Bermuda companies may be formed by individuals, corporate entities or trusts who wish to operate a trade or business in or from Bermuda. Companies are incorporated either by registration or by Private Act. Most Bermuda companies are incorporated by registration, which takes approximately two business days. Private Act companies are established when a specific exemption from the Companies Act or another piece of general legislation is sought. Under Bermuda law, a company may have all the powers of a natural person. Company law differentiates between a local company (which carries on business domestically in Bermuda) and an exempted company (which conducts business internationally from Bermuda). The Companies Act, 1981 specifically permits the formation of the following types of companies:

• Companies limited by shares
• Companies without limited liability
• Companies of Limited Duration
• Companies incorporated by Private Act (when an exemption from some provision of the statue is specifically required)
• Limited Liability Company (LLC)
• Companies limited by guarantee (formed for a charitable or other socially useful purposes)

Bermuda companies fall into two principal categories: companies incorporated by Bermudians to trade primarily in Bermuda and companies incorporated by non-Bermudians for the purpose of conducting business outside Bermuda. This guide is concerned only with the latter kind of company. Companies falling into this category are known as “exempted companies” and are so-called because they are exempted from those provisions of Bermuda law which stipulate that at least 60% of the equity must be beneficially owned by Bermudians.

In general terms, the Companies Act restricts an exempted company from carrying on business in Bermuda, except to the extent that it is so authorised by its constitutional documents and has been granted a license by the Minister of Finance (Minister), who will form a view as to whether or not the granting of such a license is in the best interests of Bermuda. Having said that, there are certain activities that are expressly excluded from the requirement for a license. Such activities include: doing business with other exempted undertakings (e.g. exempted companies, permit companies, exempted partnerships and exempted unit trust schemes) in furtherance of the business of the exempted company that is being conducted outside Bermuda; dealing in securities of exempted undertakings, local companies or partnerships; carrying on business as manager or agent for, or consultant or adviser to, any exempted company or permit company which is affiliated (whether or not incorporated in Bermuda) with the exempted company or an exempted partnership in which the exempted company is a partner or, in the case of mutual funds, selling or distributing their shares in Bermuda.

A limited liability company (LLC) is a hybrid legal structure allowing the contractual and operational flexibility of a partnership to be housed within a corporate entity. Like a Bermuda exempted company, an LLC has a separate legal personality and the liability of its members is limited. whilst members of a Bermuda company receive shares, members of a Bermuda LLC will each have an interest in a capital account in a similar way to partners in a partnership. Under the Bermuda LLC Act parties can create bespoke vehicles having the contractual freedom to set out in the LC agreement the terms of operation and management of the LLC as well as expressly agreeing on the allocation of profits and timing of distributions among its members. A Bermuda LLC may be managed by one or more members (a managing member) or a manager may be appointed who may or may not be entitled to share in the profits of the LLC.

Key Features of an LLC

• An LLC is a separate legal entity, the existence of which as a separate legal entity will continue until the LLC is dissolved, and the LLC will not be  dissolved by reason only that the LLC has no members.
• An LLC is governed by an operating agreement (LLC Agreement), which must be governed by Bermuda law but otherwise allows for maximum contractual flexibility amongst the members, particularly with respect to the allocation of profits, losses and distributions amongst its members. LLC interests can be denominated in any currency which the LLC chooses. The LLC Agreement can also provide for the voting and consent rights of different classes or groups of members.
• Subject to the LLC Agreement, an LLC has the capacity, rights, powers and privileges of a natural person.
• A person’s duties (including fiduciary duties) to the LLC or to another member or manager or other person party to or bound by the LLC Agreement may be expanded, restricted or eliminated by the LLC Agreement (except no such provision shall permit fraud or dishonesty).
• Any one or more persons may form an LLC for any lawful business, purpose or activity.
• The process of forming an LLC is simple and requires the filing of a certificate of formation with the Registrar of Companies and payment of the appropriate fee. The Registrar will maintain a register of LLCs in Bermuda.
• The management of an LLC is vested in its members or a manager chosen in the manner provided in the LLC Agreement.
• The LLC Act provides that an LLC may be amalgamated or merged with a foreign entity and either continued as an LLC or as a foreign entity.
• In addition, an LLC may continue into Bermuda from a foreign jurisdiction and vice versa.
• The LLC Act also provides that an LLC may convert to a company and vice versa.
• The LLC Act provides for the conversion of an exempted LLC to an exempted limited partnership and vice versa.

A company, trust or individual who is a Bermuda within the meaning of the Companies Act 1981 may incorporate a local Bermuda company to conduct business within Bermuda. Local companies must be controlled by Bermudians and ‘control’ is defined in the Companies Act 1981 as Bermudians holding sixty per cent of the shares, and Bermudians forming sixty per cent of the Board of Directors. For further information on the formation of local companies, download our Memorandum on the Incorporation of Local Companies. For legal assistance with forming and incorporating companies in Bermuda, please contact us.