BERMUDA Law and Practice Contributed by: Erik Gotfredsen, Jemima Fearnside and Larina Kenny, Wakefield Quin Limited
1.6 ESG/Sustainability-Linked Lending Initiatives by the Bermuda Stock Exchange and the Bermuda Development Agency have raised aware- ness of ESG opportunities in Bermuda. Bermuda companies with activities focusing on renewable energy investments have been notably successful in bucking the trend of higher cost debt transac- tions when negotiating revisions to existing lending arrangements. Several global players with Bermuda group structures have developed green bonds, listing on exchanges including Singapore and the Bermuda Stock Exchange, and the Bermuda government has itself launched a blue and green investment fund, the proceeds of which are intended to be used to support ocean conservation and decarbonisation in Bermuda. 2. Authorisation 2.1 Providing Financing to a Company The provision of financing to a Bermuda company, whether by a foreign bank or alternative credit pro- vider, does not require that such lender be licensed in Bermuda. Unless security is taken over Bermuda assets (such as real estate situated in Bermuda or shares of a Bermuda company) third-party consents or permissions in order for a Bermuda company to grant security over its assets are generally not required. 3. Structuring and Documentation 3.1 Restrictions on Foreign Lenders Providing Loans Provided the loans are granted from outside Bermuda, there are few restrictions on a foreign lender providing loans to a Bermuda company. Restrictions do apply under the Bank and Deposit Companies Amendment Act 2022 where a foreign lender is seeking to open a branch establishment in Bermuda. 3.2 Restrictions on Foreign Lenders Receiving Security There are few restrictions on Bermuda companies providing security or guarantees to foreign lenders. A Bermuda company may guarantee borrowings of members of its group provided the company has
capacity to provide such guarantees and there is a sufficient corporate benefit to the guarantor company. There are special rules that apply if an overseas lender wishes to hold a mortgage over real property in Ber- muda, including obtaining the prior consent of the Bermuda Minister of Finance. If a mortgage taken by an overseas lender is subsequently enforced, any land obtained by such lender (as mortgagee in possession) must be sold within five years to either an individual or entity having Bermudian status or to another appro- priately licensed person. Security over shares of Bermuda companies is gen- erally granted under a charge over shares. Legal mortgages are uncommon. It is recommended that chargors also be required to deliver certain ancillary documents to strengthen their security, including irrevocable voting proxies and undertakings. Although it is recommended that share charges be governed by Bermuda law, the laws of foreign jurisdictions may govern share charges if required by the underlying transaction documents. Bermuda exchange control regulations generally require the prior consent of the Bermuda Monetary Authority prior to any disposition of shares of a Bermuda company, which includes the granting of a security interest in the shares. The Ber- muda Monetary Authority has issued a blanket con- sent in situations where the chargee is a licensed bank or lending institution in certain appointed jurisdictions and the Bermuda Monetary Authority is provided with written notification of the creation of the charge. Fur- ther, the increased use of security agents already known to the Bermuda Monetary Authority (see 1.2 Impact of Global Conflicts ) enables such security agents to take advantage of swift clearance proce- dures in order to hold and register shares of Bermuda companies on enforcement of security interests. 3.3 Restrictions and Controls on Foreign Currency Exchange Bermuda entities generally used in cross-border transactions are either exempted companies or lim- ited liability companies, each of which is designated as non-resident for exchange control purposes and therefore generally free from restrictions on foreign currency exchange.
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