The Amendment Act 2021 introduces, amongst other things, requirements for registered funds to ensure consistency across the different classes of funds. Notably there are: provisions targeted at Private Funds; a requirement to appoint a local registrar for registered funds; amendments to filing requirements for all registered funds and overseas funds; and a widening of the definition of “company fund” to include incorporated segregated accounts and incorporated segregated accounts companies.
All existing funds are required within 6 months of the Operative Date to comply with the applicable provisions brought about by the Amendment Act 2021. Operators of all existing funds should use the transition period to assess whether the changes to the IFA are applicable to them.
COMPANY FUND – DEFINITION
Section 2 of the IFA has been amended to include incorporated segregated accounts and incorporated segregated accounts companies within the scope of the definition of “company fund”. This change addresses the Incorporated Segregated Accounts Companies Act 2019, which has recently come into force, allowing for incorporated segregated accounts companies and their incorporated segregated accounts to be registered or authorized as funds under the IFA.
As noted above, the Amendment Act 2021 introduces additional requirements for Private Funds by way of amending section 6 of the IFA to include a requirement for an operator of a Private Fund to ensure that an officer, trustee or representative resident in Bermuda is appointed who has authority to access the books and records of the fund. Prior to this amendment, the only Bermuda specific requirement for Private Funds was requiring the operator of a Private Fund to appoint a local service provider authorized and regulated by the Bermuda Monetary Authority (Authority).
Section 19 of the IFA has also been amended to impose on all registered funds, being Private Funds, Professional Class A Funds, Professional Class B Funds and Professional Closed Funds, the requirement to appoint a registrar in Bermuda to establish and maintain a register of the participants in the fund. Prior to the Amendment Act 2021 this was only a statutory requirement for authorised funds. The register must contain (a) the name and address of each participant, (b) the number of units (including fractions of a unit) of each type held by each participant and (c) the date on which the participant was registered in the register in respect of the units standing in his name; but the registrar shall not be obliged to register more than four persons as the joint participants of any units. In terms of ongoing obligations under the IFA, the registrar shall take all reasonable steps and exercise all due diligence to ensure that the information contained in the register is, at all times, accurate, complete and up to date. Such function may be performed by a corporate service provider, secretary or any other local service provider equipped to take on the role. Registered funds that currently have overseas fund administrators performing this function alongside their other duties will have a 6 month transition period to appoint a local service provider to act as registrar and to update their offering document to demonstrate compliance with the requirement, by way of a supplement, term sheet or such other form of update to the offering document.
REGISTERED FUNDS AND OVERSEAS FUNDS – FILING REQUIREMENTS
The Amendment Act 2021 revises the filing requirements for all registered funds and overseas funds, amending the previous requirement to file annually on or before June 30th and now allowing for registered funds and overseas funds to make their annual filings within 6 months of its financial year end. This amendment brings these funds into line with the requirements that are currently applicable to authorized funds. It is therefore essential that the operators of all registered and overseas funds ensure that whomever is making the annual filings on its behalf is aware of the funds financial year end date, so that the filing is made within the appropriate time frame.
INSTITUTIONAL FUNDS AND ADMINISTERED FUNDS
As a result of the Amendment Act 2021, operators of an institutional fund or administered fund no longer require the approval of the Authority, in which notice has been given to the Authority, to replace a manager of a limited liability company or appoint any additional manager or decrease the number of managers in the post, in relation to limited liability company funds.
INVESTMENT FUNDS (DEFINITION) ORDER 2019 – AMENDMENT
The Investment Funds (Definition) Order 2019 sets out those arrangements which, notwithstanding that they may prima facie appear to be investments funds, are nevertheless not. The list of arrangements has been amended by the Amendment Act 2021 so that it is now not enough that investor rights or interests represent transferable securities, as such rights or interests must also be listed on a stock exchange save that such arrangements cannot include open-ended investment funds.
REASON AND SUMMARY OF CHANGES
Our view is that, broadly speaking, the Amendment Act 2021 can broadly be seen to implement certain housekeeping measures applicable to investment funds in Bermuda and achieve consistency across fund and entity class where appropriate. If you are concerned that any of the outlined changes may impact the operation of your existing fund structure or are in the process of considering structuring an offering which includes one or more Bermuda investment funds, we would encourage you to contact your usual Appleby contact or any member of the Funds and Investment Services Team.