BERMUDA Law and Practice Contributed by: Erik Gotfredsen, Jemima Fearnside and Larina Kenny, Wakefield Quin Limited
3.4 Restrictions on the Borrower’s Use of Proceeds As a result of ongoing geopolitical tensions, there is greater scrutiny on the use of debt proceeds to ensure compliance with anti-money laundering, anti-terrorist financing, and international sanction compliance. Oth- erwise, there are few restrictions on the use of pro- ceeds by a Bermuda borrower. 3.5 Agent and Trust Concepts Agent and trust/trustee structures are commonplace in Bermuda. For alternative credit providers, the use of security agents/trustees previously known to the Bermuda Monetary Authority is increasingly employed in situations where security is being taken over shares of a Bermuda company, ensuring local regulatory consent is forthcoming (see 1.2 Impact of Global Conflicts ) on a timely basis. Non-licensed lenders and security agents/trustees not previously known to the Bermuda Monetary Authority face greater due diligence scrutiny by the Bermuda regulator and, as a result, regulatory approvals can sometimes take longer to procure. 3.6 Loan Transfer Mechanisms Loan transfer mechanisms are mandated by the con- tractual documentation, with no Bermuda-specific provisions applicable to such transfers. Transfers may be effected by assignment or novation deed. 3.7 Debt Buyback Debt buy-backs are permitted in Bermuda. 3.8 Public Acquisition Finance Bermuda has no specific requirements for “certain funds” with both public acquisition finance trans- actions and private acquisition finance transactions involving Bermuda entities being subject to Bermuda law without distinction. 3.9 Recent Legal and Commercial Developments The Personal Information Protection Act 2016 (PIPA) came into full force on 1 January 2025, aligning Ber- muda’s data protection framework with global privacy standards, giving individuals greater control over their personal information and ensuring that organisations handle data responsibly and transparently.
The replacement of LIBOR by SOFR continues to require updates to pre-existing financing and trans- action documentation in Bermuda. Similarly, the introduction of Bermuda’s Investment Business Amendment Act 2022 broadened the scope of what constitutes “investment business” in or from Bermu- da, and ensured that all entities conducting invest- ment business in Bermuda now fall under the remit of the Bermuda Monetary Authority. 3.10 Usury Laws There are no laws on usury that limit the amount of interest that can be charged to exempted companies. In relation to local companies (being a Bermuda com- pany that is at least 60% owned and controlled by Bermudians), a lender may stipulate for, allow and exact on any contract, any rate of interest that is agreed upon. However, a contract which creates or evidences a debt dischargeable in Bermuda dollars by a debtor resident or incorporated in Bermuda at the time of contracting is subject to orders made by the Bermuda Monetary Authority, including the maximum rate of interest. 3.11 Disclosure Requirements Save as required to comply with laws on anti-terrorism financing, anti-money laundering or sanctions compli- ance, there is no general law regarding disclosure of financial contracts. Neither Bermuda exempted companies, partnerships nor limited liability companies are subject to withhold- ing tax or similar deductions on payments made to lenders. 4.2 Other Taxes, Duties, Charges or Tax Considerations Bermuda-exempted companies, partnerships and limited liability companies are exempt from taxes payable in Bermuda in respect of loans, guarantees or security (other than in limited situations, including security over real property situated in Bermuda). 4. Tax 4.1 Withholding Tax
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