He added: “The basic premise being that if the majority did not need to be owned by Bermudians then the number of people able to own the entity would be significantly larger.”
Sources close to political circles believed Mr Burt's plan to flip the quota met resistance from a small, but loud, number of PLP voters.
One said: “It got pushback from the people that support him.
“Some of the PLP constituents seem to have this fear about bringing in people from overseas, with their money, and thinking that they're going to take over the island or get Bermudian status and they don't want any threat from that.”
Another claimed there had also been “pushback” at a recent meeting when the matter was raised and while there was some “uneasiness”, that did not extend to the entire PLP voter base.
The source added: “Those who have a business or want to go into business, they wish to get the foreign investment to come in but they don't know if, when divvying up the profits, they should have as much as 60 per cent.”
The Royal Gazette asked the Government what progress had been made to reform the 60:40 rule since Mr Burt's statement last year, as well as whether new exemptions will be introduced, but received no comment.