ECONOMIC SUBSTANCE COMPLIANCE DURING LOCKDOWN
About Teressa Macbeth
Teressa Macbeth is a Senior Associate in the corporate practice group at MJM Limited. Her practice includes acting for multinational financial institutions, public and privately owned companies, high net worth individuals and asset managers and alternate lenders on complex, multidisciplinary financings.
In response to the global Covid-19 outbreak, the Bermuda Registrar of Companies issued a notice on 20 March, 2020 in respect of Bermuda companies’ compliance obligations pursuant to the Economic Substance Act 2018 (the “Act”).
All in-scope companies are still required to comply with the provisions of the Act, but the Registrar will now take into consideration all appropriate circumstances in line with the principles set out in the applicable Guidance Notes when assessing an entity’s economic substance compliance pursuant to the filing of an annual Economic Substance Declaration with the Registrar of Companies (“ESD”).
The particular compliance obligations that the Registrar will consider relate specifically to the attendance at meetings or observance of any other similar compliance measures in Bermuda.
Due to the restrictions on entry into Bermuda and the 14-day quarantine period in place for any arrival on the island, it is unlikely that an external designated officer of an in-scope entity will attend meetings or attend to any other similar compliance measures in person in Bermuda.
Accordingly, when filing their ESD, if an in-scope entity was unable to hold meetings or satisfy any other compliance measures pursuant to the Act, they must now provide detailed information in support of why these were unable to be met for the consideration of the Registrar.
This does not mean that in-scope entity is released from all compliance requirements under the Act. They are still required to keep detailed information evidencing their compliance with all other sections of the Act and the Guidance Notes.
The Notice suggests that the Registrar will relax the compliance obligations of ‘in person’ attendance for the period that the Bermuda’s borders remain closed only. It is not suggested that such meetings do not take place. They can continue, but should be held ‘remotely’ and via video or phone link, during this lockdown period.