Bermuda – Proactively Seeking to Grow its Influence as an Off-Shore Investment Jurisdiction

Bermuda has long been a favorite jurisdiction of captive insurance companies and insurance-linked investment funds. More than 70% of the $25 billion in global insurance-linked securities (ILS) volume is listed on the Bermuda Stock Exchange (BSX). In furtherance of its expanding role as a destination in the off-shore investment fund ecosystem, Bermuda has, in the last several years, updated its investment fund regulation, revised its limited partnership law and implemented the Contracts (Rights of Third Parties) Act 2016 (modelled on the UK act allowing third parties to enforce terms of contracts that benefit them). Now, Bermuda has made another step to create a more favorable jurisdiction for off-shore investments by passing the Limited Liability Company Act 2016 (LLC Act).

The LLC Act, passed by the Bermuda Senate in July 2016 and effective on October 1, 2016, authorizes the limited liability company as a business entity structure under Bermuda law. The new Bermuda law is modeled on the Delaware Limited Liability Company Act and permits flexible design of the governance, management and operation of the entity, while retaining limited liability for members (owners)—including those actively involved in the management and day-to-day affairs of the business. That familiarity may provide comfort for US investors, their advisors and fund managers alike; a clear advantage of the LLC Act is consistency and efficient process where managers align the terms of onshore Delaware LLCs with those of the newly authorized offshore Bermuda LLCs.

Other features provide comfort: formation is simple – filing a certificate of formation with the Registrar of Companies and payment of the appropriate fee. Fiduciary duties are understandable. Management of a Bermuda LLC is vested in its members or a manger chose in the manner provided in the LLC Agreement, as in US LLCs.

Why else choose a Bermuda LLC? The government’s reform efforts, coupled with a strengthening Bermuda economy, signal a business-friendly jurisdiction. The US/UK “feel” of governance and a 400-year old judicial system is an added value. The convenience of travel, sophisticated law firms and other service providers, phone calls in a Bermuda time zone and managing the expenses associated with all these factors are attractive.

Other helpful information may be found at: Bermuda Business Development Agency; Bermuda Regulatory Compliance Association Regulation, Operations and Compliance Symposium; Bermuda World Alternative Investment Summit; and the Bermuda branch of the Alternative Investment Management Association.