BERMUDA Law and Practice Contributed by: E Scott Swainson, Katrina Dickson and Erik Gotfredsen, Wakefield Quin Limited
does not render the security invalid vis a vis the borrower, but it does impact priority. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders Foreign Lenders Special rules apply if a foreign lender wishes to hold a mortgage over real property in Bermuda, including obtaining the prior consent of the Min - ister of Finance and the Minister responsible for Immigration, respectively. Enforcement If such a mortgage is subsequently enforced, any land obtained by a mortgagee in posses - sion must be sold within five years either to a person or entity having Bermudian status or to another licensed party. Restrictions on Repayments Generally, there are no restrictions on repay - ments being made to a foreign lender under a security document or loan agreement. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Fees and Taxes Stamp duty is payable on the mortgage/deben - ture; see 2.10 Taxes Applicable to a Transac- tion . Exemptions Most assignments of mortgages are exempt. As of 1 April 2023, refinancings up to the maximum value of USD1 million are exempt, with any “new money” triggering stamp duty at the usual rates. Registration Fees Any first legal mortgage triggers first registra - tion at the LTRO. Fees are based on the market value of the property and banded, with the high -
est band being for properties valued over USD1 million and attracting a fee of USD1,300. 3.5 Legal Requirements Before an Entity Can Give Valid Security Generally, a Bermuda company may grant a security interest over real estate in order to secure its obligations as a borrower under a credit facility and as a guarantor of the obliga - tions of other borrowers/guarantors, provided there is a demonstrable corporate benefit to the company (which may be in the form of a ben - efit to the company group, if applicable) and the There is no general prohibition or restriction on financial assistance, but loans to directors or security in favour of directors (or loans to per - sons connected to a director) are restricted. 3.6 Formalities When a Borrower Is in Default company is solvent. Financial Assistance The current market has not altered the typical reluctance on the part of most established lend - ers in Bermuda to exercise their power of sale. Exercising such a power continues to be widely considered a last resort, with lenders attempt - ing to negotiate voluntary surrender where other accommodations fail. Court Order A lender with the right to exercise power of sale may require an order of court (in order to obtain vacant possession and effectively complete a disposal where the borrower is unco-operative). Lender Duties A lender who exercises a power of sale must secure the best realisable sale price and account to the borrower for any surplus. Many corporate insolvencies lead to receivership rather than the
168 CHAMBERS.COM
Powered by FlippingBook