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BERMUDA COMPANY AND PARTNERSHIP LEGISLATION STREAMLINED |
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A series of legislative amendments have been passed by the government of Bermuda. The amendments aim to simplify and improve the efficiency of international business in Bermuda:
The Companies Amendment Act 2009:
Improved electronic filing requirement for companies
Documents will now be deemed to have been delivered to a shareholder if posted on a website, as long as the shareholder has been advised of the website address and how to find the document. If a shareholder wishes to receive physical copies of documentation, they can notify the company which will then be obliged to provide physical documents. This will bring Bermuda in line with the US Securities and Exchange Commission’s e-commerce provisions.
Residency requirements for a Bermuda Exempted Company
The residency requirements for Bermuda Exempted Companies have been relaxed. An exempted company will now only need to appoint one Bermuda based director, secretary or resident representative in order to satisfy the requirements of the Companies Act. The secretary and resident representative can be either an individual or a company.
Amendments have been made to the following Partnership Legislation:
• The Partnership Amendment Bill 2009;
• The Exempted Partnership Amendment Bill 2009;
• The Limited Partnership Amendment Bill 2009; and
• The Overseas Partnership Amendment Bill 2009.
The main effects of these amendments are:
More efficient formation and administration requirements for partnerships
Increased efficiency in registration and administration of Bermuda exempted and limited partnerships. Partnerships will now be formed in a similar manner to the incorporation of companies.
Improved application procedure for an overseas partnership
A partnership fund is now exempt from the need to obtain a permit to carry on business in Bermuda if a person in Bermuda is engaged to attend any principal fund activities and such a fund is now permitted to advertise, and offer and accept subscriptions. |
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LABUAN CAPTIVE INSURANCE INDUSTRY RECEIVES BOOST AND LEGISLATION FOR PROTECTED CELL COMPANIES INTRODUCED |
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Exciting developments in Labuan International Business and Financial Centre (IBFC) look set to strengthen the jurisdiction’s position as a dynamic and diversified international finance centre:
Amendments to the Insurance Act 1996
Labuan-based insurance companies are now able to handle marine and aviation risks as a result of the subsection 140(1) exemption introduced on 1 April 2009. Prior to this, all risks had to be insured through a local onshore company.
Introduction of Sharia-compliant captive insurance vehicle
In a further boost to the insurance industry, a sharia-compliant captive insurance vehicle is expected to be available in Labuan within six to nine months. Labuan IBFC is already well positioned at the forefront of Islamic Finance and this will be a welcome addition to the jurisdiction’s sharia-compliant repertoire.
A captive insurance company insures the risk of its parent company. Captive insurance is a popular practice as it allows companies to self insure and manage their risk, it can also reduce costs and facilitate tax planning.
The proposed structure was presented to the Sharia Advisory Council (SIO) of the Labuan Offshore Financial Services Authority (LOFSA) in June 2009. LOFSA accepted the principle in general, however, they advised certain structural adjustments. A more detailed blueprint will be presented at the next meeting between the two bodies. It is anticipated that the model will be finalised in the autumn of 2009.
There are around 144 takaful insurers and reinsurers throughout the world and the takaful captive concept would be an important addition to Labuan’s Islamic financial product portfolio.
Labuan IBFC is also developing guidelines on sharia-compliant captive insurance that are also expected to be completed within six to nine months.
Introduction of Protected Cell Companies
Legislation for Protected Cell Companies (PCC) has had its first reading in Parliament. A Protected Cell Company (PCC) is an innovative structure which in addition to its “core” company, contains a number of segregated parts or “cells” which are legally independent and separate from the other cells and the core company. Each cell is ringfenced from the others and insolvency of one cell does not affect the others. This provision could become effective as law as early as the first quarter of 2010 and would represent another important financial product in Labuan. |
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ISLE OF MAN COMPANY LAW AMENDMENTS |
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The Financial Supervision Commission (FSC) in the Isle of Man announced that the Companies (Amendment) Act 2009 (the Act) will come into force on 1 September 2009.
The provisions of the Act extend to all Isle of Man Companies and will have immediate effect on all Isle of Man businesses.
The changes are as follows:
Company prospectuses
From 1 September 2009, the directors of a company must ensure that the company prospectus includes all material information, relating to the offer or invitation, that the intended recipients would reasonably expect to be included in order to make an informed decision. The directors must also ensure that all of the information that they were aware of or should reasonably have been aware of, at the time of issue, is included in the prospectus and that all such information is set out fairly and accurately. Previously, companies were required to comply with a specific list of information to be contained in a prospectus under Schedule 4 to the Companies Act 1931.
Before a prospectus is issued, a signed copy must be delivered to the Financial Supervision Commission for registration.
The Financial Services Commission has the power to make a direction, if it becomes aware of matters which gives it reasonable grounds to believe that the information contained in a prospectus contains false or misleading claims or that a prospectus was issued in contravention to a provision of sections 34 to 38. A copy of the direction will be placed on the company’s public file.
Registration of charges
To remove conflicts existing between the Companies Registry and the Land Registry requirements, companies will be permitted to file either the original document or a certified copy of charge instrument.
Changes to accounting provisions
The Act qualifies the accounting requirements of the Companies Act 1931. The directors of a company will be required to lay financial statements before the members in a general meeting within 18 months of incorporation and subsequently, at least once every calendar year. There will also be a reduction in the current time limit within which the financial statements are to be laid before the members before the financial year end. The new time limits are:
• within six months for a public company; and
• within nine months for a private company.
Furthermore, any member or director of the company will be able to require financial statements to be prepared, and where the company fails to do so, the member/director will be permitted to access the underlying accounting records.
There has also been an expansion of the definition of who is qualified to audit an Isle of Man company.
Treasury shares
The Act grants powers to the Financial Services Commission to permit companies, by regulations, to hold their own shares as treasury shares.
Limited Liability Companies Act 1996
The Act amends section 27(c) of the Limited Liability Companies Act 1996 in such a way that upon the retirement, resignation, expulsion or dissolution of a member, the affairs of a limited liability company will no longer be automatically wound up if a notice has not been delivered to the Commission in the prescribed form within 60 days. The company will only be wound up in such circumstances if the company’s operating agreement so provides. |
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BREAKTHROUGH DEAL BETWEEN LIECHTENSTEIN AND UK WIDENS THE SCOPE OF INFORMATION EXCHANGE |
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A breakthrough deal has been signed by HM Revenue and Customs (HMRC) and Liechtenstein widening the goalposts of tax information exchange.
Investors in Liechtenstein will be offered the opportunity to volunteer details of their undisclosed deposits. If they choose to come clean, they will have to settle their tax liabilities and they will be subject to an interest payment, however, penalties for non-disclosure will be capped at 10% of tax evaded over the past 10 years and while no guarantee of immunity has been offered, an implicit guarantee of non-prosecution for tax evasion seems to have been included within the deal.
Investors in other jurisdictions will also be in a position to settle their unpaid tax liabilities at a reduced penalty rate of 10% through a new disclosure scheme unveiled by HMRC which will run from 1 September 2009 to 12 March 2010. However, treatment under the new disclosure scheme is less favourable than that afforded to investors in Liechtenstein as tax liabilities going back 20 years will have to be settled, and some people will be subject to a 20% penalty rate if HMRC wrote to them in 2007 offering the 10% rate and they chose not to accept this.
This particular deal is unusual because Liechtenstein banks will be asked to close customer accounts if investors do not voluntarily disclose their existence and an audit will be carried out to ensure that they have done so. Investors who fail to volunteer their details will therefore risk losing their savings.
While investors may choose to move their money to accounts in other jurisdictions, this might trigger a disclosure under anti-money laundering rules.
Liechtenstein, once viewed as one of the most secretive jurisdictions, came under pressure in 2008 when Germany obtained stolen information from an ex bank employee containing details of wealthy Germans with money stashed away in Liechtenstein accounts. Subsequently, on 12 March 2009, under immense international pressure prior to the 1 April 2009 G20 London Summit, Liechtenstein pledged to ease its bank secrecy rules.
It is estimated that approximately 5,000 British investors hold between GBP2 billion and GBP3 billion in secret bank accounts in Liechtenstein.
This deal is significant as it may serve as a precedent for other jurisdictions seeking to penetrate Liechtenstein accounts. A tax information agreement has also been signed between the two countries.
The day after this deal was struck, a ruling was made opening the path for HMRC to force around 300 banks to hand over details of UK clients holding offshore accounts. The success of the ruling can be attributed in part to evidence gathering during the 2007 tax amnesty which suggested that there was a significant level of non-compliance among those with accounts offshore. |
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