jurisdiction update - conyers...uisicion uae ˜ issue no. 3 2 • conyersdill.com bermuda news...

Jurisdiction update - issue no. 3

bermudabrit ish v irgin islandscayman islandsdubaihong konglondonmaurit iussingaporeconyersdi l l .com

n 2013

n I ssue No. 3

jurisdiction update:• bermuda • british virgin islands • cayman islands • mauritius

http://www.conyersdill.com


2 • conyersdill.com

Bermuda newsinsurance developments

in an effort to position itself to attain solvency ii equivalency, Bermuda continues to strengthen its supervisory regime over the commercial insurance sector while guarding against over-regula-tion of its captives market.

in november 2012, the Bermuda monetary authority published a number of amendments to its existing individual company and group rules, the most significant of which involved the suspension for one year (until 2014) of the implementation of enhanced capital requirements for commercial long-term insurers and insurance groups.

a number of amendments to the Insurance Act 1978 were enacted pursuant to the Insurance Amendment (No.2) Act

2012. these changes became effective on 1 january 2013 and include:

• a revision of the material changes notification requirements (the definition of material changes was expanded);

• the introduction of a new prohibition against registered insurers carrying on ‘non-insurance business’ (although existing insurers will be grandfathered through year-end 2016); and

• an amendment of the definition of ‘long-term business’, which now allows long-term insurers to write accident and disability contracts of any duration and general business insurers to write such contracts with terms of up to five years.

while now being required to submit a risk self-assessment return and file annual statutory returns electronically, captive insurers (the class 1, class 2 and class 3 general business insurers and class a and class B long-term insurers) are not otherwise subject to the solvency ii regulations, which now impose enhanced reporting, governance and solvency requirements on Bermuda’s commercial insurers.

according to recently published insurance statistics, 53 insurance companies were incorporated in Bermuda in 2012, nearly half of which (25) were set up by conyers. of the 53 new insurance companies established in 2012, 27 were granted special purpose licences, nine received long-term licences and the remaining 17 were registered as general business insurers.

BritisH VirGin isLands newsnew ‘approved manager’ regime

a new regulatory regime has recently been introduced in the British Virgin islands (the “BVi”) that makes it significantly easier for mid-market private equity and venture capital firms to estab-lish investment managers and advisers in the BVi. For investment managers and advisers that qualify, this new “approved manager” regime substantially reduces the time and cost of establishing fund structures and entails significantly less ongoing regulation than was previously the case.

when considered in conjunction with the flexibility of the BVi’s corporate and limited partnership laws, the strength of its com-mercial court and its competitive incorporation fees, the new regime makes the BVi a highly attractive domicile for mid-market private equity and venture capital firms.


conyersdill.com • 3

Background and Qualifying Criteria

private equity and venture capital funds themselves are not regulated in the BVi. However, since 2010, investment managers and advisers incorporated in the BVi have generally required an investment business licence under the Securities and Invest-

ment Business Act, 2010 (“siBa”). the process for obtaining an investment business licence under siBa is typically cumbersome and, upon obtaining such a licence, a manager or adviser is subject to regulation under siBa and the BVI Regulatory Code,

2010 (the “regulatory code”).

the investment Business (approved manager) regulations, 2012 (the “regulations”) have introduced a “lighter touch” regulatory regime for BVi investment managers and advisers. to qualify under the new regime:

• Closed-ended funds. the proposed investment manager or adviser must only manage or advise funds with less than us$1 billion in committed capital, and (in broad summary) the funds which it manages or advises must be restricted to either (i) professional investors, being investors who have a net worth of us$1 million and who invest a minimum of us$100,000; or (ii) a maximum of 50 investors.

• open-ended funds. the proposed investment manager or adviser must not have more than us$400 million of assets under management and the funds that it manages or advises must (in broad summary) be recognised as private or profes-sional funds in the BVi or be funds in another jurisdiction having equivalent characteristics to a BVi private or profes-sional fund.

any proposed investment manager or investment adviser that meets these criteria may apply to the BVi Financial services commission (the “Fsc”) for approval as an “approved investment manager” (an “approved manager”) and, if so approved, the regulations will:

• exempt the approved manager from having to obtain an investment business licence under siBa;

• exempt the approved manager from having to comply with the continuing obligations under siBa and the regulatory code; and

• exempt the approved manager from having to appoint a compliance officer and maintain a compliance manual.

Application Process

the application process under the regulations is straightforward. a simple application form must be completed and submitted to the Fsc together with (i) basic supporting documentation in respect of the manager/adviser and the fund; (ii) a copy of the management, partnership and/or advisory agreement; (iii) a curriculum vitae for each principal, director and senior officer of the manager or adviser; and (iv) a declaration that the principals, directors and senior officers of the manager or adviser satisfy certain “fit and proper” criteria. a BVi lawyer or licensed BVi-authorised repre-sentative must also submit a declaration confirming the applica-tion is complete and meets the application requirements.

assuming all is in order, it is expected that an application under the regulations will be approved by the Fsc within 30 days. unless



the Fsc otherwise objects, the approved manager may commence business seven days after submission of the application for a period of 30 days. if the application is not approved within this 30-day period, the Fsc can authorise the manager or adviser to continue carrying on business for another 30 days while it com-pletes the approval process.

Continuing Obligations

approved managers are subject to far fewer continuing obligations than managers and advisers holding an investment business licence under siBa. under the new regime, the approved manager must:

• file an annual return that (i) confirms it is in compliance with the regulations and confirms that its principals, directors and senior officers continue to be “fit and proper”; and (ii) provides details of its funds under management and whether any significant complaints have been received from investors;

• prepare and submit annual financial statements to the Fsc, although there is no requirement for these financial state-ments to be audited;

• at all times have at least two directors and a licensed autho-rised representative in the BVi (our affiliated services company, codan, can provide this service); and

• notify the Fsc of any change in the information provided in its application form and of any matter that has a material impact on the approved manager or the business it carries on.

Converting a SIBA Licence

the regulations do not expressly contemplate the holder of an existing investment business licence under siBa “converting” to an approved manager under the regulations. However, in princi-ple, managers and advisers that already hold a siBa licence and qualify for the approved manager regime should be able to opt into the new regime and cancel their existing licence under siBa.

caYman newscayman islands master Funds

the Mutual Funds (Amendment) Law, 2012 (“amendment Law”) came into effect on 10 january 2013 with the purpose of clarifying the regime relating to the registration of master funds introduced by the Mutual Funds (Amendment) Law, 2011.

prior to the amendment Law, there had been some question as to whether a master fund with only one feeder fund registered with the cayman islands monetary authority (“cima”) was required to register as a master fund under the mutual Funds Law (as amended). the amendment Law has clarified the registration requirement, confirming that such entities are required to register under the master fund registration regime. master funds that have either one regulated feeder fund investor or one or more direct or indirect regulated feeder funds will now be required to register with cima.

master funds not currently registered but which are required to register pursuant to the revised regime will have until 1 march 2013 to come into compliance. the master fund registration



requirements remain unchanged.

if you have any questions regarding existing or proposed fund structures, please contact your customary conyers dill & pear-man representative or any of the members of our funds team who would be pleased to assist.

changes to the cayman islands companies Law and exempted Limited partnership

the companies Law and the exempted Limited partnership Law have been amended by 2012 and 2013 amendment laws, which came into force on 10 january 2013. in addition to a number of updates to penalty provisions and incidental matters, some of the more pertinent changes are outlined below.

Companies Law

1.1 Records and Register of Members Not Available to the

Public

the register of members of a cayman islands exempted company may, but need not be, kept at the company’s registered office in cayman. it is not available for inspection by the public or any governmental authority in cayman. in keeping with international standards for tax information exchange promoted by the oecd, under the new law, the register of members of a cayman islands exempted company must be made available at the registered office (electronically or otherwise) if the company is served with a valid order or notice under the Tax Information Authority Law. For such an order or notice to be issued under the Tax Informa-

tion Authority Law, a proper request must be made in accor-

dance with an applicable tax information exchange agreement with respect to a particular taxpayer, and that request must be recognised by the local tax authority having regard to the terms of the treaty in question.

similarly, an exempted company’s books of account, which may be kept at its registered office or at any other place in or outside of the cayman islands, must be made available at the registered office if a valid order or notice is made under the Tax Information

Authority Law.

1.2 Register of Directors

the register of directors must now contain the name and address of alternate directors.

1.3 Certificates of Good Standing

in addition to providing a statutory basis for the issue of certifi-cates of good standing by the registrar, the companies Law now provides that:

• a certificate of good standing is evidence of the fact that a company is in good standing on the date that the certificate is issued; and

• a company is deemed to be in good standing if all fees and penalties under the companies Law have been paid and the registrar has no knowledge that the company is in default under the companies Law.



Exempted Limited Partnership Law

2.1 Location of Register of Partnership Interests

in a move that will be well-received by the cayman islands’ international business sector, particularly in the funds arena, the register of partnership interests need no longer be maintained at the registered office. the register, which must contain the name and address, amount and date of the contributions of each partner as well as the amount and date of any payment representing a return of any part of the contribution of any partner, may now be kept either at the registered office of the limited partnership or such other place within or outside the cayman islands, as the general partner may from time to time determine.

2.2 Penalty for Failure to Maintain Register of Partnership

Interests

the register is required to be updated within 21 business days of any change in the particulars recorded in it. in the event of a default or breach of this requirement, the general partner faces a significant fine.

2.3 Records and Register Not Available to the Public

in keeping with the amendments to the companies Law, the register of partnership interests and the books and records of the partnership may be kept at the registered office or at another location and, if they are kept at another location, need only be made available at the registered office if a valid notice or order is made under the Tax Information Authority Law.

cayman islands monetary authority Launches corpo-rate Governance initiative

cima recently began formal consultation with local industry associations and other interested stakeholders on corporate governance proposals. these proposals are aimed primarily at enhancing corporate governance standards in the jurisdiction. cima has commissioned a corporate governance survey seeking views from industry. conyers has taken an active role in respond-ing to this initiative, and will keep our clients advised of the progress of the consultation process. while the process is still in its initial stages, and there are still many details to be examined, cima’s corporate governance initiative is strongly supported in principle by both public and private sectors.

mauritius newsmauritius Law relating to shadow directors

the Mauritius Companies Act 2001 (the “act”) contains the following provisions relating to the possibility that a party, who is not appointed as a director of a company, may be considered to be a shadow director:

• For the purposes of the act, “directors” include (i) a person occupying the position of director of the company by whatever name called; and (ii) an alternate director, but does not include a receiver.

• For the purposes of sections 143 to 157, which deal with the duties of the directors and transactions in which the directors have an interest, and 160 to 162, which deal with the standard of care and civil liability of directors as well as indemnification



and professional insurance, “directors” include (i) a person in accordance with whose directions or instructions a person referred to in the above definition of director may be required or is accustomed to act; (ii) a person in accordance with whose directions or instructions the Board of the company may be required or is accustomed to act; (iii) a person who exercises or who is entitled to exercise, or who controls or who is entitled to control the exercise of powers, which, apart from the constitu-tion of the company, would fall to be exercised by the Board; and (iv) a person to whom a power or duty of the Board has been directly delegated by the Board with that person’s consent or acquiescence, or who exercises the power or duty with the consent or acquiescence of the Board.

it should be noted that a person acting only in a professional capacity would not be considered as a shadow director.

Based on the foregoing provisions of the act, there is clearly some form of risk that a party who becomes overly involved in the activities of a mauritius company may be considered to be a shadow director. However, this would only arise in a situation where the Board becomes accustomed to acting in accordance with the directions or instructions of that person.

this update is not intended to be a substitute for legal advice or a legal opinion. it deals in broad terms only and is intended to merely provide a brief overview and give general information.

About Conyers Dill & Pearman

Founded in 1928, conyers dill & pearman is a world-class legal services firm advising on the laws of Bermuda, the British Virgin islands, the cayman islands and mauritius. with a global network that includes 140 lawyers spanning eight offices worldwide, conyers provides responsive, sophisticated, solution-driven legal advice to clients seeking specialised expertise on corporate, company and commercial, litigation, restructuring and insolvency, and trust and private client matters. conyers is affiliated with the codan group of companies, which provide a range of trust, corporate, secretarial, accounting and management services.

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