Due to the exclusion of foreign banks, classical banking services in Bermuda are provided primarily by the three established Bermudian banks. 

These banks now have adequate international correspondent networks, and some overseas branches. Foreign involvement has been allowed in more sophisticated financial services such as securities issuance and custody, and such services are increasingly available through the Internet, reducing reliance on the local financial infrastructure.

Foreign-controlled firms can nowadays freely provide financial services (other than deposit-taking) internationally, but the Bermuda Government is protectionist as regards local activities, requiring 60% local ownership unless special permission is given. There are currently eight trading members of the stock exchange, most being locally-owned firms, and seven of them can sponsor listing. A number of foreign firms are providing electronic brokerage, dealing and trading services internationally, alongside the Stock Exchange, and in some cases with its involvement.

Bermuda's new anti-money laundering legislation came into effect via the Proceeds of Crime Amendment Act 2000, from 1 June, 2001, which applies to all banking and financial institutions. With the Act in place, fiscal offences are now consistent with international anti-money laundering standards and all forms of tax evasion are now a criminal offence in Bermuda.
In July, 2002, the Bermuda Monetary Authority suggested that the jurisdiction's banking sector could be opened up to to a greater extent to foreign ventures.

In its annual report, released last week, the Monetary Authority revealed that it has not ruled out the possibility, and that several banking licence applications from foreign operators were currently being considered.

The Companies Act 1981 (as amended) provides exemption from the 60% local ownership requirement to a company which is does not engage in any activity on the island except with other exempt entities. 

Managing other exempt entities is also permitted, and, for mutual companies, so is the local distribution of their shares. Other activities may be permitted to exempt companies if a licence is granted by the Minister of Finance.

An exempt company must have two individuals resident in Bermuda, either as directors, or one as secretary and one as director, or one as secretary and one as 'permanent representative'.

Exempt companies pay annual fees based on their 'assessable' capital (authorised capital plus share premium account; or for a mutual company its authorised capital - a share premium account is not required) as follows:

An exempt company may apply to the Minister of Finance for a certificate exempting it from future profits taxation, should there be any, for a period ending not later than the 28th March, 2016.

Bermudan companies are usually formed by registration under the Companies Act 1981 as amended, taking between two and five days depending on whether the Minister's approval is required, An application for registration is made to the Bermuda Monetary Authority, giving details of the proposed beneficial ownership and the proposed name is reserved with the Registrar of Companies; some sensitive words are not permitted, including 'bank'. 

When business requirements are unusual a company can be formed by Act of Parliament, which takes about two months.

Local companies must be 60% owned by a Bermudian and they can trade within the domestic economy. Two directors are required who cannot be corporate but need not be Bermudian; a secretary is required, does not have to be local, and can be corporate. At least one shareholder is required and nil-value shares are not permitted. The minimum capital is $12,000 and there is an annual fee related to the authorised capital, which does not have to be issued.

Accounts must be kept at a local registered office along with the share register and minutes of shareholders' and directors' meetings although the accounts are not open to inspection. 

The share register, register of directors and officers, certificate of incorporation and memorandum and articles of association are all publicly accessible. Shelf companies are not obtainable but old companies are available on occasion.

If a company incorporated outside Bermuda intends to open a branch or actively trade within Bermuda, it must first obtain a permit issued by the Minister of Finance. 

Whether an overseas company requires a permit is frequently a question of fact to be determined in the light of those activities which are intended to be carried on by or on behalf of the company in or from Bermuda. An overseas company is not normally considered to be trading within Bermuda unless it occupies premises there.

The application procedure takes up to 10 days and involves an application to the Minister accompanied by fairly extensive information about the company, its owners, and the proposed trade.

A permit company usually carries on its business in the same way and is subject to the same rules as an exempt company. Bermuda representatives must be appointed and the Registrar must be notified of the relevant particulars. A permit company must keep adequate records although they do not need to be filed except in the case of a permit company which is registered as an insurer.

A permit company pays an annual fee of $1,780 or, for insurance and finance companies, $3,635. Companies who manage unit trust schemes pay an additional fee of $2,595 for each scheme managed. If a permit is issued after the 31st October in any year, the fee payable for that year is reduced by 50 per cent.

Like an exempt company, a permit company may apply for exemption from future taxation for a period ending not later than the 28th March, 2016.

Partnerships are recognised in Bermudan law under the Partnership Act 1902 as amended, which is modelled on equivalent English law. 

They can become exempt from local ownership requirements and exchange controls under the Exempted Partnerships Act 1992, through an application process similar to that for Exempt Companies (see above). An exempted partnership must maintain an office in Bermuda and must appoint a resident representative.

Exempt partnerships pay the Government an annual fee of $$2,100.

Limited partnerships are governed by the Limited Partnership Act 1883 as amended. As is usual, a limited partnership must have at least one general partner with full liability and one or more limited partners whose liability is limited to their contributions and who do not take part in the management of the partnership.

A limited partnership can become exempt under the Exempted Partnerships Act 1992 in the same way as a general partnership, and is subject to the same terms.

The Limited Partnership Act provides for limited partnership interests to be traded on overseas stock exchanges by permitting branch registers of limited partners to be maintained outside Bermuda.

An exempt limited partnership pays an annual fee of $2,100.

An overseas partnership is defined as a partnership formed under a law other than the law of Bermuda. An application must be made to the Minister of Finance giving the reasons why an exempted partnership should not be formed instead (for instance, that it is more tax-efficient). In other respects, the application process is similar to that for an exempted partnership. 

The Minister issues a permit, analogous to that for a permit company, and the Registrar keeps a register of overseas partnerships. An overseas partnership may not participate in the domestic economy.

An overseas partnership must maintain a registered office in Bermuda and must keep sufficient records there to show the nature of its business and its financial situation, updated at least every three months.

An overseas partnership pays an annual fee of $2,100. It is deemed to be non-resident and is exempt from exchange controls.

Bermudan trusts are governed by The Trustee Act 1975 which is largely based on the English Trustee Act 1925. 

The Trusts (Special Provisions) Act 1989, another significant statute, introduced the concept of the "purpose trust" and brought Bermudan law still closer to English law. The Perpetuities and Accumulations Act 1989 increased the perpetuity period to 100 years. 

Foreign inheritance laws are specifically excluded, and there is provision for the non-recognition of foreign judgements. Bermuda has adopted the Hague Convention; the Trusts (Special Provisions) Act 1989 made some consequent adjustments to the law. Appeal is to the English Privy Council.

In general, trustees need not be resident in Bermuda; but one must be. The trust fund may comprise cash, land, securities, interests in property or other trusts. Non resident trusts are not permitted to hold Bermuda currency, shares or security in local companies, or an interest in land in Bermuda without the prior consent of the Bermuda Monetary Authority.

Bermudan trusts need not be registered, and there is no stamp duty.

The Segregated Accounts Companies Act 2000 came into force in November 2000. It allows for the registration of segregated accounts companies by standardised procedures - previously, segregated accounts companies were being brought into existence by the Private Act route. This can still be used when necessary; but most new formations are likely to be under the new Act.

Segregated accounts companies are mostly used in the insurance sector (where they are often called protected cell companies), for umbrella mutual funds, and in the e-commerce sector where each individual user of a set of trading systems can occupy a segregated space rather than having to register separately. Server farms would be a good example.

The Act specifies that any asset linked to a particular segregated account is held in a separate fund for the beneficial interest of the account holder, and does not form part of the general funds of the segregated account company in the event of liquidation or sale. The concept is not totally unlike that of the trust, with the segregated account company playing the part of the trust manager.

Registered insurers may make use of segregated accounts companies without permission; other types of company need to obtain permission from the Minister of Finance.

Bermudian trusts are governed by The Trustee Act 1975 which is largely based on the English Trustee Act 1925. 

The Trusts (Special Provisions) Act 1989, another significant statute, introduced the concept of the "purpose trust" and brought Bermudian law still closer to English law. 

The Perpetuities and Accumulations Act 1989 increased the perpetuity period to 100 years. Foreign inheritance laws are specifically excluded, and there is provision for the non-recognition of foreign judgements. Bermuda has adopted the Hague Convention; the Trusts (Special Provisions) Act 1989 made some consequent adjustments to the law. Appeal is to the English Privy Council.

The legislation allows for the appointment of a Protector, who can be given power to replace trustee(s), add or remove beneficiaries, and transfer the trust to another jurisdiction.

In general, trustees need not be resident in Bermuda; but one must be. A Bermudian trustee is subject to the jurisdiction of the Supreme Court of Bermuda.

The trust fund may comprise cash, land, securities, interests in property or other trusts. Non resident trusts are not permitted to hold Bermuda currency, shares or security in local companies, or an interest in land in Bermuda without the prior consent of the Bermuda Monetary Authority.

Bermuda trusts need not be registered, and following the Stamp Duty Amendment Act 1993 the only Bermuda trusts still subject to stamp duty are those established by residents in favour of their families.

The Trust Companies Act 1991 provided for the licensing and regulation of trust formation and management companies; private individuals or partnerships managing one or a group of named trusts do not need to register under the Act.

Bermuda, like many other offshore jurisdictions, is tightening up its regulatory regime in response to pressure from the OECD and FATF. As part of this, the government passed the Trusts (Regulation of Trust Business) Act 2001.

Much of the Act is based on the recommendations made by the November 2000 KPMG report on financial services regulation in the Overseas Territories, which was commissioned by the UK government.

The Bermuda Monetary Authority (Collective Investment Scheme Classification) Regulations 1998 (known as the CISC Regulations) gathers together existing statutory and voluntary rules for fund management in Bermuda.

The Regulations divide funds into three classes:

Bermuda Recognised Schemes  

The UK Financial Services Act 1986 (UK) includes Bermuda as a "designated territory". Mutual funds which have been certified as UK-class schemes by the Minister of Finance in Bermuda can apply to the Securities and Investments Board in the United Kingdom for classification as "recognised schemes". The funds can then be promoted to the public in the United Kingdom in a similar way to UK authorised unit trusts. The enabling legislation in Bermuda dating from 1991 has now been subsumed into the CISC Regulations; it was based on the was based on the EU UCITS Directive.

Bermuda Standard Schemes Non-UK Class schemes were previously supervised under a voluntary Code of Conduct, which has now been brought into the CISC Regulations. Such schemes can usually be distributed to certain types of investor in the UK and some other countries, depending on the local regulatory structure.

Institutional Schemes Whereas the previous two categories covered open-ended, essentially public schemes, this category is for schemes appealing to professional investors, and which may often be closed-end schemes run by limited partnerships. A minimum initial investment of $100,000 is required, and an initial offering of at least $50m. A lower level of supervision is applied to such schemes.

The Bermuda Monetary Authority (BMA) regulates the collective investment industry and vets new applicants to determine their qualifications and experience. A draft prospectus is required as well as evidence of the investment experience of the fund manager and details of the promoters' background. 

The BMA does not necessarily expect promoters to be internationally-recognised investment houses, and will normally give permission fairly readily if it thinks that a fund will be honestly and competently managed.

The promoters can either form their own management company for the scheme or select an existing Bermudan management company. A Bermuda bank must be appointed as custodian although sub-custodians are permitted. Similar regulations apply to the functions of registrar and transfer agent. 

The minimum capital requirement for a mutual fund is $12,000, which can be subscribed as founder shares by the promoters.