In a judgment which is likely to have wide-ranging implications for local companies subject to the '60/40 rule', the Privy Council has held that local companies may confer on non-Bermudians "de facto control by commercial arrangements", provided that non-Bermudians have no control over the manner in which directors and shareholders vote.
Breaking with the Court of Appeal's prior decision, the Privy Council has held that commercial arrangements which would give non-Bermudians influence over the decisions of shareholders and directors are not prohibited by the 60/40 rule, provided that the directors remain free to vote in the company's interests and shareholders remain free to vote in their own interests.
Accordingly, it is now clear that the prohibition of non-Bermudian controlling influence in the 60/40 rule operates only to prevent commercial agreements or arrangements which confer voting control or constrain the effectiveness of majority votes in the board of directors or general meetings.
For further information on this topic please contact Michael Hanson, Mary V Ward, Henry Tucker or Gavin Woods at Carey Olsen Bermuda by telephone (+1 441 542 4500) or email ([email protected], [email protected], [email protected] or [email protected]). The Carey Olsen Bermuda website can be accessed at www.careyolsen.com.
