There are no income, profit or capital gains taxes in Bermuda (it is therefore "tax neutral", that is, it does not impose additional tax obligations to those incurred by companies operating in other markets). This is particularly attractive to holding companies with subsidiary operations in, or significant income arising from, more than one country. If the parent is incorporated in a tax neutral jurisdiction, it is much more difficult for a particular taxing authority to assert its right to tax all of the group's operations or profits. Accordingly, operations are generally taxed where the business is carried on and are not subject to double taxation when profits are sent to the holding company.

In addition, the absence of withholding taxes in Bermuda is also attractive to a Bermuda company's shareholders, and there are also no restrictions on a Bermuda company's ability to transfer funds in and out of Bermuda or on paying dividends to shareholders.

Bermuda has been establishing international companies longer than any other international financial centre (IFC) and has generally emphasised quality over quantity of business. More recently, the jurisdiction has consistently demonstrated its commitment to meeting international standards of co-operation and transparency, including the following:

Since June 2009, Bermuda has been on the Organisation for Economic Cooperation and Development's "white list" of countries meeting tax transparency standards (www.oecd.org/tax/transparency/).

To date, Bermuda has entered into 41 tax information exchange agreements (http://eoi-tax.org/jurisdictions/BM#agreements).

Bermuda’s reputation and profile in the offshore business community offers a high level of comfort to both management and investors. This is evidenced by the fact that a majority of the Fortune 100 companies maintain some presence in Bermuda.

Bermuda's government and business community have traditionally worked together to ensure the reputation and integrity of the jurisdiction are preserved without the need for overly burdensome regulation. This system of less obtrusive but effective regulation is generally characterised by a significant level of co-operation between the business community and the government and has helped maintain Bermuda's reputation over the years. Additionally, much of Bermuda's regulatory regime is designed to avoid double regulation. For example, where a Bermuda company's securities are publicly traded in another jurisdiction, Bermuda law recognises that the company is subject to oversight in that jurisdiction, and generally will not add additional layers of regulation. This is demonstrated by two examples: in relation to Bermuda prospectus requirements, and the restrictions on Bermuda companies issuing or transferring shares to non-residents of Bermuda.

Prospectus requirements. Usually, a Bermuda company offering its shares to the public must comply with Bermuda's prospectus requirements (including producing a prospectus and filing it with the Registrar of Companies in Bermuda). However, in the case of publicly listed companies, Bermuda's system of regulation defers to the regulation afforded by virtue of the company's stock exchange listing. There is no need to file a prospectus in Bermuda if the company has already filed a prospectus with:

In addition, if the company is subject to the rules or regulations of such a stock exchange or regulatory authority and those rules or regulations do not require a prospectus, Bermuda law does not require a prospectus. The net effect is that Bermuda companies with shares listed on an appointed stock exchange never need to file prospectuses in Bermuda.

Restrictions on issuing or transferring shares to Bermuda non-residents. Similarly, as a general rule Bermuda companies require the approval of the Bermuda Monetary Authority to issue or transfer shares to non-residents of Bermuda. However, this restriction (which would otherwise be unworkable for a public company) is eliminated by the Bermuda Monetary Authority's standing permission for the issuance and free transferability of all shares of a company listed on an appointed stock exchange. That standing permission is based on Bermuda's recognition of the regulation inherent in such listings.

Location. Bermuda's geographical location further contributes to its popularity: the Island is 90 minutes by air from New York, and there are regular direct flights from other major US cities, Toronto and London.

Infrastructure. Bermuda has a long history of accommodating international businesses, with the first international company incorporated by Conyers Dill & Pearman in 1935.

Telecommunication services and physical infrastructure are very well developed, and there is a high level of professional services available (including representation on the Island by all of the big four accounting firms). Bermuda practitioners have considerable experience with the requirements of international regulators and stock exchanges and, in turn, organisations such as the SEC, the NYSE and NASDAQ deal with Bermuda companies on a regular basis and are familiar with the Island's legal system and regulatory environment. Bermuda has a stable political and social environment reflecting its status as a self-governing British territory with a tradition of parliamentary government dating from 1620.

Legal system. The legal system is based on that of England, with a final appeal to the Privy Council of the House of Lords in England. More specifically, Bermuda's corporate law is largely based on English corporate law. Corresponding English legislation formed the basis for Bermuda's Companies Act, so statutory interpretation is greatly aided by the decisions of the English courts (which decisions are highly persuasive in the Bermuda courts). The legislative provenance and large body of jurisprudence provide enhanced certainty when dealing with the dynamic demands of the capital markets.

Bermuda's regulatory regime has been tailored so that listed companies effectively no longer have to comply with Bermuda's prospectus requirements (see above, Sensible regulation: Prospectus requirements).

For many years, a Bermuda company was unable to hold its own shares, although it was possible for a subsidiary to hold shares in its Bermuda parent. Accordingly, Bermuda companies wanting to replicate a structure involving treasury shares would often incorporate a subsidiary to hold the parent's shares as if they were treasury shares. That has now changed, and Bermuda companies are able to acquire their own shares to be held directly as treasury shares (but not to exercise any rights in respect of those shares). This means that it is now possible for shares of a Bermuda company to either be held by the company as treasury shares or to be held by one of its subsidiaries. The latter option has been used somewhat controversially in a few instances to enable two companies to hold voting control of each other, creating a circular ownership structure that is difficult for a hostile bidder to break up or acquire.

Traditionally, the rights, privileges and conditions attaching to the shares of a Bermuda company are established by the company's shareholders. However, reflecting US practice, it is possible for a Bermuda company's bye-laws to allow the company's board (rather than its shareholders) to establish the rights, privileges and conditions in respect of a particular class of shares. Shares of this kind, known in the US as blank check preferred, can provide a company's board greater flexibility in raising capital.

In the context of potential takeovers and possible corporate defences, one of the most basic forms of defence for a US company is the staggered board, although staggered boards are facing increasing opposition from activist shareholders. The staggered board allows only one-third of the board to be elected each year (making it more difficult for a hostile bidder to elect a majority of "friendly" directors).

The Companies Act provides the option of having directors elected each year at a company's annual general meeting or being elected in such other manner as a company's bye-laws may provide. The latter option allows the bye-laws to stipulate that only a portion of the company's directors are to be elected each year, thus enabling a staggered board. Bermuda law also allows the bye-laws to restrict the shareholders' ability to remove directors, and, individually or together, these provisions can have the effect of providing board stability and discouraging a hostile takeover bid.

The US practice of adopting poison pill rights plans is also designed to encourage potential acquirers to work with a company's board. Generally, a poison pill takes the form of a rights agreement, under which a public company issues rights entitling shareholders, other than an acquiring shareholder, to subscribe for shares in the company at a significant discount if the acquiring shareholder reaches a specific threshold (typically between 10% and 20%) or commences a tender offer to acquire a large percentage of the company's shares. However, if the company's board approves the acquisition, it has the ability to redeem the rights before they become exercisable. The consequent potential for dilution makes it highly undesirable for a potential acquirer to proceed with an acquisition that has not received prior board approval.

Many Bermuda public companies have adopted poison pills. This is at least partly due to the fact that the validity of poison pills was considered by the Supreme Court of Bermuda in Stena Finance v Sea Containers (1989) 39 WIR 83. In that case, the Court confirmed that the adoption of a poison pill rights plan by the board of a Bermuda company could constitute a proper and constitutional exercise of the board's powers. Increasingly, a company's board will prepare a rights plan to be kept "on the shelf" and adopted if and when a hostile bid is anticipated. This avoids the company having to engage with proxy advisory organisations, such as Institutional Shareholders Services, Inc. (ISS) which advises shareholders to vote against a board that does not put a rights plan to a shareholder vote within 12 months of adoption unless and until such engagement is required.

Another element of US law that has found its way into Bermuda practice relates not to takeovers, but restructuring. Chapter 11 of the US Bankruptcy Code is a tool used by US companies in financial difficulty to gain the protection of the US Bankruptcy Courts without necessarily proceeding to a full liquidation of the company. Bermuda law does not have an equivalent of Chapter 11; however, there have been a number of examples of Bermuda public companies with a sufficient nexus to the US which has enabled them to file for protection from their creditors under Chapter 11. In these cases, the Chapter 11 proceedings have often been combined with proceedings in the Bermuda courts to enable the company to effectively reorganise itself and continue as a going concern in much the same way that it could have reorganised had it been a US company.

Under Bermuda law, a company may indemnify its directors, officers and auditors against all liability, except in cases where such liability arises from their fraud or dishonesty. In addition, the bye-laws of a Bermuda company can provide that the shareholders waive all claims or rights of action that they might have, individually or in right of the company (that is, by derivative action), against any of the company's directors or officers, except in respect of the director's or officer's fraud or dishonesty. Such protections can provide significant comfort for directors and officers honestly carrying on a company's business.