Key among the recent legislative changes is the introduction of the Limited Liability Company Act (LLC Act), which was approved by the legislature in July 2016 and is expected to come into force later this year. A limited liability company (LLC) is a hybrid legal structure allowing the contractual and operational flexibility of a partnership to be housed within a corporate entity. Like a Bermuda-exempted company, an LLC has separate legal personality and the liability of its members is limited. While members of a Bermuda company receive shares, members of a Bermuda LLC will each have an interest in a capital account in a similar way to partners in a partnership. Under the Bermuda LLC Act, parties can create bespoke vehicles, having the contractual freedom to set out in the LLC agreement the terms of operation and management of the LLC as well as expressly agreeing the allocation of profits and timing of distributions amongst its members. A Bermuda LLC may be managed by one or more members (a ‘managing member’) or a manager may be appointed who may or may not be entitled to share in the profits of the LLC. While the LLC vehicle may be utilised by clients in a broad range of sectors, the Bermuda LLC is an attractive structuring option for operators of investment funds and in particular closed-ended private equity funds as the flexible corporate governance structure allows managing members to manage the fund (in a similar way to a general partner) but without unlimited liability for such members in respect of the fund’s losses.
The Contracts (Rights of Third Parties) Act 2016 came into force in March 2016. This legislative change is of particular interest to the asset management sector as indemnities in favour of third parties (such as those typically found in investment management agreements) can now be enforced directly by such third parties. This is an opt-in regime, and the contract would have to contain an express intention for the Act to apply.