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Bermuda’s recently enacted Limited Liability Company Act, 2016 (the “Bermuda LLC Act”) comes into force on 1 October 2016. The legislation provides for the formation and operation of limited liability companies (“Bermuda LLCs”) which will be familiar to those with experience of Delaware LLCs.
The Bermuda LLC Act provides for a new form of entity which can be used for any lawful business or activity, including trading, asset holding, financing and investment.
What is a Bermuda LLC?
A Bermuda LLC is a hybrid entity combining characteristics of a limited partnership and a company limited by shares (referred to here as a corporation). The LLC concept was first developed in the United States, where it has become one of the most common forms of business entity, due to its flexibility and ease of operation. The central provisions of the Bermuda LLC Act were closely modeled on the corresponding provisions of the Delaware LLC legislation, so that Bermuda LLCs will look, feel and operate much like Delaware LLCs.
Like a corporation, a Bermuda LLC is a separate legal entity, and its members have limited liability; however, like a partnership, the affairs of a Bermuda LLC are governed by an agreement, rather than by statutorily mandated constitutional documents. This provides great flexibility, as the Bermuda LLC Act, like its Delaware counterpart, expressly provides that it is to be construed to give maximum effect to the principle of freedom of contract in relation to LLC agreements – allowing the LLC agreement to fully reflect the parties’ intentions and eliminate many of the formal constraints applicable to corporations.
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Bermuda LLCs: A New Entity in a Familiar Form