BERMUDA: Liberalisation of Bermuda foreign investment

Friday November 16 2012

A recent amendment to the Companies Act of 1981 has removed an impediment to foreign investment in Bermuda. The amendment facilitates Bermuda foreign investment in a broad range of industries in Bermuda by removing the requirement that such businesses shall be “controlled by Bermudians”.

The Companies Act has provided a mechanism whereby participation in the local economy is restricted to Bermudian-owned companies. The current rules are contained in Part IX (Local Companies) and the Third Schedule to the Companies Act of 1981. A 60/40 rule requires that a company must be controlled by Bermudians and that 60% of its directors must be Bermudian and 60% of its voting shares must be owned by Bermudians.

The 60/40 rule applies to all local companies, regardless of the nature of business being carried on by the company. However, the Ministry of Finance has the power to relax the application of the 60/40 rule in particular cases by granting a licence under Section 114(b).

Effective July 27 2012, the 60/40 rule was abolished in the case of certain `prescribed industries` (telecommunications, energy, insurance, hotel operations, banking and international transport services by ship or aircraft), provided that the business is being carried on `in a material way` and the company is listed on the Bermuda Stock Exchange, or if the company is a wholly owned subsidiary of such a listed company.

Since the July 2012 amendment several companies listed on the Bermuda Stock Exchange have given notice of their intention to avail themselves of the new opportunity to access foreign capital – including Keytech Limited (the holding company of The Bermuda Telephone Company Limited and various other telecommunications businesses) and Ascendant Group Limited (the owner of the Bermuda Electric Light Company Limited).