Written by Phelecia Barnett
Bermuda is widely perceived as a blue chip offshore financial centre (not just in insurance and mutual funds) and continues to introduce new or amend existing legislation to attract more investors to use the jurisdiction.
After extensive consultation with industry stakeholders, a series of amendments to Bermuda's partnership legislation were passed by the Bermuda government on May 29, 2015, and became operative in June 2015.
The amendments operate to broaden Bermuda's appeal as a premier offshore jurisdiction for private equity and investment funds generally, and add a competitive edge to operation of Bermuda partnerships.
The key changes to the existing partnership legislation are described below.
Partnerships can convert into Companies and Companies can convert into Partnerships
Exempted limited partnerships which have legal personality can transition into exempted companies under the Bermuda Companies Act 1981 and exempted companies can transition into exempted limited partnerships. This amendment allows entities to convert to a different and more advantageous structure based on their individual business needs without having to dissolve the entity from which they wish to convert.
Partnerships can continue into Bermuda
Similar to the legislation governing Bermuda exempted companies, partnerships registered in certain jurisdiction can now deregister in their home jurisdiction and continue in Bermuda, and partnerships registered in Bermuda can deregister from Bermuda and continue into another jurisdiction. This amendment provides additional flexibility for an exempted partnership to either: (1) relocate its business to Bermuda without having to dissolve the partnership; or (2) be registered in Bermuda as an overseas partnership under our existing legislation.
Creation of a Register of Charges for Partnerships with Separate Legal Personality
Partnerships which have elected to have legal personality may have charges granted over the assets of such partnership registered on a register of charges maintained by the Registrar of Companies in Bermuda. In so far as Bermuda law governs the priority of the security, such security will have priority over any subsequent registered charges and over any unregistered charges in respect of the asset which is the subject of the registered security. Like the register of charges for companies, the register of charges will enable the public to access information related to encumbrances against partnership assets.
This amendment will increase the attractiveness of Bermuda for our clients who wish to use Bermuda partnerships for transactions where security is required to be taken.
Similar to the provisions set out in the Bermuda Companies Act 1981, exempted partnerships may now have a secondary name in addition to its primary name which can be in any language not using roman script.
Extension of Safe Harbour Provisions for a Limited Partner
The existing safe harbour provisions for activities of limited partners when a limited partner is consulting or advising a general partner without losing its limited liability status with respect to the business of the partnership have been clarified. A limited partner can consult or advise a general partner with respect to the business of the limited partnership, without taking part in the management of the limited partnership, if the limited partner or a representative of a limited partner serves on any board of committee of: (a) the limited partnership; (b) a general partner; (c) the limited partners; (d) the partners or any class or category of those partners; or (e) any person in which the limited partnership has an interest.
The amendments to the partnership legislation demonstrate Bermuda's commitment to enhancing its attractiveness as a jurisdiction of choice through efficient and modernized legislation and the effectiveness of the Bermuda government to be attentive to the needs of the international business community to ensure that Bermuda's legislative framework for business remains competitive.
We invite interested persons to contact us for additional information about the amendments or Bermuda as a jurisdiction of choice generally.