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Bermuda has the largest population in a British overseas territory in the North Atlantic Ocean. Bermuda is in the world’s highest per capita income. Because of its dependence on the financial sector, Bermuda was hit hard by the global downturn during COVID. The public debt has increased stands USD 3.35 billion. Bermuda has solid anti-money laundering legislation. Bermuda has 41 agreements Tax Information Exchange Agreements with other jurisdictions. Bermuda has signed nine income tax settlements across the. The Association for Economic Co-operation and Development (OECD) has developed Bermuda on its “white list” of countries with transparent tax practices. Bermuda is a signatory of the convention on mutual assistance in tax matters with other jurisdictions. Accordingly, it automatically exchanges tax information annually with over 100 partner countries that belong to the convention. Here we will discuss the Overview of Incorporation of Company and Types of Company in Bermuda.
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Incorporation of a Bermuda Company is a straightforward process. The Registrar of Companies (ROC) enlists all companies in Bermuda. It incorporates exempted companies, local companies, foreign sales Corporations, and offshore companies under the guidelines of The Companies Act 1981. The Companies Act initially came into operation on 1st July 1983.
There are a few types of entities available in Bermuda. We will discuss four types: the limited company, company liability limited by guarantee, and unlimited liability company. While incorporating a Bermuda company, the limited company restricted the liability of its shareholders and investors.
Here are some details on the four different kinds of companies mentioned under the Companies Act of 1981:
In Bermuda, the Limited Liability Company is formed under the Companies Act of 2016. However, it is suitable for small and medium-sized businesses.LLC in Bermuda must have at least one member, or each member isn’t responsible for the company’s operation results except for the contributions to the LLC. The members of the LLC are subject to handle the management of the limited liability company.
2. Exempt Company
The main advantage of an exempt company is the complete exemption of the profit, and commonly used for international transactions. They are liable for holding investments and conducting businesses outside of Bermuda only within the amounts unpaid to their shares.
This company can have one director and one shareholder, either natural or legal. The company must maintain the register of its members and beneficiary owners. The exempted companies are not subjected to paying corporate tax in Bermuda but are liable to pay an annual fee based on their authorised share capital. The status of an exempt company should be mentioned in its statutory documents. Such a company must hold an annual general meeting at least once yearly.
3. Permit Company
A permit company is suitable for overseas companies eligible to conduct business activities upon obtaining a permit or license from the Minister of Finance. Such a company will have a place for business in Bermuda after obtaining a permit with an option to carry out business outside the jurisdiction. Appointing a representative is needed for the liability to occur.
4. Mutual Funds Company
This type of company is registered under Bermuda Monetary Authority and is limited by shares with statutory capital to provide its members’ funds for their mutual benefit. Such members’ liability is limited to the amount unpaid to their shares and makes them comply with the applicable regulations and requirements.
5. General Partnership
In a general partnership, the business activities are conducted by two or more partners jointly while they bear the same joint liability for all the results of such business undertakings. General Partnership is not subject to income tax. Instead, partners are individually responsible for paying taxes on their share of the partner’s income.
6. Limited Partnership
A limited partnership in Bermuda is governed by the Limited Partnership Act 1883, which sets out some rules. This type of company can be arranged by (i) one or two persons who are general partners responsible for the management and its outcomes jointly and severally and (ii) one or more persons who aren’t liable for any debts of such a partnership. It must be registered with the Bermuda Registrar of Companies. This type of company is not subjected to pay income tax in Bermuda.
A trust is a legal arrangement where an entity transfers assets to a trustee to benefit one or more beneficiaries. Bermuda Trusts is recognised and enforceable both in Bermuda and offshore. However, it is not permitted to conduct trading activities.
In Bermuda, there are no taxes on benefits, pay, or profits paid to a Bermuda company or its investors. Additionally, no estate tax, capital gains tax or death duty is levied on Bermudian citizens. Only shareholders who are residents of Bermuda are subject to paying tax to Bermuda Gov. In the incorporation of a Bermuda company, tax regulations do not require the company to pay dividends.
It allows exempted companies to get legal protection from the Minister of Finance under the Exempted Undertakings Tax Protection Act of 1966 in Bermuda. This protection ensures that Bermudian law changes to impose a tax on income, profits, or capital asset gains; those taxes will not be charged to exempted companies under the Exempted Undertakings Tax Protection Act of 1966. The Minister of Finance in Bermuda grants these assurances when companies make such requests before the authority.
There is no stamp duty concerning any instrument executed by an exempted company. Stamp duty is a government tax levied on legal documents in Bermuda. Such documents transfer real estate or other assets from one party to another. There is no stamp duty on an instrument concerning an interest of an exempted company. However, the government may collect stamp duty concerning transactions involving property in Bermuda.
2. Minimalist shareholder requirement
Under the Companies Act of 1981, businesses require only one director and one shareholder to be incorporated in a Bermuda company. However, LLCs only require one member and director.
3. Tax reporting requirements
The Bermudian law only requires the following items for the exempted company in the incorporation of a Bermuda company:
The regulations only require Bermuda-exempted companies to make one annual filing. Regulators call this the Statutory Declaration. This filing lists the authorised share capital.
4. Aircraft registration
The Bermuda Aircraft Register has a solid international reputation for registering aircraft for personal use. The Bermuda Department of Civil Aviation (BDCA) regulates such registrations. The BDCA maintains internationally recognised standards for licensing, operating, and maintaining private aircraft in Bermuda.
However, incorporating a Bermuda company offers tax benefits, economic stability, security and data protection, making it an attractive location for businesses and individuals looking to incorporate a company in Bermuda.
The memorandum of association and by-laws of an exempted company in Bermuda form a constitution. The memorandum of association is a document with the registrar in Bermuda. It is used as a public document. The memorandum of association of an exempted company is made accessible for public inspection upon request at the registrar’s office.
An exempted company’s by-laws prescribe the rights and duties of the corporation, its shareholders, and its directors. It is not generally accessible to the public domain.
Exempted companies are legally authorised to have a registered office in Bermuda. The address of the office must be on the document with the registrar.
As per rules in Bermuda, the corporation requires to have one director and one secretary in general. The secretary can be a person or a company. The director of an exempted company is an individual or any other legal entity person. The secretary or the director shall be a resident of Bermuda to fulfil the residency requirement.
In exempted companies, the directors can act as the company’s officers in Bermuda. The company appointed a secretary whose duty is to participate in all meetings of the directors and investors. The secretary has the duty of maintaining the company’s financial records.
The corporations in Bermuda are legally allowed to hold bank accounts within the territory or, in some cases, outside of the territory.
Bermuda companies are duty-bound to maintain accounting records about business activities. These records must be kept on the document for five years.
The company’s by-laws should describe the ability to affix the seal.
Exempted companies in Bermuda are legally required to declare a financial year-end.
Shareholders of a Bermuda company appointed the company’s auditors. They are responsible for maintaining the remuneration of the auditor. They may also delegate the responsibility to the board of directors. This requirement can be waived if all the shareholders and directors agree in writing or at a general meeting where minutes are taken.
The exempted companies in Bermuda must have at least one shareholder and director according to Bermuda law. A shareholder may hold their shares as a nominee for another person.
Incorporating a company in Bermuda can offer several benefits regarding tax exemption, a solid legal framework, and a stable economic position. Incorporating a company in Bermuda typically involves selecting one, filing documents before the Registrar of Companies and obtaining a certificate of incorporation. It has a favourable environment for business with no capital gains tax, no withholding tax on dividends or income tax. It is worth mentioning that Bermuda followed the English common law of the UK, and companies incorporated must comply with the laws and regulations.
Read our Article: What is the Registration Process of a Company?
Minakshi Bindhani has completed LL.M. with a specialization in Criminal Law from Madhusudan Law University, Cuttack, Odisha. She is more inclined toward legal research and writing and have prior experience in Civil and Criminal litigation and content writing.
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