BERMUDA, BRITISH VIRGIN ISLANDS AND CAYMAN ISLANDS COMPANY LAW CHRISTOPHER BICKLEY HONG KONG SINGAPORE MALAYSIA SWEET & MAXWELL ASIA 2004
CONTENTS Note to Readers About the Author Acknowledgments Foreword by The Hon. Madam Justice Kwan Foreword by Professor ELG Tyler Preface Table of Cases Table of Statutes Page v vii ix xi xiii xv xix xxi CHAPTER 1 - INTRODUCTION TO BERMUDA Para Background 1-01 Company Law in Bermuda 1 03 Directors 1 07 Establishment 1-08 Taxation 1-09 Inspection of Corporate Records 1-10 Government Fees 1-11 Annexure A: Objects contained in the Second Schedule to the Bermuda Act 1-12 Annexure B: Standard powers contained in the First Schedule to the Bermuda Act 1-13 Annexure C: Appointed stock exchanges designated by the Minister of Finance under the Bermuda Act 1-14 Annexure D: Personal Declaration 1-15 Annexure E: Sample organisational documents on the incorporation of a Bermuda exempted company 1-16 CHAPTER 2 - INTRODUCTION TO THE BRITISH VIRGIN ISLANDS Background 2-01 Company Law in the BVI 2-03 Directors 2-09 Establishment 2-11 Taxation 2-14 Documents Available for Public Inspection 2-1 5 Government Fees 2-16
lviii Contents Annexure A: Sample documents relating to the organisation of an IBC 2 17 CHAPTER 3 - INTRODUCTION TO THE CAYMAN ISLANDS Background 3-01 Company Law in the Cayman Islands 3 02 Directors 3-07 Establishment 3-09 Taxation 3-13 Public Disclosure 3-14 Government Fees 3 15 Annexure A: Sample organisational documents on the incorporation of a Cayman Islands exempted company 3 16 CHAPTER 4 - JOINT VENTURES, PREFERENCE SHARE ISSUES AND SHAREHOLDERS AGREEMENTS Introduction 4-01 Veto Rights and Super Majorities 4 04 Dividends 4-05 Conversion 4-06 Return of Capital 4-07 Special Considerations for Bermuda 4 08 Corporate governance 4-09 Dividends 4-13 Redemptions 4 14 Special Considerations for the BVI 4-15 Corporate governance 4 16 Dividends 4-18 Redemptions 4-19 Special Considerations for the Cayman Islands 4 20 Corporate governance 4 21 Dividends 4-22 Redemptions and purchases 4-23 CHAPTER 5 - SECURITY ISSUES Bermuda 5-03 The BVI 5-13 The Cayman Islands 5-18
Contents Annexure A: Form No. 9 (particulars of a mortgage or charge) 5-20 Annexure B: Form No. 9A (particulars of a mortgage or charge) 5-21 Annexure C: Form No. 11 (memorandum ofcomplete satisfaction of mortgage or charge) 5-22 Annexure D: Form No. lla (memorandum of (1) partial payment of satisfaction of mortgage or charge (2) release of part of property or undertaking from mortgage or charge) 5-23 Annexure E: Form No. lib (memorandum of fact that part of property or undertaking mortgaged or charged has ceased to form part of property or undertaking of company) 5-24 Annexure F: Register of mortgages, charges and other encumbrances 5-25 Annexure G: The Companies Law register of a charge or mortgage pursuant to Section 54 5-26 CHAPTER 6 - INITIAL PUBLIC OFFERINGS Hong Kong 6-01 Incorporation and share swap 6 02 Share premium and contributed surplus 6 05 Prospectus requirements 6-09 Underwriting agreements 6-11 Bye-laws or articles of association 6 13 Hong Kong rules 6-14 Singapore Listings 6-22 Post Offering Matters 6-23 Schemes of Arrangement 6 24 Listings on Other Exchanges / Prospectus Requirements and Liabilities /Anti-takeover Provisions 6-26 Other Considerations 6-33 Annexure A: Illustration of incorporating the proposed issuer in Bermuda or the Cayman Islands 6-36 Annexure B: Illustration of implementing a share swap between the intermediate holding IBC and the operational group 6-37 Annexure C: Illustration of the position after the second share swap 6-38 Annexure D: Illustration of the position after the public offering 6 39 Annexure E: List of competent regulatory authorities 6-40 CHAPTER 7 - DIRECTORS Directors' Powers and Duties 7-01 Common Law Considerations 7-02 Directors' powers 7 02
Contents To whom are the duties owed? 7-03 Types of duties owed 7-04 Statutory Duties and Obligations 7-11 Bermuda 7 12 The BVI 7-17 The Cayman Islands 7-21 Meetings of Directors 7-25 1. Notice 7-26 2. Quorum 7 27 3. Proceedings and voting, 7-28 4. Directors' interests 7-29 Written Resolutions 7-30 CHAPTER 8 - SHAREHOLDERS Rights of Shareholders 8-01 Personal actions 8-02 Representative actions 8-03 Derivative actions 8-04 Winding up 8-07 Additional Provisions for Each Jurisdiction 8-08 Bermuda 8-08 The BVI 8-10 The Cayman Islands 8 13 Shareholder Meetings 8-14 Bermuda 8-14 The BVI 8-20 The Cayman Islands 8 22 CHAPTER 9 - ALTERATIONS TO CONSTITUTIONAL DOCUMENTS AND CAPITAL Amendments to Constitutional Documents 9-01 Bermuda 9-01 The BVI 9-03 The Cayman Islands 9 04 Financial Assistance 9-05 Bermuda 9-05 The BVI and the Cayman Islands 9-06 Alteration of Share Capital 9-07 Bermuda 9-07
Contents The BVI and the Cayman Islands 9-12 Annexure A: Form No. 7 (memorandum of increase of share capital) 9-19 Annexure B: Form No. 17 (memorandum of diminution of authorised but unissued share capital) 9 20 Annexure C: Form No. 16 (memorandum of change of the currency denomination of share capital) 9 21 Annexure D: Form No. 8b (memorandum of reduction of issued share capital) 9-22 Annexure E: Form No. 8c (certificate of deposit of memorandum of reduction of issued share capital) 9 23 CHAPTER 10 - MERGERS AND ACQUISITIONS Bermuda 10-02 General offers 10-02 Compulsory acquisition when holding 95 per cent in value of shares 10-04 Schemes of arrangement 10-05 Amalgamations 10 06 The BVI 10-09 Redemption of minority shares 10-10 The Cayman Islands 10-13 Compulsory acquisition 10 13 Scheme of arrangement 10-14 Reduction of capital 10 15 Discontinuation 10 16 CHAPTER 11 - AMALGAMATIONS, MERGERS AND CONTINUATIONS Bermuda 11-02 Procedure 11-03 Effect of amalgamation 11-06 Short form amalgamations 11-07 Continuations 11 09 Amalgamation into Bermuda 11-13 Discontinuances 11-14 Amalgamation from Bermuda 11-17 The BVI 11-20 Continuation 11 28
lxii Contents The Cayman Islands 11-35 Continuation 11-36 CHAPTER 12 - MUTUAL FUNDS Bermuda 12-01 Bermuda Standard Schemes 12-03 Bermuda Institutional Schemes 12-11 Bermuda Recognised Schemes 12-13 The BVI 12-15 The Cayman Islands 12-24 Annexure A: Application for recognition of a private or professional mutualfund 12 31 Annexure B: Application for registration of a public mutual fund 12-32 Annexure C: Recognised stock exchanges 12-33 Annexure D: Application for registration of a regulated mutual fund under the mutual funds law 12-34 CHAPTER 13 - INVESTMENT MANAGERS Bermuda 13-02 The BVI 13-06 The Cayman Islands 13 08 Annexure A: Application for a 'general" licence to provide management and/or administration services to mutual funds 13 L3 Annexure B: Application for a "restricted" licence to act as non-resident provider of management or administrative services to professional or private funds 13-1* Annexure C: CIMA application 13-15 CHAPTER 14 - SECURITISATION Introduction 14 01 Bankruptcy Remoteness 14 02 Contractual restrictions on activities and debt limitations 14-03 Change of ownership 14 04 Independent existence 14-05 Security interests over assets 14 06 Limited recourse and non-petition 14-07 Maintenance of the Vehicle and Trust 14-08 Purpose/STAR Trust and Charitable Trusts 14-09 Bermuda 14-10
Contents The BVI i4_i i The Cayman Islands 14-12 Charitable trusts 14-13 Conclusion 14-14 Annexure A: Illustration of a simple securitisation structure 14 15 Annexure B: Illustration of relationships between security ranking, payout in interest and return 14-16 Annexure C: Illustration of the use of synthetic securitisations 14-17 Annexure D: Illustration of the acquisition of assets and receipt of income by an SPV 14-18 CHAPTER 15 - SEGREGATED ACCOUNTS COMPANIES Introduction 15-01 Bermuda 15-02 Deregistration 15 04 Private acts 15-05 Segregated account representatives 15 06 Governing instruments and contracts 15-07 Dividends, redemptions, repurchases and reductions of capital 15-08 Accounts and registers 15 09 Internal transactions 15-10 Receivers 15-11 Winding up 15-12 The BVI 15-13 Shares and dividends 15-14 Contracts 15-15 Designation of assets 15-16 Receivership 15-17 The Cayman Islands 15-18 Issue of shares and dividends 15-19 Contracts 15-20 Segregation of assets and liabilities 15-21 Winding up 15-22 CHAPTER 16 - INSURANCE Bermuda 16-01 Class 1 insurer 16 04 Class 2 insurer 16 05 Class 3 insurer 16-06
lxiv Contents Class 4 insurer 16-07 Long-term insurers 16-08 Establishment 16-09 Ongoing requirements 16-10 Fees 16-13 Long-term business 16 14 Transfers of long-term business 16-15 Powers of the BMA 16-16 Failure to meet margins of solvency 16-19 Dividends and reducing statutory capital 16 20 Winding up of insurers carrying on long-term business 16-21 Subsidiary insurers 16-22 Cancellation of registration 16 23 Request for assistance by foreign regulatory 16-24 The BVI 16-25 Establishment 16-26 Ongoing requirements 16 27 Long-term business 16 32 Winding up 16-34 Cancellation of licence 16-36 Disclosure of documents 16 37 The Cayman Islands 16 38 Establishment 16-40 Ongoing requirements 16-42 Revocation of licence 16-43 Winding up 16-44 Annexure A: Bermuda pre-incorporation form 16-45 Annexure B: BVI insurance application form 16-46 Annexure C: Cayman Islands application for Class B insurer's licence 16 47 CHAPTER 17 - LIQUIDATIONS Bermuda 17-01 Voluntary winding up 17-02 Liquidator's powers 17-07 Winding up by the court 17-08 Power of directors to petition 17 0J Definition of inability to pay debts 17-1" Provisional liquidators 17-12
Contents Liquidators 17-14 Fraudulent trading, fraudulent preference and fraudulent conveyance 17-18 Power to summon persons 17-19 The BVI 17-20 Winding up under the IBC Act 17-20 Insolvency Act 17-26 Administration orders 17-27 Receivership 17 36 Liquidations 17-41 Remedies against delinquent officers 17-50 Fraudulent trading 17-51 Insolvent trading 17 52 Disqualification orders 17-53 Termination 17-57 Court termination 17-58 Termination by liquidator 17 59 The Cayman Islands 17-60 Voluntary winding up 17-61 Winding up by the court 17 64 CHAPTER 18 - THE INTERNATIONAL INITIATIVES AND THEIR EFFECT ON BERMUDA, THE BVI AND THE CAYMAN ISLANDS The OECD Review 18-02 Financial Action Task Force on Money Laundering 18-04 Bermuda 18-05 The BVI 18-06 The Cayman Islands 18-07 The KPMG Review 18-08 Bermuda 18-09 The BVI 18-15 The Cayman Islands 18-22 Conclusion 18-27 Index page 547