Barbados to Bermuda: Companies Migrating By Way of Continuation

Transcription

1 Barbados to Bermuda: Companies Migrating By Way of Continuation

2 Preface This publication has been prepared for the assistance of those who are considering the process of transfer by way of continuation to Bermuda of certain types of Barbados companies. It deals in broad terms with the requirements of Bermuda Companies Law for the process of transfer by way of continuation and the requirements of Bermuda Companies Law for the process of discontinuance. It is not intended to be exhaustive but merely to provide brief details and an outline of the relevant rules. The information regarding the laws in Barbados and the effect of such laws has been provided to us. We have made no investigation of and express no opinion in relation to the laws of any jurisdiction other than Bermuda. In particular, Conyers Dill & Pearman does not advise on the laws of Barbados and this document must not be construed as advice on the laws of Barbados. Before proceeding with any steps in the process of transfer by continuation in Bermuda, clients are advised to consider the implications in Barbados and to consult with other professional advisers as appropriate. We also recommend that our clients seek legal advice in Bermuda on their specific proposals before taking steps to implement them. Conyers Dill & Pearman would be pleased to assist. Conyers Dill & Pearman Page 2 of 11

3 TABLE OF CONTENTS 1. INTRODUCTION 2. CONTINUANCE INTO BERMUDA 2.1 Procedure 2.2 Consequences of Continuation 3. REQUIREMENTS AND PROCESS FOR DISCONTINUANCE 3.1 BCA Requirements 3.2 Filing Requirements 4. TAXATION ISSUES Page 3 of 11

4 1. INTRODUCTION This publication outlines the steps necessary under the Companies Act 1981 of Bermuda (the Act ) and the Barbados Companies Act ( BCA ) for a Barbados company to continue into Bermuda as a Bermuda exempted company. The Act provides that any foreign corporation, other than a bank or a licensed trust company, may continue into Bermuda in accordance with the procedures set out below. The BCA provides that companies may migrate from Barbados upon continuance in another jurisdiction. Barbados companies licensed as International Business Companies, Exempt Insurance Companies and International Financial Services Companies are sufficiently similar to Bermuda s exempted company so as to comply with the Act and allow the continuance into Bermuda. 1 The continuance of a Barbados entity into Bermuda requires careful planning. Due to the nature of a continuance, it is possible that a continuing company will be, at least for a short period, a stateless entity. To ensure that such a situation does not occur, it is suggested that before any application is made, all the appropriate documentation first be completed both here and in Barbados. If at all possible, it is preferable that applications for registration of a continuance are made at the same time both in Bermuda and in Barbados. The end result should be that the company will discontinue from Barbados and continue in Bermuda at the same time. 2. CONTINUANCE INTO BERMUDA 2.1 Procedure An application must initially be made to the Bermuda Monetary Authority (the BMA ) seeking permission for the shareholders of the Barbados entity to the shareholders of a Bermuda company. This application should include: 1 This publication does not address International Societies with Restricted Liability registered in Barbados. We are able to provide information on their migration on request. Page 4 of 11

5 (a) a statement of the proposed business of the company; (b) information concerning the beneficial owners of the company; and (c) the opinion of Barbados counsel referred to below. An insurance company will also need to make an application to obtain approval for its insurance business as a preliminary step to obtaining an insurance licence upon its continuance in Bermuda. Prior to continuing to Bermuda, this Firm, the BMA and the Registrar of Companies (the Registrar ) must be supplied with an opinion of Barbados counsel to the effect that all necessary authorisations under the Barbados law have been obtained to allow the foreign corporation to continue in Bermuda. In certain cases, the financial statements of the Barbados entity prepared for a period ending within twelve months of the proposed date of continuance will also be required. Once the relevant consent has been received from the BMA, application for registration of the Barbados entity in Bermuda is made to the Registrar. The submission must include: (a) the original signed Memorandum of Continuance; (b) a copy of the legal opinion issued by Barbados counsel; (c) the appropriate annual government fee; and (d) the required filing fee. Page 5 of 11

6 The Registrar will register the Memorandum of Continuance if satisfied that the foreign corporation is in compliance with the Act, and will issue a Certificate of Continuance, which will be dated the date of the deposit. Upon registration of the Memorandum of Continuance, the continuance will become effective and the Barbados entity will become a company to which the Act and any other laws in Bermuda apply as if the Barbados entity had been incorporated in Bermuda on the date of the registration. The Memorandum of Continuance will be deemed to be as of the date of the Memorandum of Association of the company in lieu of any of its previous constitutional documents. The Certificate of Continuance will be deemed to be as of the date of the company s Certificate of Incorporation. The company must forward a copy of the Certificate of Continuance issued by the Registrar to the Barbados Registrar. Barbados will require an opinion of Bermuda counsel confirming the consequences of continuance in Bermuda (which are set out below). Every company that continues into Bermuda is required to ensure that it adopts byelaws conforming to Bermuda law. Board and shareholder meetings (dealing with matters such as appointing a Bermuda resident director, secretary and/or resident representative, and establishing a registered office in Bermuda) must also be held. It is our policy that these actions are carried out by the Barbados entity prior to continuance to be effective upon continuance, thus resulting in the company being in full compliance with Bermuda law upon its arrival in Bermuda. 2.3 Consequences of Continuance Upon continuance of a Barbados entity as an exempted company under the Act: (a) the property of the Barbados entity will continue to be the property of the company; (b) the company continues to be liable for the obligations of the Barbados entity; Page 6 of 11

7 (c) any existing cause of action, claim or liability to prosecution in respect of the Barbados entity is unaffected; (d) any civil, criminal or administrative action or proceeding pending by or against the Barbados entity may be continued by or against the company; and (e) any conviction against, or any ruling, order or judgment in favour of or against the Barbados entity may be enforced by or against the company. The continuance of a Barbados entity under the Act does not create a new legal entity or prejudice or affect the continuity of a body corporate which was formerly a foreign corporation and becomes a Bermuda company. In addition, the Bermuda courts will apply the law of evidence and the rules of procedure with the intent that no claimant against the continued company shall be prejudiced in pursuing, in or under the laws of Bermuda, a bona fide claim that existed prior to the date of continuance and which could have been pursued under the laws then governing such foreign corporation. 3. DISCONTINUANCE FROM BARBADOS 3.1 BCA Requirements The BCA provides that the following conditions must be met for continuance in Bermuda and discontinuance in Barbados: A. Approval by the Barbados entity s shareholders, by way of special resolution, given at a meeting duly convened. The notice of the meeting must state that dissenting shareholders are entitled to be paid the fair value of their shares. Each share, regardless of stated voting rights, can be voted. B. The continuance in Bermuda will not adversely affect the Barbados entity s creditors or shareholders. C. The property of the Barbados entity will continue to be its property. D. The obligations of the Barbados entity continue to be its obligations. Page 7 of 11

8 E. Any existing cause of action, claim or liability to prosecution is unaffected. F. A conviction against or ruling, order or judgment in favour of or against, the Barbados entity can be enforced by or against it. G. The Barbados entity has no liabilities to discharge to the National Insurance Office. H. The Barbados entity has no liabilities to discharge to the Commissioner of Inland Revenue. 3.2 Filing Requirements The Registrar of Barbados will discontinue the Barbados entity on the receipt of the following evidence in a Director s Declaration (supported by attached documents and certificates) stating that: A. Notice of the shareholders meeting was duly sent to the shareholders, directors and auditor of the Barbados entity. B. A special resolution approving of the continuance in Bermuda and discontinuance in Barbados was passed. C. An opinion from Bermuda counsel was obtained and that it states: (a) the continuance will not affect any obligations or liabilities of the Barbados entity; (b) the continuance will not affect the choice of law applicable to the Barbados entity prior to the registration of the continuance; (c) a conviction against, or ruling, order or judgment in favour of or against, the Barbados entity may be enforced by or against it; Page 8 of 11

9 (d) the property of the Barbados entity will continue to be property of the body corporate; (e) the entity will continue to be liable for its obligations; (f) any existing cause of action, claim or liability to prosecution is unaffected; and (g) a civil, criminal or administrative action or proceeding pending by or against the Barbados entity may be enforced by or against it. D. Confirmation of the conditions in 3.1(B), (G) and (H) above. Upon the Barbados Registrar being satisfied that the requirements have been met and that the Barbados entity has been continued in Bermuda, he must file the notice and issue a certificate of discontinuance (and send it to the representative of the Barbados entity) and publish notice in the Barbados Gazette. The Barbados entity then becomes an external company for the purpose of the BCA. Usually the discontinuance application takes four to six weeks to process. 4. TAXATION ISSUES BCAs licensed as International Business, Exempt Insurance, and International Financial Services companies are taxed on profits on a sliding rate of tax from a maximum of 2.5% to 1%. These companies are excused from paying ad valorem stamp duty (except in respect of real estate) and customs duty on certain business related imports, and certain specially qualified employees are allowed concessions on income tax otherwise due. When a Barbados entity becomes an external company for the purposes of the BCA it incurs no additional tax liability in Barbados. That is, there is no tax liability triggered by discontinuance and tax liability on profits ends on discontinuance in Barbados. Page 9 of 11

10 Bermuda does not impose tax on the income or profits of companies or their employees, but exempted companies are not excused from paying stamp duty or customs duty on imported items used in business. Page 10 of 11

11 This publication should not be construed as legal advice and is not intended to be relied upon in relation to any specific matter. It deals in broad terms only and is intended merely to provide a brief overview and give general information. Conyers Dill & Pearman, February 2013 About Conyers Dill & Pearman Conyers Dill & Pearman is a leading international law firm advising on the laws of Bermuda, the British Virgin Islands, the Cayman Islands and Mauritius. Conyers has over 130 lawyers in eight offices worldwide and is affiliated with the Conyers Client Services group of companies which provide corporate administration, secretarial, trust and management services. Page 11 of 11