The partnership is a popular form of collective investment vehicle primarily because it is regarded in many
jurisdictions (including the U.S. and the U.K.) as fiscally transparent, tax being payable at partner rather than
partnership level. (No tax is imposed on a Bermuda partnership under Bermuda law.) Consequently, the tax position
of one partner will not affect the position of the other partners. In addition, if the business of the partnership is not
profitable, a partner can often use his share of the losses to reduce any tax liability.
As in many other areas of law, Bermuda partnership law is based on English principles. The partners of a general partnership will have personal liability for the debts of that partnership. The general partner(s) of a limited partner will be similarly liable for the debts of that limited partnership, whereas the liability of its limited partners will be limited to the amounts they have agreed to contribute to the partnership.
Bermuda partnerships, including limited partnerships,
have no separate legal personality under Bermuda law, but are simply an aggregate of the individuals or companies that comprise them. There is no Bermuda insolvency regime directly applicable to Bermuda partnerships. Consideration of the appropriate insolvency regime will depend upon the law of bankruptcy/insolvency pertaining to a particular partner.
Significant Changes Increase Bermuda Advantage
Recently, there have been changes to the Partnership Legislation in respect of Bermuda partnerships, (typically used for venture capital private equity, real estate and other investment opportunities for institutional and high-net worth investors), that further enhance and simplify the operation of Bermuda partnerships, with their uncomplicated and sensible regulation which suits the needs of sophisticated investors .
Significant highlights to the changes are as follows:
Register of Limited Partners
The Register of limited partners is no longer available for inspection by the public. It is thought to be a significant advantage over other offshore jurisdictions where this is a requirement. This if of significance where the information of investors is often sensitive (for example where the promoter considers such information to be proprietary). The need to differentiate between capital of limited partners as contributed between cash and in kind has been eliminated.
Capital
There used to be a requirement for a minimum capital of $12,000. This has now been removed completely. Whilst this is a modest amount in the scheme of the average partnership, it removes an administrative hurdle where most partnerships do not look for capital contributions on being formed. The requirement to notify the Authorities of changes in limited partners’ capital has been removed.
Position of Partners of Bermuda Exempted and Overseas Partnerships The position in relation to non-Bermudian partners of exempted or overseas partnerships has been
clarified in relation to whether permission is required for the partners themselves to obtain permission to operate from Bermuda. Changes to the legislation now makes it clear that partners themselves, whether corporations or partnerships, do not need permission to operate from Bermuda (providing they are only acting in respect of the partnership).
The above changes should be seen against a backdrop of the existing regulation which requires:
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no permission for limited partners (permission from the Minister of Finance is required for general partners and their ultimate beneficial owners. Since the general partner is normally associated with a well established institution permissions are routine in this regard);
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no requirement for an overseas partner to be licensed;
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no requirement to file or clear offering memorandums or prospectuses or other requirements generally associated with collective investment funds.
The formation of exempted partnerships requires merely the submission of the details of the general partner, the proposed certificates of registration (giving brief details of the partnership) and the form of partnership agreement to the Bermuda Monetary Authority. Once permission is obtained which generally takes a few days, the certificates, as applicable, are registered with the Registrar of Companies enabling the partnership to commence operations in Bermuda.
BIBA invites readers wishing more information on Bermuda Partnerships to visit the website of the contributors of this article, Conyers Dill & Pearman (www.conyersdillandpearman.com).
For more on doing business in Bermuda or invitations to Bermuda Briefings in your locale,
please contact sstirling@biba.org. |
