Key Takeaways
- Exempted companies in Bermuda are designed for non-residents conducting business primarily outside the jurisdiction.
- Ownership structure, share capital, and the roles of directors and officers shape how the entity is controlled and governed.
- Taxation and compliance treatment, alongside clear advantages, are balanced by specific limitations and restrictions worth weighing early.
- Formation follows a defined process grounded in Bermuda's governing law, which non-resident owners should map before incorporating.
Understanding the Exempted Company in Bermuda
If you are a non-Bermudian planning to do business outside Bermuda, the Bermuda Exempted Company is the vehicle built for you. The term "exempted" refers to a release from the rule requiring at least 60% Bermudian beneficial ownership, which means foreign nationals and foreign entities may hold the entire share register. Bermuda law sorts companies into two camps: local companies, formed by Bermudians to trade primarily on the island, and exempted companies, formed by non-Bermudians to operate elsewhere.
This guide explains what the exempted company is, how it is governed, who owns and runs it, how it is taxed, and the practical limits a foreign owner should weigh before committing. It is most relevant to international investors, holding company structures, and fund promoters who want a tax-neutral entity with full foreign ownership and no obligation to trade locally.
One point of housekeeping at the outset: shelf companies do not exist here. Every exempted company is freshly incorporated.
Legal Basis and Governing Law
The exempted company is created and regulated under the Companies Act 1981, as amended, the principal statute for entity formation. The Registrar of Companies administers the regime under the supervision of the Ministry of Finance.
A defining provision is the restriction on local trade: an exempted company may not carry on business in Bermuda unless its constitutional documents permit it and the responsible Minister grants a licence. That single rule shapes much of how the vehicle is used.
Several other laws bear on the entity over its life. The Exempted Undertakings Tax Protection Act 1966 underpins the tax assurance certificate; the Economic Substance Act 2018 and its regulations set out substance obligations; and government fees are governed by regulations updated through the Registrar of Companies (Annual Corporate Regulatory Fees) Act 2024.
A drafting note worth keeping in mind: a Bermuda company's constitution is a Memorandum of Association plus bye-laws, not "articles of association" as used in some other jurisdictions.
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Defining Features and Characteristics
An exempted company is a separate legal person with limited liability. Your finances stay distinct from the company's, and a shareholder's exposure is capped at any amount unpaid on the shares held.
Four company forms exist under the Act: limited by shares, unlimited liability, limited by guarantee, and limited duration. The exempted company may take any of these, but the share-limited form dominates in practice.
Bermuda draws no formal line between private and public companies, though some provisions apply only to firms listed on appointed stock exchanges. The absence of that distinction simplifies how you think about the entity.
Most exempted companies are designated non-resident by the Bermuda Monetary Authority (BMA). That status frees the company from exchange control and lets it deal in any currency except resident Bermuda dollars; share certificates, too, may be denominated in any currency.
Two prohibitions are worth flagging. Shares of no par value are not permitted, and bearer shares are not permitted.
On records, the entity enjoys real flexibility. It need not keep records in Bermuda, and where it chooses to keep them, they may sit anywhere in the world. There is also no general obligation to file accounts with the Registrar.
Share Capital, Shareholders, and Ownership Structure
A single shareholder is enough to form an exempted company, and there is no statutory ceiling on the number of members. Shareholders need not be Bermudian residents or nationals, corporate shareholders are allowed, and foreign persons may own 100% of the equity.
The Companies Act 1981 imposes no statutory floor on authorised or paid-up capital, and the Registrar does not check a minimum threshold before registering the firm. In practice, businesses commonly adopt a standard structure of US$12,000 divided into 12,000 voting shares of US$1, which sits at the top of the lowest government-fee tier.
This is the conventional capitalisation at which the minimum annual fee band applies, not a mandatory paid-up requirement. Minimum issued capital can be as low as US$1; confirm the right structure for your case with Bermuda counsel.
Higher minimums attach to regulated entities, such as US$120,000 for an insurance company and US$1 for a mutual fund. Authorised capital can be raised later by resolution in general meeting.
Ownership mechanics carry one regulatory gate. In most cases, transferring the beneficial interest in shares or issuing shares to a new member requires prior BMA approval.
Nominee shareholders are permitted, and underlying beneficial interests are disclosed at incorporation rather than through an annual return of shareholders. The Register of Directors and the Register of Members can be inspected by any person visiting the registered office.
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Management, Directors, and Officers
Every exempted company needs at least one director and a secretary. A director may be an individual or a legal entity, and the secretary may likewise be a person or a company.
There is no requirement for a locally resident director. What the Act does require is that one of three roles, director, secretary, or resident representative, be filled by someone ordinarily resident in Bermuda; only one of those positions needs a resident holder, not all three.
The company must also appoint a President and Vice President, or a Chairman and Deputy Chairman, and these officers must be directors. Directors take on fiduciary duties to act in the company's interests and to exercise reasonable care and skill.
On filings, the Registrar must hold a list of directors with names and addresses, and any change must be notified within 30 days. Corporate records and the register of officers and directors are kept at the registered office.
Common Uses and Who Chooses an Exempted Company
The exempted company is the standard cross-border vehicle for multinational groups and private investors. Typical applications include:
- Holding assets and equity stakes across a group
- Owning and managing intellectual property portfolios
- Intercompany financing arrangements
- Aircraft and ship leasing
- Operating trading or manufacturing arms outside Bermuda
Foreign investors, holding structures, and fund promoters find this the most directly applicable entity on the island. Thousands of global structures, including those of Fortune 500 groups, use Bermuda for asset holding, insurance and reinsurance platforms, mutual funds, and asset management.
There is a regulatory fork to be aware of. The standard exempted company is distinct from firms carrying on trust, banking, investment, insurance, fund administration, or fund business, which face additional sector regulation and need ministerial consent to incorporate.
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Taxation and Key Compliance Treatment
Bermuda does not impose corporate income tax. Trading income, investment income, capital gains, rents, and royalties are exempt, and no withholding tax applies to dividends, interest, or royalties paid to non-residents.
You can lock that position in. Under the Exempted Undertakings Tax Protection Act 1966, an exempted company may obtain an assurance that any future Bermuda tax on profits, income, capital gains, or estate and inheritance will not apply to it until March 2035, except where the tax reaches persons ordinarily resident in Bermuda holding the company's obligations. These Tax Assurance Certificates are routinely obtained.
So long as the company has no employees in Bermuda, the only charge it bears is an annual government fee.
Economic substance
The Economic Substance Act 2018, effective 1 January 2019, responds to the EU Code of Conduct Group and applies to entities carrying on a "relevant activity." Those activities are banking, insurance, fund management, financing, leasing, headquarters, shipping, distribution and service centre, intellectual property, and holding entity.
Where an in-scope activity is carried on, the entity must meet substance tests: control and management from within Bermuda, adequate physical presence, employees and operating expenditure on the island, and conduct of its core income-generating activities there. Pure equity holding entities face lighter requirements, while high-risk IP companies face stricter ones.
Each in-scope entity files an economic substance declaration with the Registrar for every relevant financial period, due within six months of the financial year end. Knowingly filing a false declaration is an offence carrying penalties of up to BD$10,000 or two years' imprisonment, or both. You can read more in this economic substance guide.
Beneficial ownership and annual fees
Beneficial ownership information must be recorded and maintained, with individuals identified where they control 25% or more of the shares or voting rights, directly or indirectly. The Beneficial Ownership Act aligns the regime with revised FATF standards and moves the central register from the BMA to the Registrar; entities once exempt, including certain permit companies and financial institutions, are now in scope.
Annual regulatory fees fall due on or before 31 January each year. A fee amendment effective 18 August 2024 reflected the Registrar's expanded role over economic substance, AML/ATF compliance, and beneficial ownership registers.
Government fee schedules have been revised more than once. Confirm the live amount for your capital band against the official Registrar schedule before you budget.
Advantages of the Exempted Company
For a foreign owner, the appeal rests on ownership freedom and tax neutrality combined with a credible regulatory reputation.
| Feature | What it means for you |
|---|---|
| Foreign ownership | 100% non-Bermudian ownership permitted |
| Local directors | No resident director required |
| Tax assurance | Statutory protection running to March 2035 |
| Direct taxes | No corporate income, withholding, or capital gains tax |
| Exchange control | Non-resident designation frees currency dealings |
| Accounts filing | No general requirement to file accounts publicly |
| Records | May be kept anywhere in the world |
Formation is quick, with the procedure typically taking three to five days once approvals are in order. Share capital can be denominated in any currency, giving you flexibility to match your group's reporting currency.
The vehicle also supports corporate reorganisation. Two exempted companies may amalgamate into one without either ceasing to exist, and Bermuda permits both inward and outward continuance, so a company can re-domicile to or from the island.
Limitations and Restrictions to Consider
The central constraint is the bar on local trade. An exempted company may not carry on business in Bermuda, own property there, or run an office with local employees, unless its constitution allows it and a licence is granted.
Regulated work needs permission. Banking, insurance, reinsurance, fund management, investment schemes, and investment advice all require licensing, and ministerial consent is needed for restricted activities such as banking, investment business, and trust business.
Two BMA gates apply. The Authority must approve the incorporation of every exempted company, and in most cases it must also approve share transfers and new share issues.
Other points to weigh:
- At least one director, secretary, or resident representative must be ordinarily resident in Bermuda
- In-scope relevant activities trigger economic substance obligations, including local management and CIGA
- No shelf companies; fresh incorporation is always required
- No par value shares and bearer shares are prohibited
- Late annual fees attract a BD$300 penalty
- A false economic substance declaration carries fines up to BD$10,000 or imprisonment
The beneficial ownership rules have widened. Entities formerly outside the regime, including certain permit companies and financial institutions, now fall within it.
Formation Overview
Forming an exempted company runs through the BMA and the Registrar; the step-by-step process is covered in a separate guide, so this is a brief outline.
- BMA approval. Apply for permission to issue shares, with supporting information on ultimate beneficial owners. Each UBO holding 10% or more submits a personal declaration.
- Ministerial consent, if needed. Required only for investment, trust, mutual fund, deposit-taking, money services, and insurance business.
- Name reservation. A name can be reserved with the Registrar up to three months ahead, and a reservation holds for 10 days. An advertisement is placed in a local newspaper announcing the intended incorporation and objects.
- Constitutional documents. Lodge the Memorandum of Association, which sets out activities, share capital, and shareholder liability, alongside the bye-laws governing internal management.
- Registered office. Maintain a registered office in Bermuda, where the share register, register of directors, and minute book are kept.
On official charges, the registration application fee under the Companies Act 1981 was BD$340 and name reservation BD$100, effective 1 April 2023. The annual government fee is set by assessable capital, beginning at BD$2,095 for the BD$0 to BD$12,000 band; where incorporation occurs after 31 August, only half the fee is due that first year.
Fee schedules were revised again from 18 August 2024. Check the current figure for your capital band with the Registrar or ask Expanship to confirm it for you.
Once the Memorandum is filed and the first annual fee paid, the Registrar issues a certificate of incorporation and the company comes into existence, typically within three to five days.
Conclusion
The Bermuda exempted company gives a foreign owner full ownership, statutory tax neutrality to 2035, and an internationally respected platform for holding, financing, and group operations conducted outside the island. The trade-off is a clear set of guardrails: no local trading without a licence, BMA approval at incorporation and on share transfers, a resident officer or representative, and economic substance and beneficial ownership obligations that demand ongoing attention. For an investor whose business sits offshore and who values a tax-neutral, well-regulated base, the vehicle fits closely. The practical question is less whether it works and more whether your activity is in scope for substance and licensing, which is where early advice pays off.
How Expanship Can Help Your Business in Bermuda
Expanship helps you assess whether the exempted company suits your plans, structures the share register and approvals correctly, and manages the BMA application, name reservation, and Registrar filings end to end. From there we support the wider needs of a foreign-owned entity on the island, from formation through annual upkeep.
- Incorporation of your exempted company and constitutional drafting
- Registered office and resident representative arrangements
- Tax assurance certificate and tax registration support
- Economic substance and beneficial ownership compliance management
- Accounting and bookkeeping for the entity
- Banking introductions for account opening
To discuss your structure and confirm current fees and timelines, contact Expanship Bermuda.
Frequently Asked Questions
Yes. The exempted company is specifically released from the rule requiring 60% Bermudian ownership, so non-Bermudian individuals and corporate entities may hold the entire share register without restriction.
No resident director is required. The Act asks only that one of three roles, director, secretary, or resident representative, be filled by someone ordinarily resident in Bermuda, so a single resident appointment satisfies the rule.
Bermuda levies no corporate income tax, no capital gains tax, and no withholding tax on dividends, interest, or royalties to non-residents. Provided the company has no Bermuda employees, its only charge is an annual government fee, and it can obtain a tax assurance running to March 2035.
Generally no. Under the Companies Act 1981, an exempted company may not carry on business locally unless its constitution permits it and the responsible Minister grants a licence, and it cannot own local property or employ local staff freely.
The incorporation procedure usually takes three to five days once BMA approval and supporting documents are in place. A reserved name holds for 10 days, and a name can be reserved up to three months before incorporation.
Economic substance rules apply where the company carries on a "relevant activity," such as financing, leasing, headquarters, intellectual property, or acting as a holding entity. In-scope companies must meet substance tests in Bermuda and file an annual declaration within six months of the financial year end, with pure equity holding entities facing lighter requirements.
Legal Disclaimer
The information provided in this article is for general informational purposes only and does not constitute legal, tax, or professional advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change, and the application of laws can vary widely based on specific facts and circumstances.
Readers should not act upon this information without seeking professional counsel tailored to their individual situation. Expanship and its authors disclaim any liability for actions taken or not taken based on the content of this article.
For specific advice regarding your business setup, compliance requirements, or any legal matters, please consult with qualified legal and tax professionals in the relevant jurisdiction.
