Ministerial Statement: To the House of Assembly By Dr. the Hon. E Grant Gibbons, JP, MP Minister of Economic Development
Mr. Speaker, I am pleased to introduce to this Honourable House, the Partnerships and Companies Amendment Act 2016. Honourable Members may recall that prior legislative reforms relating to partnership governance were approved by the Legislature in 2015 as part of our efforts to enhance and modernize our partnership laws. This Bill is a continuation of that effort and makes additional changes to the Exempted Partnerships Act 1992; the Limited Partnership Act 1883; and the Partnership Act 1902. Amendments to the Companies Act 1981 are also included in this Bill as appropriate to give effect to some of the prior amendments to the partnership laws.
Mr. Speaker, the current amendments will enhance the regime for Bermuda partnerships by:
- Providing more flexibility with respect to the management and operation of Bermuda partnerships;
- Clarifying the legal impact of certain changes in the constitution of limited partnerships as well as certain activities of limited partners; and
- Providing further clarity in relation to de-registration of Bermuda partnerships and conversion of exempted companies to partnerships.
Mr. Speaker, as with prior legislative reforms, the amendments proposed by this Bill are the result of collaboration amongst various Government Ministries, the Bermuda Monetary Authority and the private sector as represented by the Legal Focus Group of the Bermuda Business Development Agency. As such, both the policies underpinning the proposed amendments and the Bill have been carefully considered and reviewed by multiple entities.
Mr. Speaker, this Bill introduces changes to the Exempted Partnerships Act 1992 to make the provisions governing relocation of partnerships into Bermuda consistent with those governing relocation of companies into Bermuda. Currently, the law provides that a partnership can only continue into Bermuda from a jurisdiction that has been approved by the Minister responsible for the Companies Act, otherwise known as an “appointed jurisdiction”. As a result, partnerships in jurisdictions that are not appointed jurisdictions will have to dissolve their existing business entity and establish a new business entity in Bermuda.
However, the Companies Act authorizes entities registered overseas to de-register from any jurisdiction and continue their business operations in Bermuda. This approach allows for a seamless transition into Bermuda without the need for dissolution of the foreign entity.
Mr. Speaker, this flexibility is particularly important to clients looking to relocate their business operations to jurisdictions with laws that are more favorable to their business needs. With recent developments in global tax standards, Bermuda has an opportunity to engage in targeted efforts to attract more businesses to establish a physical presence in Bermuda. The ability to transition in a manner that facilitates and preserves business continuity is a strategic marketing tool for encouraging international clients to relocate existing business ventures to Bermuda.
Mr. Speaker, the Exempted Partnerships Act is also being amended to provide clarity in relation to the effective date for de-registration of any Bermuda partnership. As with companies, de-registration of any partnership from Bermuda will continue to be to an appointed jurisdiction only. However, the amendment will clarify that the effective date of such de-registration is determined by the date of continuation into the foreign jurisdiction.
Mr. Speaker, this Bill will also amend the Limited Partnership Act 1883 to clarify that, subject to the partnership agreement, a partnership which has not elected separate legal personality is not dissolved by a change in any of the partners. This default statutory position of continuity of the partnership following a change in partners provides certainty as to the legal impact of such a change to the partnership and all other entities and persons with whom the partnership deals.
Mr. Speaker, this Bill also expands the “safe-harbour” provisions for activities by limited partners. It allows limited partners to investigate, approve or be advised of the financial or business affairs of the partnership without these actions being viewed as taking part in the managerial functions of the partnership. This change will enable limited partners to be well informed as to the activities of the partnership and engage in certain decisions related to their business interests without losing their limited liability status.
Mr. Speaker, other amendments to the Limited Partnership Act include:
- Authorization to prescribe new fees or to make changes to existing fees applicable to limited partnerships;
- Enabling partnerships from any jurisdiction to relocate to Bermuda; and
- Providing clarification as to the effective date of de-registration of a Bermuda partnership.
Mr. Speaker, this Bill makes several amendments to the Partnership Act 1902. The first of which is to enable partnerships to elect separate legal personality at any time during the term of the partnership, at the partners’ discretion. This change removes the time restrictions imposed upon any partnership seeking to elect separate legal personality. Under the existing legislation, failure to adhere to such restrictions results in permanent loss of the ability to elect separate legal personality.
This Bill will eliminate this consequence and will have the added benefit of enabling more partnerships to become eligible for structural conversions, should the partners so choose.
Mr. Speaker, further changes to the Partnership Act 1902 include:
- Adding a new section to provide guidance on the priority and applicable procedures for charges registered against life insurance contracts; and
- In line with freedom of contract principles, providing express authority for partnerships to enforce default and forfeiture provisions included in partnership agreements.
Lastly, Mr. Speaker, this Bill will amend section 132N of the Companies Act 1981 to clarify that conversion of an exempted company to a partnership does not require a company to wind up its affairs nor does it constitute a dissolution of the company. This provision is consistent with and gives effect to the underlying policy of business continuity for structural conversions of partnerships and companies.
Mr. Speaker, I’d like to acknowledge the work of the members of the Ministry’s Business Development Unit which has the responsibility of policy development and legislative reform in relation to international business. I’d also like to thank the members of the Attorney-General’s Chambers who have worked closely with the Ministry to prepare this legislation.
Finally, I want to acknowledge the work of the Legal Focus Group. The members of this group give freely of their time to develop proposals for legislative changes which are intended to help Bermuda maintain its competitive edge and well-earned reputation as a jurisdiction of choice for many international businesses.
Thank you Mr. Speaker.