BERMUDA Trends and Developments Contributed by: John Wasty, Claire van Overdijk, Sam Riihiluoma, James Batten and Jordan Knight, Appleby
The Bermuda Monetary Authority (the Authority) has increasingly been using restructuring and insolvency proceedings as a means to encourage compliance with relevant laws and regulations. This follows the completion of an initial Section 30 investigation, which allows the Authority to investigate potential violations of the Insurance Act of 1978. A recent example of this was Inthe Matter of White Rock Insurance (SAC) Limited [2023] SC (Bda) 261 Civ, in which the Authority presented a winding up petition of White Rock Insurance (SAC) Limited. The Authority subsequently made an application to with- draw the petition following certain developments fol- lowing its presentation, leading it to form the view that winding up the company was no longer in the public interest. The Court accepted the Authority’s applica- tion, thus emphasising its primary role in upholding the reputation and integrity of Bermuda’s insurance market. Creditors’ first mover advantage A recurring theme is that Creditors recognise that financially distressed businesses often face multiple enforcement actions. This can lead to a perception of a ‘first-mover’ advantage, as the creditor initiating a petition may have greater control over the timing and early stages of the insolvency process compared to other creditors. Segregated accounts Because Bermuda hosts a large number of insurers/ reinsurers and segregated accounts companies, insol- vency and restructuring issues in that sector are espe- cially salient. In January 2025, the Authority’s guid- ance note entitled “ General Business Insurers with Segregated Accounts and Separate Accounts ” came into effect, which provides the insurance industry with clarity on the regulatory regime and requirements for Bermuda insurers using segregated accounts and separate accounts (SAC Insurers). If SAC insurers fail to comply with this enhanced regulatory regime, they risk being subjected to Section 30 Investigations and restructuring/insolvency proceedings. Proposals There are proposals to create a new restructuring pro- cess involving the appointment of a ‘court-appointed
restructuring officer’. While there would be consider- able overlap between the roles of a court-appointed restructuring officer and a provisional liquidator, there would be greater emphasis on restructuring, clear cri- teria for appointment, and prompt reporting on the feasibility of a restructuring proposal. There are also proposals to reduce the threshold for approval of a scheme of arrangement from 75% of each class to 66% of each class. The time frame for the introduction of these reforms is, at present, uncertain. Looking ahead The increase in debt restructuring activity, both in and out of court, reflects creditors’ continuing belief that rescue procedures can preserve value and demon- strates their confidence in Bermuda as a restructuring destination. Considering Bermuda’s well-established position as an international financial centre and a preferred place of incorporation for multinational corporations, the identified trends are likely to persist well into the fore- seeable future and Bermuda will continue to be an active jurisdiction for rescue, restructuring, and insol- vency proceedings. Section B: Commercial Bermuda has recently seen significant developments in shareholder appraisal proceedings, which are brought when a shareholder is not satisfied with the price offered for their shares in an amalgamation or merger. The directors of each amalgamating company must submit an amalgamation agreement for approval at a shareholder meeting. The notice of meeting must state the fair value of the shares as determined by the company and that a dissenting shareholder is entitled to be paid the fair value of their shares. The amalga- mation must be approved by 75% of shareholders, subject to the byelaws of the company. Shareholders who did not vote in favour of the amalgamation, and who were not satisfied with the offer price, may apply to court to appraise the fair value of their shares.
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