Incorporating a Bermuda Company Made Easier

Incorporating a Bermuda Company Made Easier

Bermuda now boasts a new licensing and supervisory regime for professional corporate service providers designed to enhance the efficiency of incorporations in Bermuda. The changes, which came into effect at the start of the year, are regarded as good news for Bermuda as they will eliminate double vetting, decrease the need for due diligence on shareholders with voting rights of less than 10 percent and improve the efficiency of registration by using an electronic system that gives immediate results.

In the ideal case a company could now be formed and registered within an hour.

The new regime was established under the Bermuda Corporate Service Provider Business Act (“the CSP Act 2012”) which came into effect on January 1^st, 2013.

This legislation establishes a new licensing and supervisory regime for professional corporate service providers (“CSP”) who act as agents for the formation of corporate entities and provide corporate secretarial services (such as company formation agent, nominee shareholder and administrative and secretarial services to companies or partnerships). Under this new regime, a CSP must comply with the requirements of the CSP Act 2012 and also with the Corporate Service Provider (Beneficial Owner) Regulations 2012, The Proceeds of Crime Act 1997 and the Regulations made thereunder. It is important to note that a CSP will be included in the definition of “AML/ATF” regulated financial institutions under Bermuda’s anti-money laundering regulations.

Here is a snapshot of the difference the Act will make and what it will mean for companies looking to do business in Bermuda:

1. The CSP Act 2012 streamlines the procedures for forming non-regulated Bermuda companies. The Bermuda Monetary Authority (the “BMA”) will no longer review the pre-vetting on each non-regulated Bermuda formation application, which will allow for speedier issuances of certificates of incorporation or certificates of partnership formation. The pre-vetting will be the responsibility of the licensed service provider. In addition, the requirement to obtain permission from the Controller of Foreign Exchange for share issuances and transfers will be eliminated.
2. Coupled with changes on the pre-vetting of potential owners of Bermuda, the BMA announced on 18^th of February, 2013, that the disclosure requirements for company formations would be established at a threshold at 10 percent or more of voting rights. This change allows for less onerous due diligence information on shareholders owning less than 10 percent of a Bermuda registered company. The policy shift from 5 percent to 10 percent took immediate effect.
3. The Registrar of Companies (the “ROC”) has announced its plan to introduce an electronic registration system scheduled to go online as of the 1^st of April, 2013. Under this system a CSP licensed under section 11 of the CSP Act 2012 can obtain instant approval on a company name. This is a change for the better as there is no waiting and this means that the registration of the company or partnership can proceed immediately. Essentially, registration of a new formation of a company or the formation of a partnership may soon be done electronically and a certificate of incorporation or certificate of partnership can be issued electronically and signed with a digital signature. The advantage of a digital signature is that physical signing of documents is eliminated (along with the delay that tends to go with it) and certificates can be received upon successful completion of electronic filing.

The three changes mentioned above:

1. the elimination of pre-vetting by the BMA
2. reduction of disclosure requirement for a company formation for shareholders of 10% or more of voting rights, and
3. the ROC electronic filing system proposed to become effective on April 1^st, 2013

will ameliorate the formation of new companies and partnerships by decreasing the amount of time spent in the vetting and registration process.