Incorporation of Bermuda Companies

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1. Exempted Company
An exempted or international business company is a company which is "exempted" from the requirements of the Companies Act, 1981 of Bermuda, regarding local companies. In particular, an exempted company may be 100% foreign owned.

2. Incorporation
It is necessary to make an application to the Bermuda Monetary Authority for permission to incorporate the exempted company and to submit:

(i) a note of the chain of ownership should there be an intermediary or nominee holding shares; and

(ii) a Personal Declaration Form for each of the proposed Non-Bermudian beneficial owners (direct, intermediate and ultimate) who proposes to have an equity interest of 5% or more in the company. In respect of partnerships, a Declaration is to be completed by the general partner(s), where the general partner is an individual.

If the ultimate beneficial owner is:

(iii) a public company, then only an Annual Report is required; or

(iv) a private company, then the most recent audited financial statements, or if unaudited then the unaudited financial statements (with a written explanation for the non-audit) must be produced together with a Personal Declaration Form on each of the Shareholders of the private company holding 5% or more of the shares in that company.

All documents submitted to the Bermuda Monetary Authority in connection with the application for consent to incorporate, are required by statute to be kept confidential, subject to some very limited exceptions.

Attached as Annexure "A" is our memorandum on Bermuda Monetary Authority Guidelines.

Incorporation takes place by registration, except in particular circumstances, and normally takes five to seven days from receipt of all required information at these offices.

3. Taxation
In Bermuda, there are no taxes on profits, income or dividends nor is there any capital gains tax, withholding tax, estate tax or death duty. Profits can be accumulated and it is not obligatory to pay dividends.

Whilst there are no taxes on corporate income, investment income derived from sources abroad may be subject to a withholding tax at source. The banks, however, offer internationally competitive rates for foreign currency deposits and, of course, the interest generated from these deposits is, from the Bermuda standpoint, entirely free of tax.

The Company, being an exempted company, will be entitled to apply for (and invariably will obtain) an undertaking from the Government that, in the event of direct taxation being imposed in Bermuda (e.g. corporate tax, dividend tax), the company will be exempt from such taxes until the year 2016. This period is extended from time to time.

As of April 1, 1990, stamp duty was eradicated on transactions involving exempted companies and non-residents.

4. Foreign Exchange Control
All exempted companies, with a few exceptions, will be designated by the Bermuda Monetary Authority (Foreign Exchange Control) as "non-resident" which means that the company will be free to deal in any currency of its choosing, other than resident Bermuda dollars, and will, in effect, be completely free from all Exchange Control regulations.

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