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D. Bermuda ‐‐ The Bermuda Perspective
Kehinde George and Larry Mussenden
Attride‐Stirling & Woloniecki
1. Chapter 15
The decision of the US Bankruptcy Court in the case of Bear Sterns 40 as upheld on appeal by the US District
Court 41 is likely to make chapter 15 relief unavailable for the insolvency officeholders of many Bermudian
companies.
Bermuda, like the Cayman Islands, has the concept of exempted companies which by law are not permitted to
carry on business in Bermuda except: with persons outside Bermuda, with other exempted companies for the
furtherance of their business outside Bermuda, and reinsurance of companies incorporated in Bermuda.
Therefore, the implications of the Bear Sterns decision for Bermudian exempted companies are similar to the
implications for the Cayman Islands companies affected by the decision.
Whilst several of Bermuda’s exempted companies have a substantial presence in Bermuda with large staffs
and office buildings, but there are many which do not. Every Bermudian company is required to have a
registered office in Bermuda at which its registers of members and directors and officers, minute books certain
records of account are to be kept. If it does not have any resident directors, it must have a secretary who is
resident in Bermuda and a resident representative. In addition, (re)insurance companies are required to
maintain a principal office in Bermuda (which would be their business office as opposed to the registered
office). (Re)insurance companies that do not manage themselves may be managed by a Bermuda based
insurance manager, in which case they may use the office of the insurance manager as their principal office.
They must appoint a principal representative in Bermuda who is required to keep the affairs of the company
under constant review and has certain reporting obligations to the regulator. It remains to be seen whether
the minimum presence of a company in Bermuda allowed under Bermudian law would be sufficient, on the
Bankruptcy Court’s interpretation, to justify recognition of insolvency or reorganisation proceedings of that
company as foreign main proceedings, or if not, whether it would be sufficient to constitute an establishment
for the purpose of recognition as non‐main proceedings.
The US Court has suggested that if the foreign proceedings were not recognized as main or non‐main
proceedings under chapter 15, the foreign representative can commence proceedings under chapter 7 or
chapter 11. However, the alternative options are likely to be unattractive to the Bermudian representative,
whose principal goal in coming to the US is to obtain protection for the company and its assets against
proceedings in the US, with the aim of requiring creditors to make their claims in the liquidation or scheme in
the company’s jurisdiction of registration. Also, chapter 7 and chapter 11 proceedings may not be available to
foreign insurance companies.
2. Parallel Proceedings
Restructurings of groups of companies which include Bermudian companies by means of parallel proceedings
under chapter 11 of the US Bankruptcy Code (“chapter 11”) and provisional liquidation proceedings in Bermuda
have occurred since the 1999 case of In the matter of ICO Global Communications (Holdings) Ltd [199] Bda L.R.
69. Whilst chapter 11 proceedings are not available to insurance companies, parallel proceedings were used to
effect the restructuring of a group of insurance companies where the top holding companies were Bermudian
companies ‐ Trenwick Group Ltd Trenwick America Corporation, et al. Chapter 11 Case No. 03‐12635 (MFW) (Jointly
Administered) and In the matter of LaSalle Re Holdings Ltd, In the matter of Trenwick Group Ltd, Supreme Court
of Bermuda, Companies Winding‐Up, 2003: Cases Nos. 339 and 340.
40
In re Bear Sterns High‐Grade Structured Credit Strategies Master Fund, Ltd (in provisional liquidation)
Chapter 15 Case No. 07‐12383 and In re Bear Sterns High‐Grade Structured Credit Strategies Enhanced Leverage
Master Fund, Ltd (in provisional liquidation) Chapter 15 Case No. 07‐12384 (Bankr. S.D.N.Y. September 5, 2007)
41
374 B.R. 122 (Bankr. S.D.N.Y. 2007), aff’d U.S. Dist. LXIS 41456, Nos. 07‐12383 and 07‐12384 (S.D.N.Y.
May 22, 2008).