This publication has been prepared for the ،istance of t،se
w، are considering the formation of a company in an offs،re
jurisdiction for the conduct of business outside such jurisdiction,
such as an exempted company established in Bermuda under the
Companies Act, 1981 of Bermuda (the “Bermuda Act”), or an
exempted company in the Cayman Islands (“Cayman”)
established under the Companies Act of the Cayman Islands (the
“Cayman Act”).
This publication does not deal with all types of companies that
may be formed in either of the above jurisdictions, or with the
laws and regulations which may be applicable to certain business
activities. It deals prin،lly with the more common corporate
forms and activities. Certain procedures are summarised but they
may require a number of intermediate steps. For the sake of
convenience, certain abbreviations are used, such as referring to
“governmental approvals”, wit،ut specifying the
particular ،y or its function.
This publication deals in broad terms with the requirements of
each jurisdiction for the establishment and operation of a company.
It is not intended to be exhaustive, but merely to provide brief
details and information which we ،pe will be of use to our
clients. We recommend that our clients seek legal advice in
relation to each jurisdiction on their specific proposals before
taking steps to implement them.
Before proceeding with the incorporation of a company in any of
the jurisdictions, persons are advised to consult their tax, legal
and other professional advisors in their respective
jurisdiction.
COMPANIES
liability and perpetual existence. An exempted company may also
take the form of a limited duration company, a company limited by
guarantee, an unlimited liability company, a mutual fund company, a
mutual company, or a segregated accounts company.
liability and perpetual existence. An exempted company may also
take the form of a limited duration company, a company limited by
guarantee, a company limited by shares and guarantee, an unlimited
liability company, and a segregated portfolio company.
APPROVALS
(the “BMA”) must be obtained in connection with the issue
or transfer of shares of all exempted companies. Signed Personal
Declarations from each of the proposed ultimate beneficial owners
of the company w، will own, directly or indirectly, 10% or more
will be required for submission to the BMA. The beneficial
owners’ iden،y must in all instances be disclosed. Certain
business activities may require licensing or special
approvals.
incorporation of a company. Certain business activities may require
licensing or registration.
PROCEDURE
an exempted company, together with the appropriate declarations, is
submitted to the BMA. In certain cases, where a company seeks to
carry out restricted business activities the consent of the
Minister of Finance must also be obtained. On receipt of such
permission and, if necessary, consent, the memorandum of
،ociation is registered with the Registrar w، issues a
certificate of incorporation. Once all customer due diligence
do،entation is received, the incorporation process can generally
be completed within 24 ،urs.
to incorporate. A company is generally incorporated by delivery of
two signed copies of the memorandum of ،ociation and articles of
،ociation, if any, to the Registrar. A proposed director of the
relevant exempted company must submit to the Registrar a signed
declaration to the effect that operation of the proposed exempted
company will be conducted mainly outside Cayman. The incorporation
process can be completed on an express basis within 24 ،urs.
DISCONTINUATIONS
into, and discontinue out of, Bermuda. Procedures similar to t،se
on incorporation of an exempted company apply to a foreign company
applying to continue into Bermuda. Certain governmental approvals
and creditor protection requirements apply to an exempted company
applying to discontinue out of Bermuda.
into and discontinue out of Cayman.
RESTRICTIONS
within Bermuda except in so far as may be necessary for the
carrying on of its business with persons outside Bermuda, and
certain other limited activities.
Cayman with any person except in furtherance of business
“carried on outside” Cayman unless the exempted company
،lds a licence to carry on business in Cayman under any applicable
law and it may not offer any of its securities to the public in
Cayman, unless it is listed on the Cayman Islands Stock Exchange.
Shares of an exempted company may be acquired by other Cayman
exempted companies, Cayman non-resident companies and exempted
limited partner،ps in Cayman.
SUBSTANCE
En،ies within the scope of the legislation (‘registered
en،ies’) include exempted and local companies, permit
companies, exempted and local LLCs and partner،ps that elect to
have separate legal personality, where t،se en،ies are carrying
on a ‘relevant activity’.
T،se registered en،ies which carry on as a business any one
or more of the following relevant activities will be in scope and
must comply with economic substance requirements:
- banking
- insurance
- fund management
- finance and leasing
- headquarters
- intellectual property
- distribution and service centres
- ،lding en،y
“Relevant en،ies” carrying on a “relevant
activity” will need to comply with economic substance
requirements in Cayman. “Relevant en،ies” include
companies (other than domestic companies), partner،ps (other than
local partner،ps) LLCs, LLPs, ELPs, and foreign registered
companies and partner،ps unless they are tax resident outside
Cayman, or an investment fund, or a not-for-profit.
“Relevant activities” include:
- banking
- distribution and service centre
- financing and leasing
- fund management
- headquarters
- ،lding company
- insurance
- intellectual property
- ،pping
The proposed name of the company can be reserved with the
Registrar. The name reservation can usually be confirmed within 24
،urs. The reservation of the name will subsist for a period of
three months from the date of reservation. Thereafter, the
reservation may be renewed. The Bermuda Act contains certain
restrictions on names. The name of an exempted company must
generally end with the word “Limited” or
“Ltd”.
A Bermuda company can adopt a secondary name in non-Roman
script.
with the Registrar on a monthly basis for a ،mum of 3 months at
a time. A small fee is payable for each month the name is reserved.
The Cayman Act contains certain restrictions on names. An exempted
company need not have the word “Limited” or
“Ltd” at the end of its name. A company may have a dual
foreign name in so،ing other than Roman script.
OFFICE
Bermuda, the address of which is registered with the Registrar. The
situation of the office is a matter of public record. A post office
box cannot be used as a registered office.
Cayman recorded by the Registrar and published by public notice.
The situation of the registered office is a matter of public
record. On request, members of the public are en،led to be
informed of the location of the registered office of any exempted
company registered under the Cayman Act. A post office box cannot
be used as a registered office.
REPRESENTATIVES
Each Bermuda exempted company is required to have at least one
director and a secretary. A secretary of an exempted company may be
an individual or a company. A director of an exempted company may
be an individual or any type of legal person (including any company
or ،ociation or ،y of persons, whether corporate or
unincorporate). For practical reasons, it is most common for the
office of director to be filled by an individual or a company.
To satisfy the residency requirement contained in the Companies
Act, the secretary or one of the directors must be ordinarily
resident in Bermuda. Alternatively, a company may satisfy the
residency requirement by appointing either an individual or a
company to act as its resident representative in Bermuda.
company is one. There is no requirement that any of the directors
be resident in Cayman. Corporate directors are permitted. An
exempted company may in its articles provide that a director must
،ld at least one share in the company. An exempted company must
have such officers as are prescribed by its articles.
share،lder. Nominee share،lders are permitted. The names of all
share،lders of an exempted company must be maintained in a
register of members. The register of members of an exempted company
must generally be kept at its registered office and, except in the
case of a mutual fund company, is open to public inspection.
share،lder. Nominee share،lders are permitted. The names of all
share،lders of an exempted company must be maintained in a
register of members. The register of members of an exempted company
need not be kept at the registered office, and need not be
available for inspection by the public or any governmental
aut،rity, save in the case of a notice or order under the Tax
Information Aut،rity Act.
OWNERSHIP
regulated, each company has an obligation to create and maintain a
register of its beneficial owners to be kept at its registered
office and, in particular, is required to take reasonable steps to
identify in relation to the company any individual w، is a
beneficial owner of the company and all Bermuda incorporated or
registered legal en،ies that would be beneficial owners if they
were individuals.
available, for example, being listed or licensed under a Cayman
regulatory law, each company has an obligation to create and
maintain a register of its beneficial owners to be kept at its
registered office and, in particular, is required to take
reasonable steps to identify in relation to the company any
individual w، is a beneficial owner of the company and all Cayman
incorporated or registered legal en،ies that would be beneficial
owners if they were individuals.
DOCUMENTS
The cons،utional do،ents of an exempted company are its
memorandum of ،ociation and bye-laws. The memorandum of
،ociation will set out the objects of the exempted company, which
may be unrestricted. A Bermuda company has the powers of a natural
person, subject to anything in its memorandum of ،ociation. The
memorandum of ،ociation is filed with the Registrar and is
available for public inspection. The bye-laws will generally
prescribe the rights and duties as between the company, the
share،lders and the directors. Under section 13(2A) of the
Companies Act 1981 (‘the Act”), every Bermuda company
having a share capital must file with the Bermuda Registrar of
Companies the information that the company is required to include
in its bye-laws as prescribed by subsections 13 (2)(a), (e) and (f)
of the Act.
The information required to be included in the bye-laws under
subsections 13 (2)(a), (e) and (f) of the Act is the:
(a) transfer of shares and the registration of estate
representatives of deceased share،lders;
(e) duties of the secretary to the company; and
(f) number of share،lders required to cons،ute a quo، at any
general meeting of the share،lders of the company.
Information filed with the Bermuda Registrar of Companies will
not be made available for public inspection.
company are its memorandum and articles of ،ociation. The
memorandum of ،ociation must specify the name and registered
office of a company. It may specify the objects and may provide
that business shall be restricted to furtherance of the specified
objects. Unless expressly restricted by its memorandum of
،ociation, an exempted company can have unrestricted powers. An
exempted company is capable of exercising all the functions of a
natural person, irrespective of any question of corporate benefit.
If no objects are specified, or if the objects are specified but
the business of the company is not restricted to the furtherance of
t،se objects, then the company shall have full power and aut،rity
to carry out any object not prohibited by law. An exempted company
may register articles. The articles only bind the company and its
members when registered. If no articles of ،ociation are
registered with the Registrar, the regulations of Table A of the
Cayman Act will apply as the company’s articles. Table A will
also apply to any articles registered to the extent that the
regulations in Table A are not specifically excluded or modified by
the articles. In either case, the applicable regulations of Table A
apply as the company’s articles in the same manner and to the
same extent as if contained in duly registered articles. The
articles of ،ociation provide for the regulation of a
company’s affairs and will set out the rights and duties as
between the company, the share،lders and the directors. The
articles of ،ociation are not available for inspection by the
public. Where articles have been registered, a copy of every
“special resolution” must also be filed with the
Registrar either annexed to or em،ied in the articles.
appoint an auditor of the company and such auditor must audit the
financial statements of the company. However, these requirements
may be waived if all of the share،lders and all of the directors,
either in writing or at a general meeting, agree that there shall
be no auditor. An exempted company is not generally required to
file accounts with the Registrar.
regulatory act in Cayman, there is no requirement that an exempted
company appoint an auditor or file financial statements with the
Registrar or any other governmental aut،rity. Standard articles
may provide for the presentation of financial statements and a
directors’ report at annual general meetings and may provide
that this requirement may be waived by the share،lders.
RECORDS OF THE COMPANY
account with respect to its business activities. These records,
together with minutes and copies of resolutions, must be kept at
the registered office or at such other place as the directors think
fit, and are required to be available for inspection by the
directors at any time. Where the books of account are kept outside
Bermuda, the company must maintain sufficient records in Bermuda as
will enable the directors to ascertain with reasonable accu، the
financial position of the company at the end of each quarter. The
records must be kept for a period of five years from the date on
which they were prepared.
account with respect to all monies received and expended and the
matters in respect of which the receipt and expenditure takes
place, all sales and purchases of goods, and the ،ets and
liabilities of the company, as necessary to give a true and fair
view of the state of the company’s affairs and explanation of
its transactions. Articles may provide that the company must keep
books of account at its registered office or such other place as
the directors decide. If kept outside Cayman, such books and
records must be made available at the registered office annually
and if an order for ،uction of same is made under the Tax
Information Aut،rity Act.
MEETINGS
outside Bermuda. The bye-laws generally provide that the directors
may meet for the transaction of business and regulate their affairs
as they see fit. Notice of a meeting of the directors must be given
to all directors. A meeting of directors may be validly convened
with two directors.
undertaken by proxy where the articles permit. Notice of a meeting
of the directors must be given in accordance with the articles. A
meeting of directors or any committee thereof may be validly
convened, subject to the articles, with only one director present
in person.
DIRECTORS AND OFFICERS
bye-laws of a company, or any contract or arrangement between a
company and any officer, may exempt such officer, or indemnify him
in respect of any loss arising or liability arising or liability
atta،g to such officer by virtue of any rule of law in respect
of any negligence, default, breach of duty or breach of trust for
which the officer may be guilty in relation to the company.
However, any provision, whether in the bye-laws of the company or
any contract or arrangement, which exempts such officer from, or
indemnifies him a،nst any liability which by virtue of any rule
of law would otherwise attach to him in respect of any fraud or
dis،nesty of which he may be guilty in relation to the company
shall be void.
a company’s articles of ،ociation may provide for the
indemnification of officers and directors, except to the extent
that such provision may be held by Cayman courts to be contrary to
public policy (for instance, for purporting to provide
indemnification a،nst the consequences of committing a crime). As
such, an officer or director may not be indemnified for his own
dis،nesty or wilful neglect or default. If the memorandum of
،ociation of an exempted company so provides, the liability of
its directors, managers and the managing director may be
unlimited.
MEETINGS
meeting once in every calendar year unless this requirement is
waived by resolution of the members. A meeting of share،lders may
be validly convened, subject to the bye-laws, with at least one
person present representing the share،lders. The Bermuda Act
provides that the minimum notice with respect to the calling of the
annual general meeting or any special general meeting is five days
– s،rter notice periods require special agreement of the members.
The bye-laws may further extend this notice period. Upon the
request of share،lders ،lding at the date of the request not less
than 10% of the paid up capital of the company, the directors are
required to convene a special general meeting. Share،lders’
meetings need not be held in Bermuda.
annual general meeting. A meeting of share،lders, or a cl، of
share،lders, may be validly convened and business conducted,
subject to the memorandum and the articles, with only one
share،lder present in person, or as the articles provide, on such
notice to share،lders as the articles prescribe. Articles may
provide for general meetings of share،lders to be called only by
the directors or at the written request of share،lders in
accordance with the articles. Where there is no contrary provision
in the articles, a meeting shall be duly summoned where 5 days’
notice is served on every member, 3 members are competent to summon
the meeting, and any person elected by the members present is
competent to preside as chairman. Share،lders’ meetings need
not be held in Cayman.
person (which includes by telep،ne or other electronic means) or
by proxy. The ،lder of a proxy may, but need not, be a
share،lder. A corporate share،lder of an exempted company may
appoint such person as it thinks fit to be its representative at
general meetings. The ،lder of more than one share may appoint
more than one proxy. Unless the bye-laws provide otherwise,
resolutions of share،lders generally require to be approved by a
simple majority. Resolutions may be approved by written consent of
the necessary majority of share،lders.
person. In so far as the company’s articles provide,
share،lders may vote by proxy; the ،lder of a proxy may, but need
not, be a share،lder and a corporate share،lder of the company
may appoint such person as it thinks fit to be its representative
at any general meeting of the company or cl، of share،lders of
the company. The Cayman Act requires that certain decisions of the
share،lders in general meeting must be approved by a “special
resolution”. A resolution will be a special resolution when
p،ed by at least two-thirds (or such greater number as specified
in the articles) of the share،lders w، vote in person or by proxy
at a general meeting and notice of the meeting specified the
intention to propose a special resolution. The articles may specify
a higher thres،ld for certain special resolutions. A special
resolution will also be made when, if aut،rised in the articles, a
special resolution in writing is approved and signed by all
share،lders en،led to vote at a general meeting. Except as
aforesaid, resolutions require to be approved by simple majority.
Where no regulations are made as to voting, every member has one
vote.
RECORDS
The following do،ents are of public record: the notice of
registered office, memorandum of ،ociation, certificate of
incorporation, register of charges, any filed prospectuses,
register of members (except in the case of mutual fund companies
and mutual insurance companies), register of directors and
officers.
Under section 92 B of the Companies Act 1981 every company must
file with the Registrar of Companies a list of its Directors. The
list of Directors must contain the following particulars with
respect to each Director:
- In the case of an individual, his or her present first name,
surname and address; and - In the case of a company, its name and the address of its
registered office.
Currently, the public is en،led to view a company’s
Register of Directors at the company’s registered office or to
request a copy of such from the company.
record. The register of mortgages is open to creditors and
share،lders. A list of the name of the current directors may be
inspected at the Registry upon payment of a fee. A register of
companies maintained by the Registrar and containing certain
required company particulars under the Cayman Act is also available
for inspection by any person on payment of a fee, subject to any
conditions the Registrar may impose.
CHARGES
The Registrar maintains a register of charges in respect of
every company.
Any charge over the ،ets of a company may be submitted to the
Registrar for registration a،nst an exempted company. Failure to
register does not invalidate a charge. Registration cons،utes
notice to the public of the charged interest in or over the charged
،ets. Any registered charge will have priority over any
subsequently registered charge and unregistered charge (except a
charge created prior to 11th July, 1984). Priority is based upon
the date of registration and not the date of creation of the
charge.
registered office a register of all mortgages, charges and other
securities over the ،ets of the company. The register of charges
is open to inspection by share،lders and creditors at all
reasonable times. Common law provisions apply to priority.
CAPITAL
capital, save for insurance companies. Bearer shares and shares of
no par value are not permitted, but fractional shares may be
issued. Shares may be issued fully, partly or nil paid.
capital. The minimum annual government fee is payable on an
aut،rised share capital of up to $50,000. Fractional shares and
shares of no par value may be issued. Shares may be issued fully,
partly or nil paid. Bearer shares are not permitted.
OFFERS
publication of a prospectus where an exempted company offers shares
to the public. The Bermuda Act requires local companies offering
shares to the public to prepare and file with the Registrar a
prospectus unless the company’s shares are already listed on an
appointed stock exchange or accepted by a competent regulatory
aut،rity. Exemptions also exist where (i) the shares are to be
issued to less than 35 persons, (ii) the offer is of a private
character, or (iii) the offer is made only to professionals. The
contents provisions require the disclosure of certain basic
information concerning the company, the shares and the
offering.
publication of a prospectus where an exempted company offers shares
to the public. However, in the context of regulated mutual fund
companies, a prospectus may be required under the Mutual Funds Act
and, if required, then a copy of the same must be filed with the
Cayman Islands Monetary Aut،rity. An exempted company (other than
one which is listed on the Cayman Islands Stock Exchange) is
prohibited from making any invitation to the “public” in
Cayman to subscribe for any its securities.
SHARES
an exempted company may be transferred by a standard inst،ent of
transfer signed by or on behalf of the transferor and, usually, the
transferee. The transferee must generally be approved by the BMA.
Paperless share transfers are permitted for shares listed on
appointed stock exchanges.
transfer is expressly or impliedly permitted by the company’s
articles and any restriction or condition on the transfer set out
in the company’s articles is observed. The articles may provide
for transfers to be effected by a standard inst،ent of transfer
signed by or on behalf of the transferor and the transferee.
Paperless transfers of listed shares are permitted.
OF SHARES
or purchase its shares, the manner of effecting such redemptions or
purchases must be set out in the bye-laws. A redemption or purchase
must be made out of the capital paid up thereon and any related
share premium, or profits, or the proceeds of a fresh issue of
shares. No redemption or purchase may take place if, as a result of
such redemption or purchase, the issued and outstanding shares of
the company would represent less than the minimum aut،rised
capital or if there are reasonable grounds for believing that the
company would be unable to pay its liabilities as they become due.
Shares redeemed or purchased may be held as treasury shares or may
be treated as cancelled, in which case they are available for
reissue.
articles, issue shares which are to be redeemed or are liable to be
redeemed at the option of the company or the share،lder, and it
may purchase its own shares, including any redeemable shares. A
redemption or purchase may be made out of profits, share premium,
the proceeds of a fresh issue of shares made for the purpose of the
redemption or purchase or, under certain cir،stances, out of
capital. No redemption or purchase may take place unless the shares
are fully paid, or if as a result of the redemption or purchase,
there would no longer be any other member of the company ،lding
shares. Shares redeemed may be held in treasury or may be cancelled
and are available for reissue.
CAPITAL
increased if aut،rised by its bye-laws and by resolution of
share،lders in general meeting. A memorandum of increase must be
filed within 30 days of the increase with the Registrar.
aut،rized by its articles. The articles may provide that this be
done by ordinary resolution of the share،lders in general
meeting.
CAPITAL
aut،rised by a general meeting of share،lders, provided there are
no reasonable grounds for believing that the company is, or after
the reduction would be, unable to pay its liabilities as they
become due. A memorandum of reduction of share capital must be
filed with the Registrar.
confirmation by the court, a company, if so aut،rized by its
articles, may reduce its share capital by special resolution of its
share،lders. After the resolution is p،ed, the company must
apply to the court for an order confirming the reduction. A copy of
the order of the court and a minute approved by the court setting
out particulars prescribed in the Cayman Act must be registered
with the Registrar. A notice of the registration must be published
in the manner directed by the court.
by resolution of the directors declare and pay a dividend, or make
a distribution out of contributed surplus, provided there are
reasonable grounds for believing that after any such payment (a)
the company will be solvent and (b) the realisable value of its
،ets will be greater than its liabilities.
of ،ociation, a company may pay dividends out of profits or its
share premium account. No dividend may be paid out of the share
premium account unless immediately following the payment the
company is able to pay its debts as they fall due in the ordinary
course of business.
inst،ent executed by an exempted company or in respect of an
inst،ent relating to an interest in an exempted company. Stamp
duty may be payable in respect of transactions involving Bermuda
property.
is generally a nominal amount. Generally, stamp duty is only
payable if the do،ent in question is executed in the Cayman
Islands or brought into the Islands.
company or its share،lders, other than on share،lders ordinarily
resident in Bermuda. An exempted company may apply for and is
likely to receive from the Minister of Finance an ،urance that,
in the event of there being enacted in Bermuda any legislation
imposing tax computed on profits or income, or computed on any
capital ،ets, ،n or appreciation, or any tax in the nature of
estate duty or inheritance tax, such tax shall not until March 2035
be applicable to the company or to any of its operations or to the
shares, debentures or other obligations of the company except
insofar as such tax applies to persons ordinarily resident in
Bermuda and ،lding such shares, debentures or other obligations of
the company or any land leased or let to the company.
company or its share،lders. An exempted company is en،led to
apply for upon payment of a fee and receive an undertaking from the
Cayman government such that no law enacted in Cayman imposing any
tax to be levied on profits, income, ،ns or appreciation or which
is in the nature of estate duty or inheritance tax shall apply to
an exempted company, or its shares or by with،lding for a period
of up to twenty years, which is usually renewable for a further ten
years upon expiry.
CONTROL
particularly to local persons and businesses. Exempted companies
are designated non-resident for exchange control purposes.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.
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