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.


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.


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

Riley O’Brien

Associate: Bermuda

T +1 441 298 3260
E Email Riley

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