Key Takeaways
- A Local Company in Bermuda is generally subject to the 60/40 Bermudian control requirement, shaping how shares and ownership are held.
- Non-resident owners should weigh the entity's management, director, and officer obligations alongside its key taxation and compliance duties.
- Defining features and typical uses make the Local Company best suited to those intending to do business within Bermuda itself.
- Formation involves clear steps, but the article also flags practical limitations worth assessing before you proceed.
Understanding the Local Company in Bermuda
A Local Company is the vehicle Bermuda law sets aside for business carried on inside Bermuda itself, and that single fact shapes everything a non-resident needs to know about it. The category sits opposite the exempted company, the structure most foreign investors actually use, which is built for business conducted outside the island. Under the Companies Act 1981, a local company must be predominantly Bermudian-owned and controlled, while an exempted company is freed from that ownership test.
This guide explains what a local company is, how the 60/40 control rule works, how it is taxed and governed, and the practical routes open to a foreign founder who wants to reach Bermudian customers. It is written for non-resident owners, investors, and their advisers weighing whether this is the right entity, rather than the exempted company that suits purely international activity.
The honest starting point: most foreign owners do not choose a local company. You would consider one only where the goal is selling goods or services into the domestic Bermudian market, usually alongside a local partner or under a ministerial licence.
Legal Basis and Governing Law
The Companies Act 1981, as amended, is the statute that creates and regulates every Bermuda company, local and exempted alike. It runs across multiple parts covering formation, management, administration, and dissolution, and it defines the terms that matter here, including "local company" and "exempted company."
The 60/40 ownership test lives mainly in section 114(1)(a) and Part 1 of the Third Schedule. Two relief mechanisms follow it: a section 114A licence where Bermudian control falls below 60%, and a section 114B licence that exempts a company from the rule altogether, each granted at the Minister's discretion.
The consolidated text reflects later changes, including Part XIIB inserted by the Benefit Entities Act 2025 (effective 1 December 2025) and amendments under the Beneficial Ownership (Consequential Amendments) Order 2025 (effective 3 November 2025). Separately, the Economic Substance Act 2018, effective 1 January 2019, sets the substance regime that touches even purely domestic firms in a reduced form.
Filings and the statutory registers are handled through the Registrar of Companies, which operates under the Ministry of Finance.
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Defining Features and Characteristics
A local company limited by shares is a separate legal person, distinct from those who own it. Shareholder liability is capped at the capital subscribed for their shares, so personal assets sit behind that wall in the ordinary course.
The defining features a foreign owner should weigh:
- Minimum share capital of $1. Shares of no par value are not allowed, and bearer shares are prohibited.
- Registered office in Bermuda at all times, which cannot be a post office box.
- Public records. The Registrar holds a list of directors with names and addresses; the register of members and the register of directors and officers are open to public inspection.
- Beneficial ownership register kept at the registered office unless an exemption applies.
- Constitutional documents comprising a public Memorandum of Association and Bye-Laws, of which only extracts are filed.
There is no statutory split between public and private companies. Note also that shelf companies do not exist here, so every entity must be freshly incorporated.
A company limited by guarantee is a separate sub-type, available only for purposes such as art, science, religion, charity, sport, or education. It is not the standard trading vehicle and rarely fits a commercial foreign investor.
Ownership, Shares, and the 60/40 Bermudian Control Requirement
This rule is the heart of the local company and the reason it is uncommon among foreign founders. To qualify as a local (non-exempt) company, Bermudians must beneficially own at least 60% of the shares, hold at least 60% of the voting rights, and make up at least 60% of the directors.
For a non-resident, the arithmetic is simple. You may take up to 40% of the shares and votes in a standard local company without any government permission; anything above that requires a discretionary licence.
| Foreign stake sought | Permission needed | Typical route |
|---|---|---|
| Up to 40% | None | Joint venture with a Bermudian 60% partner |
| Above 40% | Section 114B licence from the Minister of Finance | Application, often in a prescribed industry |
The joint venture is the workable entry path for most foreign investors. You incorporate as a 40% minority shareholder alongside a 60% local partner, frequently negotiating veto rights at board and shareholder level in the joint venture agreement. This needs no licence and can usually be set up within about two weeks.
Where you need majority control, the section 114B licence is the gateway. When weighing an application the Minister considers the economic situation in Bermuda and protection of existing businesses, the conduct of the company and its principals, the advantages or disadvantages of the business operating locally, and the policy goal of keeping economic resources under Bermudian control.
Certain companies escape the 60/40 cap by other means: those listed on a designated stock exchange, those operating materially in a prescribed industry, or wholly owned subsidiaries of such listed companies. Prescribed industries include telecommunications, energy, insurance, hotel operations, banking, and international transportation services.
The Government signalled an intention to cut the required Bermudian ownership from 60% to 40% while keeping the board at 60% Bermudian. No public source confirms enactment, so confirm the current position with Bermuda counsel before relying on it.
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Management, Directors, and Officers
The residency rule is where a local company diverges sharply from an exempted one. A local company must have either a director ordinarily resident in Bermuda, or both a resident secretary and a resident director. The local market cannot be served by a resident representative standing in for a resident director.
Beyond that, the board is flexible. There is no maximum age and no ceiling on the number of directorships a person may hold, corporate directors are allowed, and non-Bermudian directors face no nationality bar beyond the resident-director minimum. An undischarged bankrupt cannot serve.
Every Bermuda company must appoint a secretary, who attends meetings of directors and shareholders and keeps the company's records. Governance is board-centric: directors are elected at the annual general meeting and run the business, and shareholders may have fewer protections than in some other systems unless the Bye-Laws build them in. Directors and officers owe duties of care, honesty, and good faith.
Only one shareholder is required. Director and officer changes go to the Registrar within 30 days, and beneficial ownership changes go to the Bermuda Monetary Authority within 14 days.
Typical Uses and Who Chooses a Local Company
Local companies exist to trade in Bermuda, and only they may carry on and compete for domestic business. If your customers are Bermudian residents, businesses, or the local government, this is the structure the law requires.
Familiar examples sit across hospitality, telecommunications, retail, professional services, construction, and the island's banks. Foreign founders generally arrive through an alliance with a Bermudian partner, which can also help secure governmental support for the venture.
In short, the people who choose this vehicle are Bermudian entrepreneurs, joint ventures pairing a Bermudian majority with a foreign minority, and strategic foreign investors seeking licensed majority control under section 114B in a prescribed industry. Those who do not are the many international companies that prefer an exempted company, keeping full ownership and an offshore domicile for business conducted outside Bermuda.
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Taxation and Key Compliance Obligations
Bermuda imposes no income or profits tax, no withholding tax, no capital gains tax, no capital transfer tax, and no estate or inheritance duty on a company or its shareholders, except for shareholders ordinarily resident in Bermuda. Local and exempted companies are taxed on the same basis.
A corporate income tax does exist, but its reach is narrow. From 2025, only multinational enterprise groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding fiscal years fall within the 15% rate; all other companies, including local firms and smaller international ones, remain at 0%.
Payroll tax applies to employers operating in Bermuda, with both employer and employee contributions; confirm the current rate with a Bermuda tax adviser before budgeting.
The recurring official charges every owner should know:
| Item | Fee | Notes |
|---|---|---|
| Application to be registered (s.6) | $340 | Government Fees Amendment Regulations 2023, effective 1 April 2023 |
| Name reservation (s.6A) | $100 | Per reservation |
| Annual government fee | BD$685 + BD$50 filing | On issued capital under BD$50,000; due by 31 March |
| Section 114A licence application | $2,100 | Plus $1,000 issuance and $1,000 annual licence fee |
| Late payment penalty | $300 | On fees filed after the due date |
Annual fees are paid to the Registrar by 31 March each year the company exists, with the first payment due on the incorporation application. A company formed between 1 September and 31 December pays half the annual fee for that part-year. Always confirm the current amounts against the Registrar's published schedule before relying on them.
On economic substance, a qualifying local company gets a lighter touch. An entity carrying on business only in Bermuda, subject to the 60% ownership-and-control test, and not part of a group with affiliates tax resident outside Bermuda, is in scope but need not demonstrate full substance. Its obligations reduce to meeting the corporate governance requirements of the Companies Act and filing an annual Economic Substance Declaration, due six months after the financial year-end.
That relief is conditional. A local company belonging to a group with affiliates tax resident outside Bermuda may face the full substance requirements, so take specific advice where any offshore affiliate exists.
A register of beneficial owners must be kept and updated, capturing individuals who control more than 25% of shares or voting rights, and it must be accessible to the Bermuda government. CRS reporting applies to financial accounts in existence from 1 January 2016, with notification due by 30 April and reporting by 31 May of the following year unless extended.
Advantages of the Local Company
The decisive advantage is access. A local company is the only structure that may carry on and compete for domestic business, which an exempted company cannot do without separate authorisation.
- Limited liability behind a separate legal person, with shareholders exposed only to their paid-in capital.
- 0% corporate income tax unless the company belongs to an MNE group with revenue of EUR 750 million or more, plus no withholding, capital gains, inheritance taxes, or VAT.
- Reduced economic substance burden for a qualifying domestic, majority-Bermudian company with no offshore affiliates: corporate governance compliance and an annual declaration, with no need to prove core income-generating activity.
- BEDC support. Local businesses meeting the 60/40 test may access certain Bermuda Economic Development Corporation financial products and incentives.
- Familiar common-law structure, board-managed under an English-law-tradition statute that advisers from other common-law jurisdictions will recognise.
- Stock exchange access. A local company can apply to list on the Bermuda Stock Exchange, and a BSX listing can open the door to foreign investment beyond the 40% cap.
Formation is quick where no ministerial consent is needed, with a limited company capable of being registered within one day of a complete application.
Limitations and Practical Considerations
The control rule is the binding constraint: a foreign investor cannot hold a majority without a section 114B licence, which is discretionary, can take up to three months, and may carry conditions such as Bermudian employment commitments. Advisers commonly seek approval in principle before committing, so the joint venture can plan around it.
Two governance limits sit alongside it. At least one director must be ordinarily resident in Bermuda, with no resident-representative substitute, and even a licensed majority-foreign company must keep its board at least 60% Bermudian.
Other practical points to factor in:
- Land ownership by businesses is restricted; land-holding powers must be set out in the Memorandum and are limited by government policy.
- Work permits. Non-Bermudians need a permit to work and reside in Bermuda, and most categories require the employer to advertise the vacancy locally and run a genuine search first.
- Licensed activities. Banking, insurance, investment business, and trust business each need separate BMA licensing, and the Minister's consent to incorporate is required for activities such as investment business, trust business, mutual fund business, deposit-taking, money services, and insurance.
- Economic substance risk. A local company within a multinational group may lose the reduced treatment and face full substance requirements.
- Stamp duty. Ad valorem stamp duty of 0.5% on capital applies to the Memorandum of Association.
A local company is the wrong tool for purely offshore structuring; the exempted company fits that purpose. Bear in mind too that professional fees and operating costs in Bermuda are high relative to other jurisdictions, the Bermuda dollar is pegged 1:1 to the US dollar, and no shelf companies exist, so every entity is formed from scratch.
Formation Overview
The Registrar of Companies, under the Ministry of Finance in Hamilton, is the authority for registration, with the Bermuda Monetary Authority involved where activities are restricted. Engaging a Bermuda-based law firm, accounting firm, or corporate service provider is a requirement, not an option, for setting up the company.
Timing depends on whether ministerial consent is needed. Most local companies can be registered within about two weeks of complete instructions; a formation needing no consent can complete in a day, while one requiring consent typically takes up to a week from when the Registrar holds all information and personal declarations.
The core documents include the proposed name with alternatives, the Memorandum of Association, the Bye-Laws, a list of proposed directors and officers, the notice of registered office, and Personal Declarations signed by each non-Bermudian beneficial owner for the BMA (not required where the parent is listed on a recognised exchange). Each principal beneficial owner holding 10% or more must provide certified identification and declare any participation in other Bermudian businesses.
The recurring obligations after formation:
- Pay the annual government fee by 31 March
- File the annual Economic Substance Declaration within six months of financial year-end
- Notify the Registrar of director changes within 30 days
- Notify the BMA of beneficial ownership changes within 14 days
- Maintain a registered office, statutory registers, and records of account in Bermuda
The step-by-step process is covered in a separate incorporation guide.
Conclusion
A local company is the right answer only when your business needs to reach the domestic Bermudian market, and even then the 60/40 control rule keeps a non-resident in the minority unless a discretionary licence is granted. For most foreign founders, a joint venture at 40% with a Bermudian partner is the realistic route in, while pure international activity belongs in an exempted company. The tax position is favourable and the structure is familiar, but the ownership, residency, and licensing constraints are real and should be weighed with Bermuda counsel before you commit.
How Expanship Can Help Your Business in Bermuda
Expanship advises foreign owners and their advisers on whether a local company fits the plan, on structuring a compliant joint venture within the 60/40 framework, and on section 114B licence applications where majority control is the goal, then handles the wider work of running a foreign-owned entity in Bermuda.
- Company incorporation and entity structuring
- Registered agent and registered office services
- Tax registration and annual filings
- Ongoing compliance and economic substance management
- Accounting and bookkeeping
- Introductions to banking providers
To discuss your plans for the Bermudian market, contact Expanship Bermuda.
Frequently Asked Questions
Not by right. A standard local company must be at least 60% Bermudian-owned and controlled, so a non-resident is capped at 40% unless the company obtains a section 114B licence from the Minister of Finance permitting greater foreign ownership, which is discretionary.
A local company is built to trade inside Bermuda and must satisfy the 60/40 Bermudian ownership and control test, while an exempted company is freed from that test and is intended for business conducted outside Bermuda. Most international investors choose the exempted company to keep full ownership.
Where no ministerial consent is required, registration can be completed within a day of a complete application, and most local companies are formed within about two weeks of full instructions. Where the Minister's consent is needed, allow up to a week once the Registrar holds all information and personal declarations.
Generally no. The 15% corporate income tax introduced from 2025 applies only to multinational enterprise groups with consolidated revenue of EUR 750 million or more; local companies outside such a group remain at 0% and pay no withholding, capital gains, or inheritance taxes.
Yes. A local company must have either a director ordinarily resident in Bermuda, or a resident secretary together with a resident director. The resident-representative alternative open to exempted companies does not satisfy this requirement.
A local company pays the annual government fee by 31 March, files an Economic Substance Declaration within six months of its financial year-end, and keeps a registered office, statutory registers, and accounting records in Bermuda. Director changes must reach the Registrar within 30 days and beneficial ownership changes the BMA within 14 days.
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.
