7 November 2005
Bermuda has undergone a raft of legislative and regulatory changes in recent months. What follows is a whistlestop tour of the most significant recent developments.
Collective investment schemes consultation
Legislation has been proposed to improve the quality of Bermuda's financial service providers and raise the level of protection for investors. It is hoped that the existing Collective Investment Scheme Classification Regulations 1998 will be enhanced by the proposed new Collective Investment Schemes Act 2005. The proposed new act would, for the first time, require persons conducting the business of fund administration with a physical presence in Bermuda to be licensed unless otherwise exempted.
The proposed legislation is currently in the consultation stage and is subject to industry comment and further amendment as it progresses through the legislative process.
EU Savings Directive
To date, the EU Savings Directive, which took effect on 1 July 2005, does not apply to Bermuda. The directive is targeted at preventing tax evasion by EU residents who make cross-border investments. Bermuda was not included in the list of dependent territories of the UK and is not, therefore, subject to the requirements of the directive or required to implement equivalent measures.
However, a Bermuda-domiciled fund whose paying agent is located in a country subject to the directive will be within the scope of the directive.
The Bermuda government is of the view that standard or institutional/professional funds were not intended to be included within the scope of the directive, and so it is presently seeking the best arrangements to ensure that Bermuda-registered standard and institutional funds are outside the scope of the directive.
Exempted Partnerships Amendment Act 2005
Section 7 of the Exempted Partnerships Act 1992 was amended to repeal the requirement for an exempted partnership to have to advertise an intention to register or to change the nature of the business of an exempted partnership.
The requirement for an exempted partnership to advertise any name change or any change in the nature of its business or its general partners has been removed. Principal representatives now have the same responsibilities as under Section 130(5) of the Companies Act 1981. In line with Section 129 of the Companies Act 1981, exempted partnerships can now hold land by way of a lease or tenancy agreement for a term of no longer than 50 years. This act became operative on 22 July 2005.
The Bermuda Monetary Authority (BMA) published a set of guidance notes in March 2005 that provide information on the application of the Insurance Act 1978, as amended by the Insurance Amendment Act 2004, and corresponding regulations.
The guidance offered by the notes reflects the minimum standard that the BMA expects insurers and other relevant parties in Bermuda to observe at all times. All parties are encouraged to come into compliance with the changes in legislation contained in the 2004 act and other matters contained in the guidance notes as soon as possible, and not later than 31 December 2005.
Limited Partnership Amendment Act 2005
The Limited Partnership Act 1883 was further amended on 4 August 2005. The amendments make it clear that a limited partnership must consist of one or more general partners. It is no longer a requirement for a person to advertise their intention to form a limited partnership in Bermuda. The responsibilities and entitlements of a resident representative are enlarged. Capital reduction provisions are now consistent with the requirements in respect of companies set out in the Companies Act 1981.
New general permissions under Exchange Control Act
As of 1 June 2005, the BMA has agreed to introduce certain new general permissions under the Exchange Control Act 1972 and regulations to help reduce the number of instances in which the BMA's specific prior consent to the issue and transfer of shares and other securities is required.
The long-term objective of the new policy is to abolish the BMA consent regime, and it is hoped that this will be enhanced further when the Ministry of Finance/BMA establishes a suitable regulatory framework for the formal regulation of corporate service providers and law firms.
Overseas Partnerships Amendment Act 2005
Section 11 of the Overseas Partnerships Act 1995 was amended on 22 July 2005 to make it possible for an overseas partnership to, among other things, hold land by way of a lease or tenancy agreement for a term no longer than 50 years. It is no longer a requirement for an overseas partnership to advertise any name change or any change to the nature of its business or its general partners.
Stamp Duties Amendment Act 2005
The 'primary family homestead' is now exempt from tax, in respect of deceased v estate, under new Sections 47A, 47B, 47C and 47D of the Stamp Duties Amendment Act 2005, effective from 1 April 2005.
In addition, the stamp duty rates applicable to certain heads of duty, as set out in the schedule to the Stamp Duties Act, have been amended. The exemption is only available to individuals having Bermudian status and individuals owning or having an interest in property situated in Bermuda. Any application for probate/administration of a Bermuda estate requires a certificate which certifies the designation of the property as the 'primary family homestead'.
Vanessa Lovell Schrum is an associate at Appleby Spurling Hunter