A segregated accounts company (SAC) is able to hold certain assets and liabilities in a separate account firewalled from the assets and liabilities of the SAC itself (the SAC’s own account is usually referred to as the “general account”) and the assets belonging to its other segregated accounts.

In order for a company to achieve legal separation of its general account and its segregated account(s) it must be registered as an SAC with the Registrar of Companies (ROC) in Bermuda and comply with all relevant laws and regulations governing the operation of an SAC.

Uses of a segregated accounts company

SACs are commonly used in the insurance sector, for special purpose vehicles, and in the areas of financial guarantees, and securitisation & derivatives structures.

The Act is the principal legislation governing SACs in Bermuda, however, an SAC must also comply with other legislation applicable to its structure, for example the Companies Act 1981 and/or the Insurance Act 1978.

Documentation and contracts entered into by an SAC are often governed by the laws of a jurisdiction other than Bermuda. In this situation, a bi-location governing law clause should be added that ensures any aspects of the document dealing with the segregated account nature of the SAC are governed by Bermuda law and the Act.

segregated accounts company registration

To register as an SAC, a company must apply to the ROC. If the company is engaged in insurance business (as defined in the Insurance Act 1978) then the company may proceed direct to application to the ROC. If it carries on business other than insurance business, it must first obtain approval from the Minister of Finance (Minister).

If the company has conducted business prior to its application to become an SAC then, unless the Minister directs otherwise, the application must be accompanied by a statutory declaration of the company directors setting out, among other things, a true and accurate statement or description of the assets and liabilities of the company and any pending material transactions. Unless the Minister directs otherwise, the creditors of the company must be notified of the application and the directors’ statutory declaration must either confirm that no creditor will be prejudiced or confirm that the creditors of the company have consented to or been given adequate notice of the registration of the company as an SAC.

The ROC may impose conditions on the registration of the company and can require that the company use the abbreviation (SAC) in its name after registration.

In addition to its annual reporting obligations and compliance requirements under the Companies Act 1981 and any other relevant legislation (e.g. Insurance Act 1978, Bribery Act 2016) the Act provides that an SAC must comply with other requirements, including:

  • Appointing and maintaining in office a resident representative. The resident representative must be approved by the Minister and has reporting obligations under which he must make written reports to the ROC on the happening of certain events, e.g. insolvency, breach of the Act or involvement in criminal proceedings;
  • Maintaining records of the assets and liabilities of each segregated account as well as the general account and preparing financial statements in respect of each segregated account;
  • Maintaining a register of account owners, including particulars of their interest in the particular segregated account; and
  • Ensuring that third parties that have dealings with it are aware that they are dealing with an SAC. This includes a requirement to inform third parties that they are dealing with an SAC and to include reference to the fact it is an SAC on its letterhead and contracts.

The ROC can remove a company from the register of SAC companies thus causing it to cease holding such status. If a company wishes to cease being an SAC it must submit a written request to the ROC.

An SAC provides companies with an alternative to the cumbersome group structure that is traditionally used to protect assets from risks associated with other aspects of the business. The SAC structure is more flexible and can be less expensive to set up and maintain.

However, there are risks associated with utilising an SAC. Not all jurisdictions have legislation in force that corresponds to the Act, and so there is a risk that the Act may not be upheld or recognised in jurisdictions other than Bermuda.

A slight variant on the SAC, the incorporated segregated accounts company (ISAC) would be an entirely new type of entity adopting aspects of the traditional limited company and SACs. Not in existence in Bermuda, it is envisaged that an ISAC structure would afford each segregated account separate legal personality, a key change from the current model.

During his Speech from the Throne on September 8, 2017, Governor John Rankin confirmed that Government will draft, table and pass such ISAC legislation as is required to ensure that Bermuda’s hard-won reputation in markets such as the captive insurance market, is preserved and maintained.

What are the advantages of a segregated accounts company?

A segregated accounts company provides companies with an alternative to the cumbersome group structure that is traditionally used to protect assets from risks associated with other aspects of the business. The SAC structure is more flexible and can be less expensive to set up and maintain.

First published in The Royal Gazette, January 2018

Share
X.com LinkedIn Email Save as PDF
More Publications
Appleby-Website-Privacy-and-Data-Protection
28 Nov 2024

Augmented Advocacy Series (Bermuda): Copyright infringement in the age of AI

Artificial intelligence is revolutionising the way that humans solve problems and create.

Appleby-Website-Employment-and-Immigration
19 Nov 2024

When and how to vary a Bermuda contract of employment

A contract of employment is a legal agreement that sets out the terms and conditions of an employee�...

Technology and Innovation
8 Nov 2024

When non-tech companies buy IT

Generally, there are three categories of information technology buyers: non-technology enterprises, ...

050-Insolvency-Restructuring-Grid-Image
15 Oct 2024

Insolvency: Bermuda

In-Depth: Insolvency (formerly The Insolvency Review) offers an incisive review of the most conseque...

Appleby-Website-Insurance-and-Reinsurance
10 Oct 2024

Recovery planning for commercial insurers

New rules released by the Bermuda Monetary Authority aim to equip certain insurers with a structured...

The Global Website header
7 Oct 2024

The Global – your offshore corporate law questions answered: October 2024

The Global is a quarterly collection of corporate expert insights and analysis across Appleby's glob...

Brad Adderley, Bermuda Managing Partner at Appleby, will speak at the 2022 Society of Actuaries (SOA) Life Meeting on 23-26 August in Chicago.
2 Oct 2024

Bermuda: It’s Impressive How Mainstream Cat Bonds Have Become

Although Brad Adderley, Bermuda Managing partner at Appleby, doesn’t expect 2024 to be another rec...

Appleby-Website-Private-Client-and-Trusts-Practice
26 Sep 2024

Private Wealth and Private Client: Bermuda

In-Depth: Private Wealth and Private Client (formerly The Private Wealth & Private Client Review) pr...

Technology and Innovation
26 Sep 2024

Augmented Advocacy Series (Bermuda): The Practice of Law in the Age of AI

As the world enters the age of artificial intelligence, the legal profession is once again faced wit...