BERMUDA Law and Practice Contributed by: E. Scott Swainson, Andrew Morgan and Erik Gotfredsen, Wakefield Quin Limited
Trusts Trusts are typically used where owners are older, in order to avoid death taxes or because the owner holds other land and typical exemptions are spoken for. They also offer asset protection against personal liability. Land holding trusts may exist for 100 years. Appointments from trust to a beneficiary attract only nominal stamp duty, so trusts are easily dissolved. Number of Trustees Land holding trusts typically have two individual trus - tees or a single trust corporation, acting as trustee on the terms of a written settlement. Fully licensed trust corporations are able to hold land as trustee without landholding sanctions and can move quickly com - pared to companies. Companies Companies need landholding powers for most land acquisitions, and this typically takes six to 12 weeks to secure. In addition, the landholding consent (when issued) will contain conditions and require the compa - ny to dispose of the land within three years if the busi - ness justification relied upon in the application ceas - es to apply. Such conditions do not apply to trusts. Companies tend to be useful when there is a mixture of unrelated shareholders who need a set framework to govern relations, and when trusts (which involve a certain amount of discretion) are less suitable. Companies must file annual returns and pay annual government fees, and can be struck off for non-com - pliance. Corporations Condominium corporations are formed under statute (when a suitable plan is registered with the Bermuda government under a specialised process). They are rel - atively rare and statutory rules apply, which are inflex - ible. Most condominiums are formed with a company holding the freehold and main structure and the unit buyers holding 999-year leases of an “internal shell”. 5.3 REITs A real estate investment trust is not a commonly avail - able investment vehicle for foreign investors. There are restrictions on both ownership and control of property,
including “anti-fronting legislation” that would typical - ly disallow ownership via a trust structure. 5.4 Minimum Capital Requirement The minimum capital requirement at incorporation could be as little as USD1. It is generally set at a num - ber that reflects the likely number of shareholders, so that the capital can be easily divided without the need to reduce or increase. 5.5 Applicable Governance Requirements Non-Bermudian individuals must observe land licens - ing rules. An applicant for a land licence must show that they are fit and proper persons, and compliance checks and references are taken. Private trustees are fiduciaries for the beneficiaries but are not subject to formal oversight. Trust corporations are also fiduciaries and are heavily regulated and may be audited by the Bermuda Monetary Authority. Companies must remain in good standing and accounting practices are subject to audit (eg, pay - ment of payroll taxes). Compliance Disclosure notices may be served on all persons sus - pected of “fronting” (see 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time ), including service providers and attorneys (such notices suspend attorney/client privilege). The Bar’s AML-ATF regulations also contain reporting requirements for suspicious transactions and prevent tipping off. 5.6 Annual Entity Maintenance and Accounting Compliance A trust corporation normally charges a flat fee (with variance for extra time spent) or a fee based on a percentage of assets managed. The trustee will often provide trust accounting. Trustee fees tend to be at least USD5,000 annually. A company is generally administered by a licensed service provider, and annual running costs typically exceed USD3,000. A private company may waive audit, provided all shareholders agree.
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