Bermuda: Something Familiar: Limited Liability Companies In Bermuda
Bermuda’s new Limited Liability Company (LLC) Act 2016 received assent on 27 July 2016, and will come into force in the near future on a day to be appointed by advertisement by the Minister of Finance.
The statute introduces a new corporate structure into Bermuda law, the limited liability company (LLC). The LLC structure is familiar in the fund industry. A substantial number of LLCs are registered in Bermuda’s onshore neighbour, Delaware, and under the law of certain offshore jurisdictions. The Cayman Islands have also recently introduced the LLC structure into Cayman law.
The Bermuda LLC Act borrows much from the structure of the LLC as organized under Delaware law.
The LLC is a highly versatile creature, allowing for bespoke voting rights and management authority, profit-sharing and equity participation. The LLC may be managed by a manager, or by the investing members. Managers may be single or multiple managers forming a committee or committees.
This versatility makes the LLC in many respects like a Limited Partnership. However, unlike a Limited Partnership, the LLC does not require that at least one member have unlimited liability for the debts of the LLC. This means, for example, that a manager may be an LLC member or manager without facing unlimited exposure to the liabilities of the fund.
The governance and executive administration of the affairs of the LLC, and the rights and interrelations of members, are governed by an LLC agreement entered into at, prior to or following formation of the LLC. A member or manager or an assignee of an LLC interest is bound by and entitled to enforce the LLC agreement whether or not the member or manager or assignee executes the LLC agreement. The LLC agreement may also provide rights to persons not party to the LLC agreement. There are no statutory restrictions on the provisions of the LLC agreement save that the LLC agreement shall be governed by the law of Bermuda.
Bermuda LLCs are otherwise subject to largely the same regime as governs Bermuda companies under the Companies Act 1981. Bermuda LLCs may be local LLCs, owned and controlled by Bermudians, or exempted LLCs, in which case no requirements apply regarding the nationality or citizenship of owners and controllers. They are to be entered on a register maintained by the Bermuda Registrar of Companies. Exempted LLCs must have a resident representative responsible for reporting statutory violations. The books and records of the LLC must be maintained at the registered office address. A register of members and a register of managers, open to public inspection, must be maintained. Naturally, corporate service providers will be required to undertake the same customer due diligence into new members/ managers as they would in respect of prospective members of a Companies Act company.
Bermuda LLCs are subject to largely the same winding up jurisdiction of the Supreme Court as applies to Companies Act companies, and are to be wound up very much as though they were Companies Act companies
IMAGE: Mark Chudleigh