As an economy closely linked to the United States, lending transactions involving Bermuda entities have not been immune from the impact of uncertainties caused by inflation and associated interest rate rises, political uncertainty and supply chain issues exacerbated by geo-political tensions in Europe, the Middle East and beyond. Although domestic lenders in Bermuda are part of international banking and finance conglomerates, the loan market in Bermuda is dominated by the use of Bermuda special purpose vehicles in cross-border structures and transactions.

Over the last year, there have been no material changes to Bermuda’s company or lending laws that negatively affect the rights of secured parties or Bermuda’s reputation as a leading creditor-friendly jurisdiction.

As a result of its close links to the North American market, the financial instability in the Eurozone markets resulting from the Russia-Ukraine war and the Israel-Hamas war have largely bypassed lending and financing transactions in Bermuda. However, the impact of global financial sanctions has prompted greater scrutiny of the use of offshore entities in structured lending transactions. Despite this, market perception of Bermuda entities in cross-border transactions has been enhanced by Bermuda’s status as a tax-compliant and creditor-friendly jurisdiction with an established legal system based on English law.

The involvement of Bermuda entities in the high-yield debt market is generally driven by external factors such as tax residency, a target investor base, and/or business operational issues, rather than Bermuda factors. The majority of Bermuda entities that do follow this path generally look to the high-yield capital markets in New York.

Recently, there has been an increased use of alternative credit providers in preference to licensed banking institutions. This is particularly notable in the refinancing of larger insurance and reinsurance groups, both of which have benefitted from regulatory uncertainty in the current global market. The use of alternative credit providers taking security over assets in Bermuda has resulted in an uptick in the use of security agents known to the Bermuda Monetary Authority, who are able to take advantage of swift clearance procedures in order to hold and register shares of Bermuda companies on enforcement of security.

There are few restrictions on financial assistance in Bermuda and therefore the use of holding company borrower structures with cross-group guarantees, debentures, and other security is commonplace. While preferred equity arrangements are less common, they benefit from strong market confidence in the ability to enforce liens, fixed and floating charges, mortgages, and other lender-friendly protections, typically without the need for judicial intervention.

Initiatives by the Bermuda Stock Exchange and the Bermuda Development Agency have raised awareness of ESG opportunities in Bermuda. Bermuda companies with activities focusing on renewable energy investments have been notably successful in bucking the trend of higher cost debt transactions when negotiating revisions to existing lending arrangements. The increasing appetite for catastrophe (CAT) bonds launched by public and private issuers continues to favour public listings in Bermuda as a global leader in the insurance and reinsurance market. Several global players with Bermuda group structures have developed green bonds, listing on exchanges including Singapore and the Bermuda Stock Exchange, and the Bermuda government has itself recently revealed plans to issue a blue bond by launching a new blue and green investment fund, the proceeds of which are to be used to support ocean conservation and decarbonisation in Bermuda.

The provision of financing to a Bermuda company, whether by a foreign bank or alternative credit provider, does not require that such lender be licensed in Bermuda. Unless security is taken over Bermuda assets (such as real estate situated in Bermuda or shares of a Bermuda company) third-party consents or permissions in order for a Bermuda company to grant security over its assets are generally not required.

Provided the loans are granted from outside Bermuda, there are few restrictions on a foreign lender providing loans to a Bermuda company. Restrictions apply under the Bank and Deposit Companies Amendment Act 2022 where a foreign lender is seeking to open a branch establishment in Bermuda.

There are few restrictions on Bermuda companies providing security or guarantees to foreign lenders. A Bermuda company may guarantee borrowings of members of its group provided the company has capacity to provide such guarantees and there is a sufficient corporate benefit to the guarantor company.

There are special rules that apply if an overseas lender wishes to hold a mortgage over real property in Bermuda, including obtaining the prior consent of the Bermuda Minister of Finance. If a mortgage taken by an overseas lender is subsequently enforced, any land obtained by such lender (as mortgagee in possession) must be sold within five years to either an individual or entity having Bermudian status or to another appropriately licensed person.

Security over shares of Bermuda companies is generally granted under a charge over shares. Legal mortgages are uncommon. It is recommended that chargors also be required to deliver certain ancillary documents to strengthen their security, including irrevocable voting proxies and undertakings. Although it is recommended that share charges be governed by Bermuda law, the laws of foreign jurisdictions may govern share charges if required by the underlying transaction documents. Bermuda exchange control regulations generally require the consent of the Bermuda Monetary Authority prior to any disposition of shares of a Bermuda company, which includes the granting of a security interest in the shares. The Bermuda Monetary Authority has issued a blanket consent in situations where the chargee is a licensed bank or lending institution in certain appointed jurisdictions and the Bermuda Monetary Authority is provided with written notification of the creation of the charge. Further, the increased use of security agents already known to the Bermuda Monetary Authority (see 1.3 Impact of Global Conflicts) enables such security agents to take advantage of swift clearance procedures in order to hold and register shares of Bermuda companies on enforcement of security interests.

Bermuda entities generally used in cross-border transactions are either exempted companies or limited liability companies, each of which is designated as non-resident for exchange control purposes and therefore generally free from restrictions on foreign currency exchange.

As a result of ongoing geopolitical tensions, there is greater scrutiny on the use of debt proceeds to ensure compliance with anti-money laundering, anti-terrorist financing, and international sanction compliance. Otherwise, there are few restrictions on the use of proceeds by a Bermuda borrower.

Agent and trust/trustee structures are commonplace in Bermuda. For alternative credit providers, the use of security agents/trustees previously known to the Bermuda Monetary Authority is regularly employed in situations where security is being taken over shares of a Bermuda company, ensuring local regulatory consent is forthcoming (see 1.3 Impact of Global Conflicts). The rationale is to ensure that the mandatory regulatory approval of the Bermuda Monetary Authority is swiftly procured without impeding transaction timetables. Non-licensed lenders and security agents/trustees not previously known to the Bermuda Monetary Authority face greater due diligence scrutiny by the Bermuda regulator and, as a result, regulatory approvals can sometimes take longer to procure.

Loan transfer mechanisms are mandated by the contractual documentation, with no Bermuda-specific provisions applicable to such transfers. Transfers may be effected by assignment or novation deed.

Debt buy-backs are permitted in Bermuda.

Bermuda has no specific requirements for “certain funds” with both public acquisition finance transactions and private acquisition finance transactions involving Bermuda entities being subject to Bermuda law without distinction.

The Personal Information Protection Act 2016 (PIPA) will come into force on 1 January 2025. The purpose of PIPA is to align Bermuda’s data protection framework with global privacy standards, giving individuals greater control over their personal information and ensuring that organisations handle data responsibly and transparently.

The replacement of LIBOR by SOFR has been a recent change requiring updates to pre-existing financing and transaction documentation in Bermuda. Similarly, the introduction of Bermuda’s Investment Business Amendment Act 2022 broadened the scope of what constitutes “investment business” in or from Bermuda, and ensured that all entities conducting investment business in Bermuda now fall under the remit of the Bermuda Monetary Authority.

There are no laws on usury that limit the amount of interest that can be charged to exempted companies.

In relation to local companies (being a Bermuda company that is at least 60% owned and controlled by Bermudians), a lender may stipulate for, allow and exact on any contract, any rate of interest that is agreed upon. However, a contract which creates or evidences a debt dischargeable in Bermuda dollars by a debtor resident or incorporated in Bermuda at the time of contracting is subject to orders made by the Bermuda Monetary Authority, including the maximum rate of interest.

Save as required to comply with laws on anti-terrorism financing, anti-money laundering or sanctions compliance, there is no general law regarding disclosure of financial contracts.

Neither Bermuda exempted companies, partnerships nor limited liability companies are subject to withholding tax or similar deductions on payments made to lenders.

Bermuda-exempted companies, partnerships and limited liability companies are exempt from taxes payable in Bermuda in respect of loans, guarantees or security (other than in limited situations, including security over real property situated in Bermuda).

Bermuda has implemented the OECD Pillar Two Global Anti-Base Erosion Rules by enacting the Corporate Income Tax Act 2023, pursuant to which Bermuda corporate income tax (CIT) is chargeable for financial years commencing on or after 1 January 2025. CIT will only apply to Bermuda businesses that are a part of Multinational Enterprise Groups with an annual revenue of more than EUR750 million in at least two of the four fiscal years immediately preceding the fiscal year in question. The amount chargeable will be 15% of the net taxable income less applicable tax credits.

Stamp duty rarely applies to documents that are executed by Bermuda companies engaged in international business. However, legal mortgages on real property situated in Bermuda do attract stamp duty at different rates, depending on the amount of the sum secured. With limited exceptions, stamp duty is payable on most documents executed by local Bermuda companies.

A fee (typically BMD700) will be payable for registering a charge at the Registrar of Companies, depending on the value secured. There is also a BMD100 fee for registering a satisfaction of a charge at the Registrar of Companies.

A fee of between BMD100 and BMD1,300 is payable to the Land Title Registry Office on the first registration of real property. Thereafter, a fee of between BMD50 and BMD400 is levied to register a charge against a registered title.

Foreign lenders can be confident regarding the tax position of lending to a Bermuda entity on “known principles” as Bermuda has 41 Tax Information Exchange Agreements in place in addition to more than 125 multilateral taxation treaty partners.

In 2022, Bermuda received the green light from the OECD/G20 Inclusive Framework (Article 14) on base erosion and profit shifting (known as BEPS) and the Corporate Income Tax Act 2023 implements the Pillar Two rules with the introduction of CIT (see 4.2 Other Taxes, Duties, Charges or Tax Considerations). In addition, Bermuda remains committed to ensuring the effectiveness and efficiency of the mutual agreement procedure on the interpretation and application of taxation treaties and has signed on to the OECD’s Convention on Mutual Administrative Assistance in Tax Matters, which now includes over 100 signatory partner countries.

Both tangible and intangible assets of a company are available to secure lending obligations. Common collateral includes real property, securities, receivables, cash deposits, contractual rights (including under policies of insurance), inventory and mortgages over Bermuda-registered ships and aircraft.

Registrable security (to ensure priority ranking over subsequent security interests created over the same assets) typically takes the form of a charge. Registration of a charge is effected by submitting an application to the Registrar of Companies with a signed electronic copy of the charge instrument, and payment of the relevant filing fee, with registration in many cases confirmed on a same-day basis.

There are no perfection requirements in Bermuda, although an equitable assignment (such as an assignment of receivables, contract rights, or bank account balances) may be upgraded to a legal assignment by notice to the relevant counterparty.

Real Property

Security over real property in Bermuda is typically granted by way of either a legal mortgage, where title is transferred to the mortgagee, or an equitable mortgage, where a charge is established without title being transferred to the mortgagee.

When the Land Title Registration Act 2011 (2011 Act) came into effect in 2018, the grant of both a legal mortgage and an equitable mortgage came to trigger compulsory first registration of title to the real property forming the subject matter of both the mortgage or charge. The relevant mortgage or charge, as well as the balance of the title documents relating to the property in question, must be lodged at the Land Title Registry Office (LTRO). Upon first registration, a mortgagee’s priority position is now established on the property register. Priority is based on the date that an application for first registration is submitted to the LTRO. The 2011 Act also operates to automatically convert a legal mortgage into a registered charge (meaning that title is returned to the mortgagor by way of a statutory vesting and the mortgagee holds a registered charge). This system replaces the historical regime, which required that any legal mortgage or charge be registered in the Book of Mortgages at the Registry General in order to establish a mortgagee’s priority position.

Both legal mortgages and charges attract stamp duty, generally at the rate of 0.5% of the principal sum secured.

There are special rules that apply if an overseas or exempted company wishes to hold a mortgage over real property in Bermuda, including obtaining the prior consent of the Minister of Finance and the Minister responsible for Immigration, respectively. If such a mortgage is subsequently enforced, any land obtained by such company, must be sold within five years to either an individual or entity having Bermudian status.

Share Charges

Security over shares of Bermuda companies is typically granted under a share charge. Legal mortgages are uncommon, although share charges usually provide the chargee with the right to create a legal mortgage upon the occurrence of certain default events. It is recommended that chargors also deliver certain ancillary documents to chargees to strengthen their secured position, including undated share transfer forms, irrevocable voting proxies and undertakings.

Bermuda companies are prohibited from issuing bearer shares. Share certificates do not need to be issued unless required under the company’s by-laws or specifically requested by a shareholder. If issued, share certificates are generally a deliverable under the share charge.

Even though Bermuda exchange control regulations generally require the consent of the Bermuda Monetary Authority prior to the granting of a security interest, the Authority has granted a blanket consent where the chargee is a licensed bank or lending institution.

Receivables

Security can be granted over receivables by way of assignment or fixed or floating charge. Assignments can be legal or equitable. Legal assignments must be in writing, executed by the assignor and unconditional and written notice must be provided to the debtor. An equitable assignment will result if any of these requirements are not completed.

Under a legal assignment, the assignee can sue in its own name and the debtor can only discharge its obligations as instructed by the assignee.

Cash Deposits

Bermuda companies may grant security over cash in their bank accounts, which is typically accomplished by way of a fixed or floating charge. The amount of control that the chargee has over the account will determine whether a charge is fixed or floating.

Serving notice on a financial institution will ensure a chargee’s priority in relation to subsequent assignees, provided the chargee has no knowledge of the earlier assignment. Service of notice on a financial institution will perfect the security granted by the chargor, regardless of whether or not the financial institution provides an acknowledgment.

Bermuda banks typically require chargees and chargors to enter into a deposit account control agreement to manage the administration of the account, including limiting withdrawals, unless permitted by the chargee and the financial institution’s agreement not to exercise set-off rights.

Floating charges and/or hybrid charges (where a floating charge crystallises to a fixed charge on the occurrence of contractually specified events) are commonplace in Bermuda.

There are few restrictions on financial assistance in Bermuda and, consequently, a Bermuda entity may grant downstream, upstream and/or cross-stream guarantees in lending transactions unless there are specific restrictions in its constituting documents.

In determining whether to approve a guarantee, the directors of the Bermuda entity would need to satisfy themselves that a sufficient direct, indirect or group commercial benefit exists. If the Bermuda entity is insolvent, its directors may be liable for wrongful trading and there is a risk that the guarantee may be void on the basis that it amounted to a fraudulent preference.

As older Bermuda companies may still have legacy restrictions in their by-laws, the constitutional documents of the Bermuda guarantor should be checked to ensure it has capacity to grant the contemplated guarantee. A company’s memorandum of association may not set out an express power to provide guarantees; however, the company’s objects would typically be sufficiently broad to permit the entry into guarantees that are ancillary to the business of the entity.

Other than as discussed herein, there are no other restrictions in connection with, or significant costs associated with, or consents required to approve the grant of security or guarantees. There are no works council consents applicable in Bermuda.

Typically, a deed of release between the chargor and chargee is used to evidence the release of security. Where security is registered with the Registrar of Companies, submission of the deed of release together with a nominal fee is required to register the satisfaction of the charge.

Generally, registration is not required in Bermuda to perfect a security interest. However, to ensure the priority in Bermuda of a security interest granted by a Bermuda company, it needs to be registered at the Registrar of Companies and upon registration, to the extent that Bermuda law governs the priority of the security interest, it will have priority in Bermuda over any unregistered security interest and over any subsequently registered security interest.

In order to register a security interest, a copy of the fully executed charge instrument will need to be filed with the Registrar of Companies, together with the appropriate filing fee. The Registrar of Companies will issue a certificate of registration recording the effective date of registration of the security interest. Registration is effective as at the time of filing and not at the time the Registrar of Companies issues the certificate of registration.

Mortgages and charges over Bermuda land and ships, aircraft, and aircraft engines registered in Bermuda must be filed with separate registers in Bermuda.

Where there are competing security interests between lenders or members of a lender group, these are generally determined by a contractual arrangement, such as an intercreditor agreement or a subordination agreement.

The rights of a secured creditor rank ahead of the claims of unsecured creditors of an insolvent Bermuda entity, save that a floating charge created within 12 months of the insolvency of the chargor is invalid except for the amount of cash paid in consideration for the granting of the charge.

Contractually agreed subordination of secured creditors generally survives subsequent insolvency, save where there is demonstrably a fraudulent preference, or the arrangements are determined to be unduly onerous by a liquidator.

Few security interests arise by operation of law that can prime a lender’s security interest that has been properly registered in Bermuda.

Recent transactions relating to Bermuda entities involved in US Chapter 11 bankruptcy exits have seen an increase in debtor-in-possession loans with existing secured lenders primed by the exit lenders. Generally, these are perceived as last-resort financing arrangements structured by onshore counsel, with Bermuda involvement ancillary to the principal transaction.

In general, secured lenders are not involved in competition with unsecured lenders, except to the degree that any balance remains due after realising on their collateral. Secured lenders will compete amongst themselves and provided that all of their security is properly perfected and registered, insolvency law will generally not interfere with the competing claims. Secured lenders may enforce collateral in accordance with the contractual agreement creating the security interest, without the requirement to seek court intervention or other enforcement steps. The instrument creating the security interest will reference the events allowing for enforcement and remedies including possession, receiver appointment, and/or sale.

In the absence of a statutory power of sale for a mortgagee or chargee, any security instrument must include an express power of sale to enable the secured lender to take advantage of this remedy.

The appointment of a receiver is commonly used to assist with gathering and realising assets. Bermuda law does not grant any statutory power to a secured lender to appoint a receiver and this remedy, including all of the receiver’s powers, should be specially set out in the applicable security documents. Any appointment of a receiver under the terms of a security document must be notified to the Registrar of Companies within seven days of the appointment.

Contractual agreements on governing law and the jurisdiction of courts outside Bermuda are commonplace, with many financing arrangements concluded under US or English law. In general, arrangements as to foreign governing law and jurisdiction are enforceable in Bermuda save in limited circumstances such as where the application of foreign law would be contrary to public policy in Bermuda or where there is litigation pending on the same matter in another jurisdiction.

A final and conclusive judgment in the superior courts of England (as well as Australia, Bahamas, Barbados, Dominica, Gibraltar, Grenada, Guyana, Jamaica, Leeward Islands, Nigeria, St. Lucia and St. Vincent) against a Bermuda company, based on a contract under which a sum of money is payable (not in respect of multiple damages, or a fine, penalty, tax or other similar charge) (each a “Money Claim”) would, on registration in accordance with the Judgments (Reciprocal Enforcement) Act 1958, be enforceable in Bermuda without the need of any retrial of issues or any re-examination of underlying claims, provided that the judgment: (i) is final and conclusive (notwithstanding that any appeal may be pending against it or it may be still subject to an appeal); (ii) has not been given on an appeal from a court which is not a superior court; and (iii) is duly registered in the Supreme Court of Bermuda.

A final and conclusive judgment in a US court against a Bermuda company, based on a Money Claim, may be enforced in Bermuda under the common law doctrine of obligation for the debt evidenced by the US court judgment. When considering whether a US court judgment should be recognised and enforced, such proceeding would likely be successful if (i) the US court was competent to hear the action in accordance with private international law principles as applied in Bermuda and (ii) the judgment is not contrary to public policy in Bermuda, has not been obtained by fraud, or in proceedings contrary to natural justice and is not based on an error in Bermuda law.

Where a foreign judgment is expressed in a denomination other than Bermuda dollars, the registration may involve the conversion of the judgment debt into Bermuda dollars. However, the current policy of the Bermuda Monetary Authority is to permit payment in the original judgment currency.

A foreign judgment against a Bermuda company can form the basis of a Bermuda statutory demand, even if the judgment has not been registered under Bermuda law, provided that the jurisdiction of the foreign court is not disputed. The non-payment of the statutory demand would be sufficient for a secured lender to seek commencement of winding-up proceedings against the Bermuda company.

The Bermuda International Conciliation and Arbitration Act 1993 gave statutory footing in Bermuda to the UNCITRAL Model Law on International Commercial Arbitration 1985, and provides that enforceable arbitral awards include:

• decisions in preliminary/provisional proceedings;
• decisions or awards by arbitral tribunals granting provisional measures (subject to the discretion of the court, provided that the granting of the measure does not lead to fraud, corruption, injustice or a breach of Bermuda public policy); and
• declaratory awards.

Similarly, Bermuda is party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and recognises awards made under agreements in any jurisdiction that is also party to such convention, without any retrial of the merits of the claim.

Save where a foreign lender may seek to enforce security over land in Bermuda (which requires the permission of the Minister of Finance) or where a chargee wishes to transfer shares in a Bermuda company in the absence of a permission granted by the Bermuda Monetary Authority, generally there are no other specific restrictions relevant to foreign lenders’ ability to enforce their rights.

Save to the extent that a floating charge is created within 12 months of insolvency, secured creditors may enforce their rights regardless of the commencement of insolvency proceedings.

In Bermuda, the concept of a moratorium on enforcement is limited to specific situations where a company enters provisional liquidation, under the supervision of court-appointed provisional liquidators, to restructure the company for the benefit of creditors generally.

In general, secured creditors have priority over all unsecured creditors and may enforce their rights outside any insolvency or winding-up process.

In the winding-up of a Bermuda company, debts secured by fixed charges retain first priority, followed by:

• all taxes owing to the Bermuda government and rates owing to a municipality;
• all wages or salary (up to a maximum of BMD2,500 in respect of any one claimant) of any employee for services rendered to the company during the four months before the winding-up;
• all accrued holiday remuneration payable to any employee on termination of his/her employment before or following the winding-up;
• certain amounts due by the company as employer of any persons under the Contributory Pensions Act 1970 or any contract of insurance;
• certain amounts due in respect of any liability for compensation under the Workmen’s Compensation Act 1965 (being amounts which have accrued before the winding-up);
• secured creditors under floating charges; and
• unsecured creditors and secured creditors to the degree that their collateral was insufficient to repay the secured obligations.

Upon an insolvency of a Bermuda company, the failure of a secured creditor to perfect its security or register the security as a charge in Bermuda does not entitle the liquidator to set aside the security (for the benefit of the company’s unsecured creditors). It is generally accepted that registration does not constitute perfection and so the method of perfection for a particular asset class is a matter of common law. Where a creditor has failed to perfect its security, there is a risk that a subsequent creditor with a security interest in the same asset may be able to achieve priority over that asset by being the first to register its security. Registration affects priority among the secured lenders. If no secured party has registered its security, priority is determined by the time of the creation of the applicable security interest.

It is difficult to determine the length of a typical insolvency process in Bermuda, as in many cases provisional liquidation orders are sought in tandem with a US Chapter 11 proceeding or a scheme of arrangement in another jurisdiction, to enable a cross-group moratorium on enforcement actions and allow breathing room for restructuring proposals to be finalised.

Bermuda has no equivalent to US Chapter 11 proceedings to enable company rescues or reorganisations outside of insolvency proceedings. A hybrid, light-touch alternative is a provisional liquidation order granted by the Bermuda court in tandem with a Chapter 11 proceeding, or scheme of arrangement in another jurisdiction, to enable a cross-group moratorium on enforcement actions.

A scheme of arrangement is a compromise between the company and its creditors that, with the approval of the Bermuda court, allows a company to implement the compromise. The scheme must be a compromise between the company and its creditors as opposed to the creditors themselves. A scheme of arrangement requires a meeting of each class of affected creditors to be convened. The statutory supermajority vote that must be obtained at the scheme meeting is a majority representing at least 75% in value of each affected class of creditors in attendance and voting. Following the relevant vote, a hearing would be held before the court to sanction the implementation of the scheme. If the scheme is sanctioned by the court, it is binding on all creditors. A minority creditor is bound by the scheme and cannot apply to the Bermuda court to vary its terms.

The provisional liquidation process has been used extensively in Bermuda for a variety of reasons. It is used where it is desirable to restructure an insolvent company rather than to wind it up and liquidate its assets.

A provisional liquidation order is a court-overseen supervision process with court-appointed provisional liquidators working with existing management to maximise creditor returns. Applications for provisional liquidation orders may be commenced by creditors or by the company, demonstrating support from creditors for the proposal, and is seen as a key interim step to allow for restructuring ahead of winding-up orders. Under a provisional liquidation, a moratorium on legal proceedings typically would be granted so long as the provisional liquidators stay in office.

The following provisions relating to reversible antecedent transactions may result in certain transactions being rendered void or invalid.

Fraudulent Preference

Any conveyance or other disposition of property made by a Bermuda company within six months prior to the commencement of its winding-up will be considered invalid if it was made with the intent to fraudulently prefer one or more of the company’s creditors at a time when the company was unable to pay its debts as they became due. A payment to a secured party would not typically be considered preferential. However, if the intention exists, a granting of security could be considered preferential and set aside. The commencement of a company’s winding-up is the date that the company resolved to be wound up and, if no such resolution exists, the time of presentation of the court petition that led to the company’s winding-up.

Fraudulent Conveyance

Under the fraudulent conveyance provisions of the Conveyancing Act 1983, a creditor may seek to set aside a disposition of property (including the creation of a security interest) if the disposition was made when the transferor’s dominant purpose was to put the property beyond the reach of a person (or class of persons) who is making, or may make, a claim against the transferor and the disposition was at an undervalue. Such a claim can only be made by an "eligible creditor", which is a person who:

• is owed a debt by the transferor within two years after the disposition;
• on the date of the disposition, is owed a contingent liability by the transferor, where the contingency giving rise to the obligation has occurred; and
• on the date of the action to set aside the disposition is owed an obligation arising from a cause of action which occurred prior to or within two years after the date of the transfer.

Floating Charges

Where a Bermuda company is being wound up, a floating charge on the undertaking or property of the Bermuda company that has been created within 12 months of the commencement of the winding-up will be invalid (unless it is proved that such company immediately after the creation of the charge was solvent). This is with the exception of any cash paid to such Bermuda company at the time of or subsequently to the creation of, and in consideration for, the charge, together with interest on that amount.

Therefore, a floating charge will be valid if the creditor provided new value at the time of, or in consideration for, the security. Otherwise, the floating charge is void to the extent that the creditor did not provide new value, unless the creditor proves that the company was not insolvent at the time of the charge’s creation.

Disclaimer of Onerous Property

From the commencement of a winding up of a Bermuda company, the liquidator may, with leave of the Bermuda court, disclaim any property belonging to such company, whether real or personal, including any right of action or right under a contract (and therefore any corresponding obligation), which the liquidator believes to be onerous for such company to hold or is unprofitable or unsalable. We do not believe that a liquidator of a Bermuda company could disclaim some transactions under an agreement to which it is a party and not others.

Bermuda’s geographical footprint limits domestic project finance activity, however Bermuda vehicles (whether exempted companies, partnerships or limited liability companies) are frequently used in project financing arrangements outside Bermuda for asset-based lending structures. The natural resources sector, both in the Far East and in Norway, has seen an uptick in the use of Bermuda vehicles in pan-jurisdictional financings, both public and private, and several Bermuda entities have reaped the benefits of lenders’ appetite for financings and refinancings in the green energy sector.

With a land mass of only 20.6 square miles (53.2 square km) and a population of 65,000, public-private partnership transactions in the jurisdiction are limited. One of Bermuda’s first projects was the Acute Care Wing of the King Edward VII Memorial Hospital, which closed in 2010. In December 2020, the newly built L.F. Wade International Airport opened in Bermuda, having been a successful BMD400 million public-private partnership transaction. The Bermuda government continues to be committed to further public-private partnership transactions and in the coming years it is expected that additional transactions will be announced.

Other than for local employment arrangements, which must be governed by and determined in accordance with Bermuda law, project documents can be governed by foreign law and disputes determined accordingly.

Subject to certain exceptions, any non-Bermudian seeking to acquire real property in Bermuda must acquire a licence from, and/or obtain the permission of, the Bermuda government to be able to own and enforce rights pertaining to Bermuda real property.

One such exception is the Economic Investment Residential Certificate programme, which enables individuals, plus their spouse and minor dependents, who invest BMD2.5 million in certain Bermuda industries, sectors, charities, or government programmes to receive residency rights.

In general, other than for issues that have been discussed herein, there are no Central Bank regulations applicable to Bermuda project financing transactions, and no taxes payable in Bermuda for Bermuda exempted companies, partnerships or limited liability companies and, as a result, the main issues that need to be considered when structuring a project financing transaction will likely arise from jurisdictions other than Bermuda.

Project financings involving Bermuda entities are typically international project finance transactions, with financing sources dictated by reference to market sector, geographical location and regulatory factors outside Bermuda.

Bermuda has limited natural resources of its own, though a 19-acre commercial solar energy generating plant developed by Saturn Energy started to provide domestic energy supplies in 2021. Bermuda has committed to 85% renewable energy by 2035. To achieve this, Bermuda has committed to 21 MW of solar, 60 MW of wind and 100% electric public transport by 2030.

No environmental, health and safety or community consultation laws apply in relation to international project finance transactions carried out outside of Bermuda.

For project financing initiatives within Bermuda, the Regulatory Authority of Bermuda is typically involved as it regulates all communication networks, submarine cables and the electronic sectors in Bermuda. The Bermuda government’s Department of Environment and Natural Resources has a broad mandate to protect Bermuda’s environment and responsibly manage its natural resources. For employees in Bermuda, the Department of Health ensures that all employers operating in Bermuda comply with the Occupational Health and Safety Act 1992.