BERMUDA Law and Practice Contributed by: Natalie Neto, Rachel Nightingale, Hannah Tildesley and Marah Smith, Walkers
Private Purchase of Shares of Target The purchaser will acquire the target company’s entire issued share capital from one or several shareholders by way of a privately negotiated share sale and pur - chase agreement. It is customary for the form of agreement to have war - ranties and protections built in, in order to protect the purchaser, which will be acquiring all of the assets and liabilities of the target company. Private Purchase of Underlying Assets of Target A purchaser may acquire all or specific assets of a target at an agreed price. The terms of the transaction will be governed by an asset purchase agreement, with specific warranties being given to the purchaser in respect of the assets subject to the agreement. In this manner, it is possible for a purchaser to “cher - ry pick” the assets that it wants and to exclude any unwanted liabilities. 2.2 Primary Regulators There are no regulations specifically regulating M&A activity in Bermuda, which does not have an equiva - lent to the UK Takeover Panel overseeing the Takeover Code. The BMA is the sole financial services regulator in Ber - muda and is responsible for regulating businesses in the banking, insurance, digital assets, trust, invest - ment funds, investment business and corporate ser - vices sectors, as well as the Bermuda Stock Exchange (BSX). In circumstances where the target is operating in these regulated spaces, the BMA may be involved in a transaction because a change of control applica - tion may need to be submitted under the applicable regulatory act as part of the M&A transaction. In addi - tion, the consent of the BMA for the acquisition of the target’s shares may be required pursuant to the Exchange Control Act 1972 (and related regulations) (“Exchange Control Rules” – see 4.2 Material Share- holding Disclosure Threshold ). If the target is listed on the BSX, the BSX Listing Regu - lations would need to be complied with. If a local company is operating in the communica - tions networks, submarine cable or electricity sectors
in Bermuda, the Regulatory Authority may be involved in any M&A transaction that results in a change of control. 2.3 Restrictions on Foreign Investments There are no restrictions on foreign investment in exempted companies – ie, companies that can be 100% owned and controlled by non-Bermudians. There is a requirement for local companies to be con - trolled 60% by Bermudians. As a result, at least 60% of the total voting rights must be exercisable by Ber - mudians and at least 60% of the directors must be Bermudian. Locally, this is described as the “60:40 rule”. Where the 60:40 rule cannot be met, it is possible to apply for a licence from the Minister of Finance under Section 114B of the Companies Act to allow a local company to conduct business in Bermuda where the ownership and control of the company are held less than 60% by Bermudians. The granting and duration of licences is at the discretion of the Minister, but they are typically granted for five years. In addition, pursuant to the Exchange Control Rules, the approval of the BMA is required prior to the issue and transfer of shares by Bermuda companies to for - eign buyers, unless the BMA has granted a general permission (eg, if shares are listed on an appointed stock exchange). 2.4 Antitrust Regulations There are no specific antitrust regulations that apply to business combinations in Bermuda. However, a change of shareholder controller of any target that is regulated by the BMA or the Regulatory Authority would be subject to regulatory scrutiny, which may include a consideration of the impact of the transac - tion on the Bermuda market. 2.5 Labour Law Regulations In Bermuda there are four main statutes governing employment rights: • the Employment Act 2000; • the Occupational Safety and Health Act 1982; • the Workers’ Compensation Act 1965; and
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