Update on beneficial ownership information gathering in Bermuda

Date published

09/27/2018

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There have been recent changes for Bermuda companies in relation to the gathering and registration of beneficial ownership details and more changes are on the horizon, following a consultation on proposed amendments to the Exchange Control Regulations 1973.

Beneficial ownership register

Many Bermuda-registered companies are now subject to new beneficial ownership registration requirements by virtue of the Companies and Limited Liability (Beneficial Ownership) Amendment Act 2017, although this is likely to be of limited significance for Bermuda insurers and their affiliates, given that it does not extend to companies registered under the Insurance Act 1978 or to companies whose shares are listed on an appointed stock exchange or to their subsidiaries.

Companies that are affected must maintain beneficial ownership registers at their registered offices, including details of beneficial owners and any “relevant legal entities”, and must provide beneficial ownership information to the Bermuda Monetary Authority (the BMA).

The requirements came into force on 23 March 2018 and companies had until 23 September to comply.

Exchange Control Regulations

Relatedly, on 1 February 2018, the Ministry of Finance and the BMA consulted on proposed amendments to the Exchange Control Regulations 1973.

Currently, the Exchange Control Act 1972 and Exchange Control Regulations 1973 prohibit (among other things) the issue and transfer of securities of a Bermuda company to non-residents without the permission of the Controller of Exchange (a position held from time to time by an officer of the BMA). Where the Controller’s permission is required, the BMA has hitherto used this to regulate control of Bermuda companies by requiring details of any 10% beneficial owners of such securities as a condition of providing permission.

There is currently general permission from the Controller for the issue or transfer of “non-equity” securities (i.e. securities without voting rights and which are not convertible into securities with voting rights) to non-residents.

Accordingly, to date, beneficial ownership information has not been gathered by the BMA through its Controller of Exchange functions in respect of:

  • Owners of non-voting securities (such as preference shares)
  • Residents.

The proposed amendments to the Exchange Control Regulations 1973 would require Bermuda companies to provide details of the 10% beneficial owners or controllers of their non-voting (as well as voting) securities, whether resident or not.

Where a company’s registered office address is provided by an entity with an unlimited Corporate Service Provider’s licence, the amended Regulations provide for the company to benefit from automatic Controller permission for the issue and transfer of all securities issued by the company. Accordingly, permission would no longer be needed for the issue or transfer of that company’s securities through the Controller’s online CRP system. On the other hand, this would not disapply the need for beneficial ownership information, in accordance with the above.

Feedback on the proposed amendments to the Regulations has not yet been published and it is not clear in what direction this consultation will proceed.

Comment

These changes have been made and/or proposed in light of current Organisation for Economic Co-operation and Development and the Financial Action Task Force international standards and global initiatives relating to the obtaining and maintenance of adequate, accurate and current records, and to the filing of information with a central authority, on beneficial owners of legal entities, including those persons with significant control over such entities.

Read other items in the Corporate Insurance Brief - October 2018