Litigation remedies and rights: some key differences between Bermuda and the UK

By Martin Ouwehand

While Bermuda’s legal landscape is similar to the UK in many respects, there are a number of key areas in which it differs. The purpose of this article is to underline the differences from the law or practice of the UK in three areas that have an important impact on the enforcement of claims by creditors and shareholders of Bermuda companies, namely the use of provisional liquidators, the stay of judicial proceedings to enforce arbitration agreements and the indemnities afforded to directors in a company’s constitution.

The appointment of provisional liquidators to a company is an extreme remedy that can be deployed before any final adjudication as to the validity of a creditor’s claim or the merits of placing the company into liquidation. Its effect is to replace directors with insolvency practitioners tasked with preserving records and assets, and otherwise conducting the company’s affairs. While the legal principles underpinning an appointment may be recognisable to English lawyers, the practical use of them in Bermuda may not. Bermuda does not have the UK’s administration or voluntary arrangement regimes that provide for restructuring and independent intervention into a company’s affairs before they are wound up.

In addition, freezing relief may not be as effective as it would be in the UK. The assets of the Bermuda company may consist primarily of shares in its foreign operating subsidiaries and its management may not be resident in Bermuda. In respect of non-proprietary claims, such relief normally provides for an exception for usual business transactions. The creditor has little visibility over what the foreign management may be doing to the company’s assets or affairs purportedly under that exception…

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