Ministerial Statement by the Minister of Economic Development, Dr. The Hon. E. Grant Gibbons, JP, MP
Mr. Speaker, this morning I had the pleasure of tabling the Limited Liability Company Act 2016. This Bill is a significant piece of legislation which will establish the first new commercial structure in Bermuda in more than 100 years. With the enactment of this legislation, we will create a structure that offers broad flexibility for both local and international use. This new structure is a tremendous step toward ensuring that Bermuda has corporate products that are modern and innovative but also familiar to many prospective clients.
Mr. Speaker, limited liability companies, commonly referred to as LLCs, are currently one of the most widely used business structures in the United States. LLCs are typically viewed as hybrid entities because they offer characteristics and advantages of both partnerships and corporations. The fundamental similarity to partnerships is that LLCs are managed and operated pursuant to a contractual agreement amongst the members, who are the owners of the LLC. This provides significant flexibility for LLC members to determine the most appropriate terms and conditions for administration and governance of the LLC.
Mr. Speaker, LLCs are also similar to corporations, or in our case, limited companies, in that LLC members generally enjoy limited liability; so any personal liability is limited to the value of each member’s capital contribution to the LLC. This limitation on liability typically remains in place even if LLC members actively participate in the management of an LLC. In fact, the ability of the members to both manage the day to day operations of an LLC while retaining their limited liability are two cornerstones of this structure and are particularly attractive to investors.
Mr. Speaker, LLCs are well known amongst US law firms as a vehicle of choice for private equity funds and asset holding structures. They are also utilized in some offshore jurisdictions such as the Isle of Man, Anguilla and the Marshall Islands. LLCs have also recently been introduced in the Cayman Islands. The popularity of LLCs is based on market demand by persons and entities seeking the flexibility and protection offered by this corporate structure.
In Delaware alone, there are nearly 800,000 active LLCs, with just over 180,000 being formed since the start of 2015. To fully engage potential clients in the US and other markets, and to make Bermuda more attractive for setting up new business ventures, Bermuda must respond to the demand for LLC structures.
Mr. Speaker, while the Bill is generally modelled after existing US LLC laws, Bermuda LLCs will be subject to the same transparency requirements for beneficial ownership that apply to existing Bermuda structures. The recent announcement by the US Government of enhanced filing requirements for certain beneficial owners of LLCs simply underscores Bermuda’s position as a world leader in relation to global transparency issues.
Mr. Speaker, the Government remains committed to strengthening Bermuda’s reputation as a premier domicile for a variety of international business activities. As such, we will continue to bring forth legislative initiatives that will be aimed at improving Bermuda’s corporate products and services.
One of the most important components of achieving success in this effort is working in collaboration with entities across the Government and the private sector to develop, implement and evaluate the impact of policies and initiatives aimed at improving our economic performance. In the past 14 months, this collaboration resulted in the enactment of 7 Bills that received bipartisan support in the Legislature and which made significant changes to our legislative framework governing partnerships, companies, trusts and contracts.
Mr. Speaker, I believe that the benefits of creating this new LLC structure for use locally and by international businesses will again result in bipartisan support for this important piece of legislation. As such, I look forward to moving this Bill through our legislative process.
Thank you, Mr. Speaker.