BERMUDA Law and Practice Contributed by: Ian Stone and Leo Shaw, Wakefield Quin Limited
• in an insolvency scenario, criminal liability for fraud, dishonesty or knowing participation in the carry - ing on of business with intent to defraud creditors (Section 246); • personal liability where they have acted while dis - qualified (Section 94); and • regulatory enforcement by the BMA for breaches of sector-specific conduct requirements, which may include civil penalties, prohibition orders, injunc - tions, public enforcement actions, and warnings and decision notices. The legislation on fraudulent preference under Sec - tion 237 of the Companies Act provides that certain transactions within six months of insolvency may be set aside (subject to available defences – eg, a bona fide transfer or disposition). Liability can attach to the preferred person (Section 238), so this is unlikely to be relevant to a director or officer. Section 98 of the Companies Act permits a company to indemnify directors and officers against liabilities incurred in their capacity as such, except for fraud or dishonesty. Most Bermuda companies maintain broad indemnification provisions in their bye-laws. This means that directors may require that the com - pany pay the cost of defending the claim and will only be liable if fraud or dishonesty is proven. In addition, most Bermuda companies pay for and carry directors’ and officers’ insurance. The fiduciary duty itself cannot be excluded, though its consequences may be mitigated by ratification by resolution of shareholders, indemnification in the bye- laws and directors’ and officers’ insurance. 3.10 Payments to Directors/Officers The Companies Act does not prescribe specific rules on director remuneration. There is no general Bermuda law obliging disclosure of director remuneration. The bye-laws typically provide that directors’ remunera - tion shall be determined by the board. Under Section 96 of the Companies Act, any loan to a director must be authorised by not less than 90% of the members holding voting rights. For companies listed on exchanges, disclosure of executive and director compensation may apply.
For domestic issuers listed on the BSX, information regarding benefits and remuneration must be dis - closed in the prospectus. For international issuers, the requirements will be governed by the primary listing authority. There is no Bermuda requirement to have a remuneration committee. It is possible that regulated entities may be required to report certain remuneration information to the BMA – for example, where there are conflicts of interest or incentive structures that the BMA considers impru - dent. The relationship between a Bermuda company and its shareholders is governed by the Companies Act, the common law, the company’s memorandum of association and bye-laws, and general principles of contract and equity. The memorandum and bye-laws constitute a contract between the company and its members, and between the members. Every company is required to maintain a register of members at its registered office in Bermuda (Section 65 of the Companies Act). The register of members is open to inspection by any member of the public without charge for not less than two hours a day dur - ing business hours (subject to reasonable restrictions) (Section 66). The company may give notice to close its register of members for up to 30 days in a year. The ROC does not maintain a public register of share - holders. The central beneficial ownership register under the BOA (see 1.4 Stock Exchange Require- ments Developments ) is not publicly accessible but is available to government authorities and AML/ATF regulated entities. Further guidance on the BOA is expected to be published in the near future. 4.2 Role of Shareholders Bermuda law follows the traditional common law prin - ciple that the management of the company is vested in the board of directors, not the shareholders. Share - holders cannot ordinarily direct the board to take or refrain from taking specific business decisions unless 4. Shareholders 4.1 Companies and Shareholders
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