The Substance Act applies to “registered entities”, which means:

  • companies incorporated under the Companies Act 1981;
  • companies formed under the Limited Liability Company Act 2016; and
  • partnerships (exempted, exempted limited or overseas).

A registered entity will be in scope of the Substance Act and subject to the ES Requirements if it conducts a relevant activity. Relevant activities are:

  • banking;
  • insurance;
  • fund management;
  • financing and leasing;
  • headquarters;
  • shipping;
  • distribution and service centres;
  • holding entity; and
  • intellectual property.

recent updates to THE SCOPE OF FUND MANAGEMENT

Effective 1 January 2022, the Substance Regulations were updated by the Economic Substance Amendment (No. 2) Regulations 2021 (Amendment Regulations). Prior to the operation of the Amendment Regulations, a registered entity engaged in the relevant activity of “fund management” if it:

…manages investments for funds and in respect of which a licence is required in accordance with the Investment Business Act 2003 or for which a licence would be required if such activity were taking place in Bermuda.

Following the Amendment Regulations, a registered entity now engages in the relevant activity of “fund management” if it:

…manages investments for an investment fund (as that term is defined in section 2(1) of the Investment Funds Act 2006), in accordance with the Investment Business Act 2003.

IMPACT ON FUND MANAGERS

Prior to the Amendment Regulations, only fund managers who required a license (or who would require a license if their activities were in Bermuda) under the Investment Business Act 2003 (as amended, IBA) were potentially conducting “fund management” which would bring them within scope of the ES Requirements.

Since their enactment, the Amendment Regulations now bring any fund manager who manages investments for investment funds into the scope of the ES Requirements. For these purposes, “investment fund” has the meaning given to such term in the Investment Funds Act 2006, and the phrase “managing investments” is to be construed in accordance with the IBA.

This means that any fund managers who are outside the IBA’s regulatory scope or who rely on an exemption from the IBA, may now be subject to the ES Requirements in respect of their “fund management” activities.

next steps?

Any Bermuda entity that manages investments for investment funds may now be subject to the ES Requirements and should carefully consider its activities and their implications. Please reach out to your usual Appleby contact or a member of the team below if you have questions regarding the application of the ES Requirements to your business.

Key contacts

Brad Adderley

Managing Partner: Bermuda

T +1 441 298 3243
E Email Brad

Sally Penrose

Partner, Head of Regulatory: Bermuda

T +1 441 298 3286
E Email Sally

Matthew Ebbs-Brewer

Partner, Head of Funds & Investment Services: Bermuda

T +1 441 298 3226
E Email Matthew

Share
Twitter LinkedIn Email Save as PDF
More News
30 May 2023 | News

Hannah Tildesley to Speak at Commercial Bar Association Event

Appleby Bermuda Partner Hannah Tildesley will speak at The Commercial Bar Association (COMBAR) North...

29 May 2023 | News

Appleby Bermuda a Gold Sponsor of INSOL International Seminar

Appleby Bermuda is a Gold sponsor of the INSOL International Bermuda Seminar taking place on 1 June ...

27 Apr 2023 | News

Tammy Richardson-Augustus Speaks at Princeton University Symposium

Appleby Bermuda Partner Tammy Richardson-Augustus spoke at Princeton’s School of Public and Intern...

17 Apr 2023 | News

Appleby Expands Dispute Resolution Practice With Specialist Lawyer in Bermuda

Appleby Bermuda is delighted to welcome a seasoned UK advocate, James Sellick, to its expanding Disp...

31 Mar 2023 | News

Appleby announces Partner and Counsel promotions

Appleby has promoted four lawyers to Partner and eight to Counsel across its Bermuda, British Virgin...

28 Mar 2023 | News

The Bermuda Monetary Authority’s ‘Insurance Sector Operational Cyber Risk Report’ for 2022

Over the last few years, financial service regulators around the world have recognized the critical ...

15 Mar 2023 | News

Bermuda Economic Substance Regulatory Update: Changes to Non-Resident Entity Requirements

There is an exemption from the economic substance requirements for entities that are resident for ta...

8 Mar 2023 | News

Appleby supports International Women's Day 2023

Appleby is proud to support International Women’s Day (IWD) and this year’s campaign theme of #E...

16 Feb 2023 | News

Appleby Bermuda Top-Ranked in Corporate, Dispute Resolution and Insurance

Appleby is ranked in Band 1 across all categories, with 9 lawyers also ranked by leading legal direc...

16 Feb 2023 | News

Top tier rankings for Appleby in Chambers Global 2023

Twenty-eight lawyers from across Appleby’s Bermuda, British Virgin Islands (BVI), Cayman Islands, ...