Restructuring and insolvency in Bermuda: overview

A Q&A guide to restructuring and insolvency law in Bermuda.

The Q&A gives a high level overview of the most common forms of security granted over immovable and movable property; creditors' and shareholders' ranking on a company's insolvency; mechanisms to secure unpaid debts; mandatory set-off of mutual debts on insolvency; state support for distressed businesses; rescue and insolvency procedures; stakeholders' roles; liability for an insolvent company's debts; setting aside an insolvent company's pre-insolvency transactions; carrying on business during insolvency; additional finance; multinational cases; and proposals for reform.

To compare answers across multiple jurisdictions, visit the Restructuring and Insolvency Country Q&A tool.

This Q&A is part of the global guide to restructuring and insolvency law. For a full list of jurisdictional Q&As visit

Sarah-Jane Hurrion, Jayson Wood and Mark Burrows, Harneys Bermuda Limited

Forms of security

1. What are the most common forms of security granted over immovable and movable property? What formalities must the security documents, the secured creditor or the debtor comply with? What is the effect of non-compliance with these formalities?

Immovable property

Common forms of security and formalities. The most common forms of security taken over immovable property are:

  • Mortgages. There are two forms of mortgage:

    • Legal mortgage. The lender holds legal title to a debtor's property as security for a debt. The debtor retains possession of the property and recovers legal ownership once the secured debt is satisfied in full;

    • Equitable mortgage. The borrower or mortgagor transfers the beneficial or equitable interest in the debtor's property to the lender and retains possession and legal interest in the property. An equitable mortgage does not take priority over a third party who, without notice of the security interest, subsequently acquires legal title to the property in good faith and for value.

  • Fixed charge. The creditor is given a right to take possession of the charged property (including the right of sale) when a specified event of default occurs. The legal title over the property is not transferred to the creditor. When a default occurs, the creditor can sell the charged property and use the proceeds to satisfy the amounts due to it from the debtor without reference to other creditors and regardless of whether the debtor is subsequently liquidated. The charged property is not deemed to be an asset of the debtor in the event of insolvency. The debtor cannot dispose of any property that is subject to a fixed charge without the creditor's consent. The charge will be released once the debt has been discharged in full.

Legal mortgages over certain property must be created by deed and validly executed.

Equitable mortgages and fixed charges must be in writing and are commonly created by deed. Deeds can be executed either under company seal or by a duly authorised signatory or signatories.

To maintain priority and provide the lender with the security it desires, mortgages and charges over real property in Bermuda must be registered with the Registrar General. Charges can also be registered with the Registrar of Companies, including a charge on assets outside of Bermuda.

Effects of non-compliance. If a mortgage or charge over real property is not registered with the Office of the Registrar General, that mortgage or charge will not have priority over a mortgage or charge over the same real property that is created later but is deposited for registration with the Office of the Registrar General.

If a charge created over certain property and assets of a company is not registered with the Registrar of Companies by the chargee, that charge will not have priority in Bermuda. If the chargee subsequently creates a charge over the same property and assets and registers that new charge, the new charge will have priority over the first (unregistered) charge, regardless of the fact that it was created later.

The deposit and registration of a security determines priority but will not affect the validity and enforceability of the security interest.

Movable property

Common forms of security and formalities. The most common forms of security taken over movable property are:

  • Mortgages. See above, Immovable property. Mortgages over movable property are most common for property such as ships and aircraft.

  • Fixed charges. See above, Immovable property.

  • Floating charges. A floating charge can be taken over a class of assets that change from day to day. Typically, a floating charge is taken over a debtor's entire business and undertaking.

    Unlike a fixed charge, a floating charge does not attach to a particular asset, but floats over one or more assets. While the floating charge is in place, the debtor can, subject to the terms of the charge, dispose of or otherwise deal with the secured assets without the creditor's consent. However, on the occurrence of a specified event of default, the floating charge crystallises and converts into a fixed charge that attaches to the debtor's specific assets at that time. The property secured by a floating charge, which has not crystallised at the commencement of a bankruptcy or liquidation of the debtor, forms part of the debtor's assets in the event of insolvency although the chargee’s claim will take priority over the claims of unsecured creditors.

  • Pledges. A pledge gives a creditor the right to take possession of the pledged asset and to sell it in the event of the debtor's default.

  • Lien. A lien gives a creditor the right to retain possession of an asset until the debt is satisfied. However, the creditor is not entitled to sell the asset if the debtor defaults.

Mortgages are generally created by deed. Specific statutory registration rules apply to mortgages over certain assets, such as aircraft and ships.

Fixed and floating charges can be created in writing but are usually created by deed. They must be registered with the Registrar of Companies.

Pledges are created by contract and perfected by actual (or constructive) delivery of the pledged asset to the creditor (for example, the delivery of stock certificates to transfer possession of shares).

Liens are created by:

  • Contract.

  • Statute, in the case of certain types of creditors, such as solicitors.

  • The common law, for example, a workman's lien on the item worked on.

There are specific registration requirements, in certain cases, for security interests created over the assets of partnerships.

Effects of non-compliance. As for immovable property (see above, Immovable property), the date of registration of the security governs the order of priority. Failure to register the applicable security over movable property may result in a mortgage or charge not having priority over mortgages or charges that are created over the same movable property at a later date.

Failure to register does not make the security invalid or unenforceable.


Creditor and contributory ranking

2. Where do creditors and contributories rank on a debtor's insolvency?

Assets secured by a mortgage or fixed charge are not assets to which the company is beneficially entitled and therefore fall outside the scope of wind up proceedings. The secured debts are satisfied from the proceeds of sale of the property. The liquidator, however, will typically:

  • Review the circumstances of the creation of the security to ensure that it is valid.

  • Seek to claim sums recovered from the sale of the property that are above the amount payable to the creditor under the mortgage or fixed charge.

If the proceeds from the sale of the property do not fully satisfy the debt secured by the mortgage or fixed charge, the secured creditor is an unsecured creditor for the remainder of the debt (see below).

Creditors and shareholders are paid in the following order:

  • Costs of insolvency proceedings. All costs, charges and expenses properly incurred in the company's winding-up are paid as a matter of priority, including the liquidator's remuneration (section 232, Companies Act 1981 (CA)).

  • Employees' debts. These are sums due to employees under the terms of their employment contracts (section 33, Employment Act 2000).

  • Preferential payments. These include:

  • unpaid taxes;

  • contributions to occupational pension schemes under the Contributory Pensions Act 1970; and

  • liability for compensation under the Workmen's Compensation Act 1965, for example, compensation for injury or occupational disease.

  • Debts secured by a floating charge. Holders of a floating charge take priority over unsecured creditors, however their claim will be subordinated to the higher priority claims, which must be paid out of property secured by a floating charge if the assets of the company are not otherwise sufficient to meet them (section 236, CA). A floating charge created within 12 months of a winding-up can also be considered to be invalid unless proven that the company was solvent immediately after the creation of the charge (section 239, CA).

  • Unsecured debts. These include shareholder loans and inter-company loans.

  • Shareholder debts. These are debts due to shareholders in their capacity as shareholders.

  • Shareholders' equity. Any residual value or equity after all valid creditor claims have been satisfied in full will be returned to shareholders.

Each category of debts must be paid in full before payment of creditors in the subsequent category. Creditors in the same category rank equally among themselves.

A company can enter into an agreement with its creditors under which certain debts are contractually subordinated to other debts.


Unpaid debts and recovery

3. Can trade creditors use any mechanisms to secure unpaid debts? Are there any legal or practical limits on the operation of these mechanisms?

Retention of title clause

A retention of title clause in a contract is the principal mechanism that trade creditors use to secure their debts. Under such a clause, the creditor retains legal title to goods supplied to the debtor until they have been paid for. Payment can be for either:

  • Specific goods.

  • Outstanding amounts due to the creditor (an "all monies clause").

While in the debtor's possession, the goods must:

  • Remain capable of being identified.

  • Not be transformed into other property or sold to a third party.

Charges and liens

Charges and liens can be created over specific assets (see Question 1).

4. Can creditors invoke any procedures (other than the formal rescue or insolvency procedures described in Questions 6 and 7 to recover their debt? Is there a mandatory set-off of mutual debts on insolvency?

Debt recovery

Creditors can use the following methods to recover their debt:

  • Receivership. A holder of a fixed or floating charge can, if the charging document specifically provides for this, appoint a receiver over the company's charged assets if a debtor defaults. The receiver will act under the powers set out in the charge document, which will typically include a right of sale. The receiver will generally realise the value of the charged asset and repay the creditor the amount of its unpaid debt.

  • Court proceedings. A creditor who is owed a liquidated debt can bring proceedings in the Supreme Court of Bermuda. If the debt is undisputed, the creditor can seek summary judgment against the debtor. If the creditor can demonstrate to the court that there is a real danger that the debtor will dissipate the assets, it can also apply for a freezing injunction over the assets up to the value of the claim. In certain circumstances, the Supreme Court can appoint a receiver to manage the debtor's affairs while court proceedings are pending. A creditor who has successfully obtained a judgment against a debtor (a judgment creditor) can have the judgment enforced by, for example:

    • a court baillif seizing the debtor's assets;

    • obtaining a court order to garnish sums due to the debtor (for example, bank account balances or debts due from a third party).

It is possible to convert judgments obtained in certain jurisdictions (for example, the UK and some other commonwealth countries) into a Bermuda judgment through procedures as set out in the Judgments (Reciprocal Enforcement) Act 1958. Foreign arbitration awards can also be recognised and enforced by the Supreme Court, under procedures set out in the Bermuda International Conciliation and Arbitration Act 1993. To enforce judgments and awards obtained in other jurisdictions, it is necessary to start fresh proceedings in the Supreme Court.

Mandatory set-off

In a liquidation there is a mandatory set-off where there have been mutual credits, mutual debts or other mutual dealings between the company and a creditor. The set-off extends to non-contractual claims as well as debts. In the case of mutual dealings, an account is taken of what is due from one party to the other.


State support

5. Is state support for distressed businesses available?

There is no official or formal state support available for distressed businesses. However, in recent years the Government has rolled out several economic initiatives to businesses, including an exemption from payroll tax for Bermudian employees on approved training schemes.

The Government has also proposed the Banking (Special Resolution Regime) Act 2016. If enacted, it will provide support to distressed banks in certain circumstances.


Rescue and insolvency procedures

6. What are the main rescue/reorganisation procedures in your jurisdiction?

Scheme of arrangement

Objective. Under a scheme of arrangement, a company can restructure its debt and/or equity by entering into a binding compromise or arrangement with creditors and/or shareholders. Although not strictly an insolvency procedure, schemes of arrangement are frequently used in this context. A scheme is available to both solvent and insolvent Bermuda companies.

Initiation. The company itself or any member or creditor can initiate a scheme. Where a liquidator has been appointed, the liquidator will usually propose the scheme rather than the company. Proceedings are started by applying to the Supreme Court for directions to convene meetings, on notice, with the various classes of creditors and/or shareholders who will be affected by the proposed scheme.

Substantive tests. Once approved by each class of creditors and/or shareholders (see below, Consents and approvals), an application is made to request the Supreme Court's sanction of the scheme.

The court must be satisfied that the:

  • Applicable statutory requirements have been met.

  • Each class of creditors or members has been fairly represented.

  • The arrangement is fair to creditors generally.

If there are no objections to the scheme, the court will generally accept that it is fair on the basis that it has been approved by a requisite majority. To be effective, a copy of the sanction order must be:

  • Delivered to the Registrar of Companies for the scheme.

  • Annexed to any copies of the company's memorandum of association issued subsequent to the order.

Consents and approvals. The scheme must be approved by the various classes of creditors and/or shareholders affected by the scheme's proposals. A majority in number and representing 75% in value of those present (either in person or by proxy) and voting at each class meeting must vote in favour of the scheme.

Supervision and control. This depends on the company's solvency:

  • Insolvent: a winding-up petition is typically presented to the court in advance of the scheme and a provisional liquidator being appointed. The provisional liquidator can be given the power to put forward the scheme, or his powers can be limited to overseeing the company's board and management. If the company is solvent at the conclusion of the scheme, the winding-up petition will be dismissed and the provisional liquidator released.

  • Solvent: the company's ordinary management is in place and normal principles of corporate governance apply.

Protection from creditors. There is no automatic stay preventing actions against the company during the period when the scheme is being proposed and implemented. However, the courts often make use of the ability to place companies in provisional liquidation to achieve such a stay. Once a company is placed into provisional liquidation, there will be an automatic stay and the company will be protected from its creditors during the implementation of the scheme. On successful implementation of the scheme, the liquidation proceedings will be discontinued without ever entering full liquidation. In such cases, the company's trading partners are not entitled to terminate their contracts with the company and/or rescind any licences granted to it.

Length of procedure. The scheme's duration varies depending on the following:

  • The complexity of the company's affairs.

  • The scheme's proposals.

  • The scheme's purpose.

Conclusion. Once the court has sanctioned the scheme and it is lodged with the Registrar of Companies, it is binding on the company and all of the affected creditors and shareholders, regardless of whether they voted or were aware of its proposals.

Once the scheme's terms have been carried out, the company continues to operate, either as a going concern or in liquidation, subject to changes imposed under the scheme's terms.

7. What are the main insolvency procedures in your jurisdiction?


Objective. Liquidation procedures can be divided into compulsory and voluntary liquidations (see below, Initiation). The purpose of both is to realise assets, pay off creditors, and distribute any remaining assets to the shareholders. The company can then be dissolved and will cease to exist.

Initiation. Liquidation proceedings are initiated as follows:

  • Compulsory. This is initiated by one of the following making a petition to the Supreme Court:

    • a creditor, including contingent or prospective creditors;

    • a contributory (that is, any person liable to contribute to the assets of the company if it is liquidated);

    • the company itself (by a shareholders' resolution if solvent and a directors' resolution if insolvent);

    • in certain circumstances, the Registrar of Companies or the Supervisor of Insurance.

  • Voluntary. There are two types of voluntary liquidation:

    • members' voluntary liquidation (MVL) under which a solvent company is wound up under the control of its shareholders;

    • creditors' voluntary liquidation (CVL), which is controlled by creditors of a company.

These are initiated by the company's shareholders through a resolution, based on the recommendation of the board of directors, although creditors participate in the CVL procedure.

Directors are not required to file liquidation proceedings where a company becomes insolvent. However, if they do not they can incur personal liability for breach of their fiduciary duty, fraudulent trading and/or misfeasance (see Question 9, Director).

The jurisdiction of the Supreme Court of Bermuda to wind up companies is derived wholly from statute. In the recent decision of PWC v Saad [2014] UKPC 35, the Privy Council confirmed that this jurisdiction does not apply to overseas companies, save for very limited exceptions such as non-resident insurance undertakings and "permit companies" (companies incorporated overseas with a licence to conduct business in Bermuda).

Substantive tests. Persons filing for compulsory liquidation or a CVL can demonstrate that the company is, or is likely to become, unable to pay its debts when due by the following:

  • On a cash flow basis (the company is unable to pay its liabilities as they become due) or balance sheet basis (the realisable value of the company's assets is less than its liabilities).

  • By proof of an unpaid debt (as evidenced by a court judgment or a statutory demand for payment that has not been satisfied or set aside in 21 days).

The Bermuda court can also put a company into liquidation if it can be shown that it is just and equitable to do so.

When applying for an MVL, a majority of the directors must make a statutory declaration confirming that they believe that the company will be able to pay its debts in full within 12 months from the date of commencement of the liquidation.

In the case of a compulsory liquidation, the court will make a winding-up order following the petition for winding-up.

Consents and approvals. In a voluntary liquidation, shareholders of the company approve the liquidation by a simple majority vote (unless the company's bye-laws specifically provide otherwise). In a CVL, a creditors' meeting must be held within 24 hours of the shareholders' resolution. At that meeting, a majority by value of the creditors present and voting appoint the liquidator and may also appoint a committee of inspection and fix the liquidator's remuneration.

Supervision and control. Once proceedings have started, and prior to the making of a winding up order, the court may appoint a provisional liquidator (see Question 11). After a winding-up order is made, in both voluntary and compulsory liquidations a liquidator is appointed (usually at the first creditors' meeting) to conduct the liquidation. In an MVL, the liquidator conducts the liquidation for the benefit of shareholders, and in a CVL for the benefit of the creditors. Once appointed, a liquidator, with the sanction of either the court or the committee of inspection, has wide powers in respect of the company and is empowered to, among other things, sell the company's assets without approval of the court or the creditors. If appointed, a committee of inspection, which represents the interests of the creditors and contributors, will provide directions to the liquidator in relation to the administration of the assets of the company and their distribution among creditors.

Protection from creditors. In a compulsory liquidation, once a winding-up order is made or a provisional liquidator appointed, an automatic stay prohibits creditor action. Secured creditors, however, are still entitled to enforce their security (see Question 2).

The automatic stay does not apply in a voluntary liquidation. However, the court can consider a liquidator's application to grant a stay of creditor action from the date of the shareholders' resolution, which is when the MVL or CVL is deemed to commence (see above, Initiation).

In the case of a stay, the company's trading partners are not entitled to terminate their contracts with the company or rescind any licences granted to it.

Length of procedure. A compulsory liquidation or CVLs duration depends on the complexity of the company's affairs and the nature of its debts and assets. An MVL is typically concluded in eight to 12 weeks.

Conclusion. In both an involuntary and voluntary liquidation, the liquidator takes over the company's management. An MVL is basically an administrative process that involves repaying all creditors and distributing any remaining assets to the shareholders. A CVL is a creditor-driven process.

Once the liquidator has realised all the company's assets, paid any amounts due in respect of preferential payments, made distributions to creditors and distributed any balance to shareholders, he must comply with certain formalities:

  • Compulsory liquidation: The liquidator must apply for a release from the court. In doing so, the liquidator must:

    • give creditors and shareholders 21 days' notice of his intention to make the application; and

    • provide an account of the liquidation with that notice.

  • CVL: the liquidator must convene final creditors' and shareholders' meetings. Within seven days of the meetings, the liquidator must notify the Registrar of Companies of the meetings and provide an account of the liquidation.

  • MVL: the company is deemed to be dissolved following the final general meeting (FGM) of the shareholders. The liquidator must notify the Registrar of Companies within seven days of the FGM.

Where a company has been struck off the Registrar of Companies and there are grounds to do so, the company or any member or creditor can apply to the Supreme Court (within 20 years of the strike off notice) to have the company restored. There may be very valid reasons for doing so, including to make good a company's ability to recover receivables and/or other monies due to it.


Stakeholders' roles

8. Which stakeholders have the most significant role in the outcome of a restructuring or insolvency procedure? Can stakeholders or commercial/policy issues influence the outcome of the procedure?


In a liquidation (whether compulsory or voluntary) the unsecured creditors play a significant role. In a CVL, secured creditors can determine the course of the liquidation through their representatives on the committee of inspection. In a scheme of arrangement, the unsecured creditors and the directors (acting with a view to the best interests of both creditors and shareholders) will play the most significant roles.

Influence on outcome of procedure

Those with an economic interest in the outcome of the restructuring or insolvency procedure will have an influence on the type of procedure used and the course of the restructuring or liquidation process. If the company is insolvent, unsecured creditors will normally control the process, particularly in the period following a winding-up order. If the company is solvent, the shareholders will have a significant influence.

The only formal process involving a restructuring (which does not involve a majority shareholder buy-out or take-over or amalgamation) is a scheme of arrangement in which the rights of creditors and/or shareholders are altered by an order of the court approving a formal scheme following meetings of the classes of creditors and shareholders involved to approve the scheme.



9. Can a director, partner, parent entity (domestic or foreign) or other party be held liable for an insolvent debtor's debts?


A director can be held liable for the debts of an insolvent company, as part of the statutory provisions intended to protect the assets of a company for the benefit of the creditors.

Criminal offences by officers of companies in liquidation that give rise to liability include (sections 243 to 247, CA):

  • Failing to fully disclose to the liquidator all details regarding the company's property.

  • Failing to deliver up such property as the liquidator directs.

  • Concealing and/or removing company property.

  • Fraudulently altering documents relating to company property or affairs.

  • Falsifying books or accounts with the intention of defrauding any person.

Directors can be liable if, during the course of the winding-up of a company, it appears that the company has intentionally carried on its business with the intention of defrauding its creditors or for any other purpose (that is, fraudulent trading). In that case, the court has the discretion to order that any person who was knowingly a party to the carrying on of business be personally liable for the debts, or part of the debts, or other liabilities of the company. In this respect, the court can summon:

  • Any officer of the company, or person known or suspected to have in his possession any property of the company.

  • Any person whom the court considers capable of giving information concerning the company's promotion, formation, trade, dealings, affairs or property.

The court can examine such persons under oath orally or through written interrogatories.

The court, on the application of the Official Receiver or liquidator, has statutory jurisdiction to compel repayment with interest from an officer or director of a company who has:

  • Misapplied company property or money.

  • Been guilty of any misfeasance or breach of trust in relation to the company.

Penalties for company directors or officers convicted of any of the above offences range from monetary fines to imprisonment (for periods ranging from 12 months to five years).

In certain circumstances, directors can be held personally liable for employees' unpaid pension contributions and unpaid taxes or in situations where they have caused the company to act in breach of it articles of association/bye-laws..


Section 9 of the Partnership Act 1902 provides that each partner is jointly liable with the other partners for all debts and obligations of the firm incurred while he is a partner. However, execution will not issue against partnership property except on a judgment against the partnership firm. An individual partner's interest in the partnership property and its profits may be the subject of a charging order in the Supreme Court, which can be obtained by a judgment creditor of that partner.

Parent entity (domestic or foreign)

There are no circumstances in which a parent company can be held liable for an insolvent subsidiary company's debts except for in situations where creditors can successfully "pierce the corporate veil". Otherwise the liability of the parent is limited to the amount paid up (or to be paid up) on its shares in the company.

Other party

A third party can be held liable for the debts of an insolvent company if that person has taken part in the management of the company in circumstances that amount to fraudulent trading, even if that person is not a director (section 246, Companies Act). Additionally, a person who has knowingly assisted a director to commit a breach of his fiduciary duties to the company can be held liable for the loss to the company caused by the breach of the director's duties (see Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, a Privy Council decision cited as binding on the Supreme Court of Bermuda in Mexico Infrastructure Finance LLC v Par-la-Ville Hotel and Residences Ltd [2015] SC (Bda) 35 Com).


Setting aside transactions

10. Can an insolvent debtor's pre-insolvency transactions be set aside? If so, who can challenge these transactions, when and in what circumstances? Are third parties' rights affected?

Avoidable transactions

The following transactions entered into by a company that subsequently becomes insolvent can be set aside, with the aim of clawing back the proceeds to restore the company to the position that it was in before the transaction:

  • Fraudulent preferences (section 237, CA). Any conveyance or other disposition of property made by execution (including any inter-group disposition) within six months before the commencement of its winding-up is void if it was made:

    • with the intention to fraudulently prefer one or more of the company's creditors;

    • at the time that the company was unable to pay its debts as they became due.

A conveyance or assignment by a company of all its property to trustees for the benefit of its creditors is effectively void. Applications concerning fraudulent preferences are most likely to be brought by the liquidator.

  • Unlawful floating charges (section 239, CA). A floating charge is considered invalid and can be set aside where it can be shown that it was created:

    • within 12 months of the commencement of insolvency proceedings; and

    • for no consideration.

Applications concerning unlawful floating charges are most likely to be brought by the liquidator.

  • Fraudulent conveyances (sections 36A to 36G, Bermuda Conveyancing Act 1983). An eligible creditor can set aside a transaction or disposition of property at an undervalue where it can be shown that the transferor's dominant purpose was to put the property beyond the creditors' reach. An eligible creditor is a person who:

    • is owed a debt by the transferor on, or within two years after, the transfer;

    • on the date of the transfer is owed a contingent liability by the transferor, where the contingency giving rise to the obligation has occurred; or

    • on the date of the action to set aside the transfer is owed an obligation arising from a cause of action that occurred before, or up to two years after, the date of the transfer.

  • Disclaimer of onerous/unprofitable contracts (section 240, CA). The liquidator of a company can, with the court's permission, disclaim any property or contracts that it considers to be onerous, unprofitable or unsaleable.

Third parties

Third parties who buy property from parties who enter into contracts with a company that later becomes insolvent obtain good title if the property they obtain was purchased in good faith and for valuable consideration.


Carrying on business during insolvency

11. In what circumstances can a debtor continue to carry on business during rescue or insolvency proceedings? In particular, who has the authority to supervise or carry on the debtor's business during the process and what restrictions apply?

In liquidation, the liquidator may carry on the business of the company so far as is necessary for its beneficial winding-up and during such period, the liquidator will have the power and authority to supervise those overseeing the conduct of the business on a day-to-day basis.

Where a scheme of arrangement is in place for an insolvent company, the liquidator will normally control the process (although a Scheme Administrator may be appointed). The company's directors can carry on the company's business where the scheme is likely to result in a reorganisation that is in the creditors' best interests and will enable the company to continue to operate. Parties to transactions involving an insolvent company must be informed that the company is involved in insolvency proceedings and this must be made clear on all company correspondence.

Once a liquidation has commenced (voluntary or involuntary), the court can appoint a provisional liquidator. This may be the Official Receiver (a government officer, presently the Registrar of Companies) or some other fit and proper person. After a winding-up order is made, the first creditors' meeting will usually vote on the appointment of a permanent liquidator (or joint liquidators). This is typically a chartered accountant in a local firm of accountants. When the company has assets and creditors in foreign jurisdictions, it is usual for the local accountant to act jointly with a chartered accountant from an affiliated firm in the foreign jurisdiction. The liquidator can, among other things, enter into compromises with the company's creditors, sell the company's property, raise money using the company's assets as security and, in certain circumstances, continue the business of the company.

If a solvent company has entered into a scheme of arrangement, however, its usual management will be in charge without the need for the appointment of a liquidator.


Additional finance

12. Can a debtor that is subject to insolvency proceedings obtain additional finance both as a legal and as a practical matter (for example, debtor-in-possession financing or equivalent)? Is special priority given to the repayment of this finance?

In liquidation, the liquidator or provisional liquidator (if his powers have not been restricted under section 170(3) of the Companies Act (CA)) of a company can raise finance to the extent that this is necessary for the beneficial winding-up of the company (section 175(2)(e), CA). This is often advisable. Repayment of this finance depends on the negotiated terms, but would usually take priority over existing creditors.

In a scheme of arrangement, the company may obtain additional financing from its existing creditors.


Multinational cases

13. What are the rules that govern a local court's recognition of concurrent foreign restructuring or insolvency procedures for a local debtor? Are there any international treaties or EU legislation governing this situation? What are the procedures for foreign creditors to submit claims in a local restructuring or insolvency process?


There is no statutory provision requiring the Bermuda courts to recognise foreign restructuring or insolvency proceedings. However, the Bermuda courts have discretion to do so, and the Supreme Court will often recognise and assist foreign proceedings in circumstances where:

  • There is property, assets or liabilities of the foreign company in Bermuda (or other relevant connections).

  • The assistance sought by the foreign liquidators would be available in the jurisdiction of the main insolvency proceedings.

  • Local law or public policy does not prevent it.

Concurrent proceedings

There is no statutory provision regarding the treatment of concurrent proceedings in other jurisdictions. Bermuda courts, however, have co-operated with foreign proceedings, allowing them to take the lead role where it can be shown that to do so would be in the best interests of the company, especially where the foreign court has the closest connection to the foreign company or is the most appropriate jurisdiction to make an order.

International treaties

Currently, Bermuda has not adopted the UNCITRAL Model Law on Cross-Border Insolvency and is not a signatory to any other international treaties relating to insolvency.

Procedures for foreign creditors

Foreign creditors can claim in Bermuda proceedings for debts owing to them, although any distribution received in foreign proceedings must be offset against any claim brought in the Bermuda courts.



14. Are there any proposals for reform?

There are currently no formal proposals for reform before the government of Bermuda. The need for reform has, however, been cited by various interested parties, most notably the Chief Justice of the Supreme Court of Bermuda. Therefore, such proposals may be presented in the near future.


Online resources

Bermuda Laws Online


Description. Bermuda Laws Online is a database of Bermuda's statutes and statutory instruments. Its content is provided by the Ministry of Justice and the Attorney-General's Chambers.

Contributor profiles

Sarah-Jane Hurrion

Harneys Bermuda Limited

T +441 405 1502

Professional qualifications. England and Wales, 2001; Cayman Islands, 2006; Bermuda, 2011

Areas of practice. International commercial litigation; hedge funds; insolvency and corporate restructuring; telecommunications and technology and regulatory.

Reported cases and matters:

  • Re Sea Containers Ltd (2012) SC (Bda) 26 Com.

  • Re Kingate Management Limited (2012) SC (Bda) 52.

  • Butterfield Trust (Bermuda) Ltd v Rütli Stiftung et al [2012] SC (Bda).

  • Re Highland Crusader Fund II Ltd (2011) Bda LR 49.

  • Re Lehman Re Ltd (2011) SC (Bda) 44 Com.

  • Kingate Global Fund Limited (In Liquidation) and another v Kingate Management Limited and others [2015] SC (Bda) 65 Com

  • Kingate Global Fund Limited (In Liquidation) and another v Kingate Management Limited and others [2016] SC (Bda) 3 Com

  • Hermes International Fund Limited, Lagoon Investment Limited v HSBC Institutional Trust Services (Bermuda) Limited, Supreme Court of Bermuda, Commercial List.

  • Thema Fund Ltd, Thema Wise Investments Ltd v HSBC Institutional Trust Services (Bermuda) Limited, Supreme Court of Bermuda, Commercial List.

Jayson Wood

Harneys Bermuda Limited

T +441 405 1518

Professional qualifications: Australia (Tasmania), 1989; Australia (Queensland), 1995; England and Wales (not currently practicing), 2007; BVI, 2007; Cayman Islands, 2009.

Areas of practice. Commercial litigation; insolvency with particular emphasis on hedge funds; corporate restructuring; shareholder disputes.

Reported cases and matters:

  • In re DD Growth Premium Master Fund [2009] CILR Note 11

  • HSH Cayman v ABN Amro [2010] CILR 148; [2010] CILR 157

  • In re Emergent Capital [2011] CILR 315; [2012] 1 CILR 1

  • Ennismore Fund v Ferris [2012] 1 CILR 84

  • Lansdowne v Matador [2012] 2 CILR 81

  • In re [2012] 1 CILR 272

  • In re Hadar Fund Ltd [2013] 2 CILR Note 4

Mark Burrows

Harneys Bermuda Limited

T +441 405 1517

Professional qualifications: Bermuda, 2015.

Areas of practice. Commercial litigation; insolvency and corporate restructuring; civil litigation.

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