Bermuda: New Reforms To Attract The Global Movement Of Wealth

As the world grapples with political and economic instability, environmental concerns, and technological advancements, this remote Atlantic archipelago has taken a forward-thinking approach to attract high-net-worth individuals and businesses seeking a secure and innovative environment for their assets. With a combination of residency programs, progressive legislation, and a commitment to environmental, social, and governance (ESG) principles, Bermuda has positioned itself as a premier destination for private client and wealth management services. This article explores four key initiatives where Bermuda’s legal framework is paving the way for transformative opportunities.

Are The Super-Rich Fleeing The UK?

The United Kingdom’s resident non-domiciled (RND) tax system has long been regarded as the world’s worst kept tax haven secret. While officially designed to attract foreign investment and talent, it has drawn criticism for its perceived leniency toward wealthy individuals seeking to minimise their tax obligations. Non-doms (often high-net-worth individuals) would move to and reside in the UK, while paying minimal tax on their offshore income and gains. Further, an extensive network of tax treaties helped to reduce taxation. This system has led to accusations that the UK provided a safe haven for those seeking to shield their wealth from taxation, even as it was a critical driver of economic activity and cultural contributions. Over the years, many globally mobile families have taken advantage of this system.

With the election of the Labour Party in July 2024, there has been much written about the super-rich leaving the UK due to announced changes to the RND tax regime and fears over amendments to IHT or the introduction of wealth tax. While popular destinations include Switzerland, Italy, Dubai and Monaco, some of those emigrating are considering a move west to Bermuda. 

With its residency programs, Bermuda aims to become a destination of choice by offering residence to families seeking stability, safety, favorable tax treatment, privacy, and all the advantages of living in beautiful Bermuda.  

Bermuda offers two residency programs for eligible non-Bermudian individuals seeking to establish a new residence on the island:

Residential Certificate to Work (or Study) Remotely from Bermuda: Many people interested in obtaining residence in Bermuda will start with this residency program because it is quick, inexpensive, and it is usually easy for applicants to meet the eligibility requirements. The Certificate is initially granted for a one-year term that can be renewed for subsequent one-year terms.  Rather than simply renew the certificate, some applicants ‘upgrade’ to the Economic Investment Residential Certificate (see below).

The turnaround time for a completed application is typically five business days and it only costs US$275.  The applicant can bring their spouse, minor children (who may attend local schools), and pets (subject to an approved application).

To be eligible for a Residency Certificate, applicants must:

• Be working or studying remotely from Bermuda. An applicant is considered to be working remotely if they can demonstrate employment with their own company or other legitimate company which is registered and operating overseas. An applicant who is studying remotely must provide evidence of enrolment in a Research, Undergraduate, Graduate or Doctorate Programme.
• Be at least 18 years old.
• Not have been convicted of a crime in Bermuda or elsewhere.
• Possess valid health insurance.
• Have sufficient means and/or have a continuous source of annual disposable income.

The application process can be completed online by visiting https://forms.gov.bm/WFB/Apply.

Economic Investment Residential Certificate (EIRC): The EIRC program grants residency to applicants (and their spouse and minor dependents) who make a qualifying investment of at least $2.5 million in Bermuda. The advantages of the EIRC are that:

• It does not expire provided that in each of the first five years the applicant spends 90 days in Bermuda and retains their investment.
• The applicant is permitted to work in Bermuda for any business that they have invested in.

Qualifying investments include:

• Purchase of Bermuda real estate (residential or commercial).
• Launch a new Bermuda-based business.
• Equity investment in an existing Bermuda-based business, excluding exempted undertakings.
• Donation to a Bermuda Registered Charity.
• Contribution to Bermuda’s Sinking Fund to reduce the debt.

ESG/Sustainable Investing: Amending The Bermuda Trustee Act 1975

Many trust settlors and beneficiaries take the view that Environmental, Social, and Governance (ESG) considerations are no longer optional when investing—they are essential.

Unfortunately, many trustees around the world remain uncomfortable exercising their general power of investment for anything other than maximising financial return. In Bermuda (like England and Wales) the powers of investment are conferred by statute.  While the power to invest under section 55A of the Trustee Act 1975 (the Act) is broad in terms of the types of investment that trustees may make, it restricts the purposes for which such investments might be made. In particular, section 55A(3) does not include non-financial factors or settlor/beneficiary values as investment purposes for consideration by the trustee. Further, section 55A(4) of the Act mandates that trustees exercise their investment powers as a prudent investor would, having regard to the purposes, terms, distribution requirements, and “other circumstances of the trust”. English case law reinforces the uncertainty of the ability of trustees of private trusts to exercise their general power of investment to pursue anything other than the best financial return.

Trustees in Bermuda wish to ensure that beneficiaries and settlor(s) views on ESG investments can be considered when exercising their general investment power. The forthcoming amendment clarifies that the “other circumstances of the trust” a trustee may consider include the views of the settlor and beneficiaries on the impact of investments on the environment, wider society, and approaches to the governance of the invested companies.

Specifically, the amendment will introduce a permissive model that address the uncertainty of the law by amending section 55A(4A) of the Act to reflect evolving investment standards and strategies by adopting the following new provision: “For the avoidance of doubt, the circumstances of the trust for the purposes of this section shall include the wishes of the beneficiaries and settlor(s), including in respect of investment strategies that align with their views regarding (a) the impact of investments on the environment, (b) the impact of investments on wider society (whether or not in Bermuda), and (c) appropriate governance related to investments, insofar as such wishes or views may be known to the trustee from time to time.”

Benefit Company Legislation: A Socially Conscious Approach

Traditionally, directors of companies have a duty to maximise profit for the benefit of the company’s shareholders. Under this traditional view, directors would breach this duty if they sacrificed the company profits to obtain a positive impact on society and the environment.

In direct conflict with the traditional duty of directors, today there is a growing demand by shareholders, investors, consumers, employees, and other stakeholders, for businesses to operate responsibly and address social and environmental issues.  Investors require evidence of effective implementation of ESG factors to mitigate financial, reputational, governance and other risks and support the company’s long-term viability. Consumers use their purchasing power to promote brands and products they believe are socially and environmentally responsible. In addition, the younger labour market is showing a growing preference for employers that value social impact.

Benefit Company legislation modifies the traditional duties of Benefit Companies’ directors by requiring that they balance the pursuit of profit with the pursuit of certain public benefit activities specified by the shareholders of the Benefit Company.

Benefit Company legislation has been passed in 39 US jurisdictions, Italy, Peru, Colombia, Ecuador, Rwanda, and the Canadian province of British Columbia. Bermuda will be the first international financial centre to pass Benefit Company legislation.

Bermuda’s Benefit Company legislation will be an opt-in model for a "for-profit" company that has decided to meet higher purpose, accountability, and transparency standards. The constitutional documents of a Benefit Company will contain a clearly stated mission to have a material positive impact on society and the environment while benefitting its shareholders, members, or partners.  Company directors/management would thereby be required to consider the impact of decisions on all stakeholders and be empowered to implement and maintain stated ESG objectives and hold the company to higher standards of accountability and transparency.

A Benefit Company’s directors would operate the business with the same authority as a traditional company.  However, Benefit Companies differ from traditional companies in the following ways:

• ‘Public benefit’ requirement – In addition to carrying on their ordinary business activities, Benefit Companies must pursue a ‘public benefit’. ‘Public benefit’ means a positive effect on one or more communities or categories of persons or on the environment, including effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific or technological nature.
• Stakeholder-centric business model – A Benefit Company’s decision-making must consider the effects of any action or inaction not only on shareholders but on all stakeholders, including employees, community, customers, the environment, and short and long-term interests of the company.
• Reporting requirements – Transparency provisions require Benefit Companies to publish periodic benefit reports of their social and environmental performance using a comprehensive and credible third-party standard. In certain instances, a Benefit Company will have the ability to opt out of the reporting requirements.

Shareholders of a Benefit Company retain the protections offered in a traditional company model, including voting and other rights.  Directors and officers of a Benefit Company are afforded greater legal protection to pursue a business model that builds a solid foundation for long-term mission alignment and value creation. This safeguard allows directors and officers to better protect broader values in leadership changes, liquidity events, and acquisitions.

Under the Bermuda legislation, a Benefit Company does not/would not:

1. Impact traditional companies that do not opt-in to become a Benefit Company or impose additional requirements or regulations on them.
2. Be a Certified B Corporation (B Corp). A Benefit Company is independent of a B Corp. It is a legislative status made available to companies. In contrast, a B Corp is a certification issued by a private organisation (ie B Lab) and has no legislative framework. A Bermuda Benefit Company may apply for B Corp certification, but this would be at the discretion of the Benefit Company, and separate and distinct from its existence as a Benefit Company.
3. Receive special tax treatment in Bermuda.
4. Require third-party certification or auditing of the Benefit Company, although a company may elect to do so.
5. Affect regulated entities that do not opt-in to become a Benefit Company.
6. Grant shareholders fewer rights. It preserves voting and governance rights and rights to bring suits against the company.

Foundation Companies For DAOs, Defi And NFTs

Bermuda has been proactive in the introduction of digital asset legislation. The Digital Asset Business Act, enacted in 2018, serves as the statutory basis for regulating Digital Asset Businesses in Bermuda.

The popularity of digital assets has led to unique concepts like decentralised finance (defi), non-fungible tokens (NFTs), and decentralised autonomous organisations (DAOs).

Most of these activities require a vehicle that will undertake the formal legal activities required by the project. The vehicles available in Bermuda include trusts, private companies limited by shares or guarantee, limited partnerships or limited liability partnerships, and Bermuda LLCs.  Bermuda practitioners, recognising that foundations are also popular vehicles, are seeking to introduce foundation company legislation.

A foundation company may be an attractive structure for digital asset projects and DAOs for several reasons:

• Ownerless: Since a foundation does not require shareholders or members, it works well with the decentralised nature of DAOs and defi (where there is often a desire for ownership and control to be decentralised).
• Corporate status: A foundation has separate legal personality, it can execute contracts and token agreements and open exchange or bank accounts.
• Flexible control mechanisms: It is possible to provide for certain powers to be held by persons or entities other than the directors of the foundation. For example, the foundation can be established so that the founding or core team members can contribute to the direction of the foundation (for example by the creation of a supervisor or advisory committee).
• Recognised structure: The use of foundations in digital asset projects is common and familiar to industry participants and investors.
• Quality service providers: Bermuda has a depth of local service providers familiar with digital asset businesses.
• Byelaws: The foundation’s byelaws are not filed with the constitutional documents, so it is possible to set out many of the confidential provisions in the bye-laws.
• Tax advantages: There may be tax advantages to establish the structure in Bermuda.
• Legal Personality: Provide a legal ‘wrapper’ for DAOs and defi projects.
• Support entity: Act as a service provider by signing documents and engaging developers or consultants on behalf of the DAO or defi project. Alternatively, the foundation might provide marketing and development services for NFTs and DAO projects.
• Fundraising: Act as a fundraising vehicle for early stage and VC private funding.
• Holding vehicle: Hold a project’s treasury assets to pay for services that are needed on an ongoing basis, or acting as a parent or holding entity when the subsidiaries that carry out functional activities need to be formed in other jurisdictions.

In conclusion, Bermuda's forward-thinking approach to legislative reform and wealth management has positioned it as an attractive jurisdiction for high-net-worth individuals and innovative businesses. With its commitment to stability, privacy, and social consciousness, Bermuda is well-equipped to navigate the challenges and opportunities of the modern global wealth landscape.

Randall Krebs
Director