BERMUDA Law and Practice Contributed by: Natalie Neto, Rachel Nightingale 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 purchase agreement. It is customary for the form of agreement to have warranties and protections built in, in order to protect the purchaser, which will be acquiring all of the assets and liabilities of the target com - pany. 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 pur - chase 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 “cherry pick” the assets that it wants and to exclude any unwant - ed liabilities. 2.2 Primary Regulators There are no regulations specifically regulating M&A activity in Bermuda, which does not have an equivalent to the UK Takeover Panel oversee - ing the Takeover Code. The BMA is the sole financial services regulator in Bermuda and is responsible for regulating busi - nesses in the banking, insurance, digital assets, trust, investment funds, investment business and corporate services sectors, as well as the Bermuda Stock Exchange (the BSX). In circum - stances where the target is operating in these regulated spaces, the BMA may be involved in a transaction because a change of control application may need to be submitted under the applicable regulatory act as part of the M&A transaction. In addition, 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 Shareholding Disclosure Threshold ). If the target is listed on the BSX, the BSX Listing Regulations would need to be complied with. If a local company is operating in the communi - cations 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 controlled 60% by Bermudians. As a result, at least 60% of the total voting rights must be exercisable by Bermudians 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 pos - sible to apply for a licence from the Minister of Finance under Section 114B of the Compa - nies 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 foreign buyers, unless the BMA
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