Bermuda Limited Liability Companies (LLCs) are flexible offshore vehicles that can replicate many of the same features as Bermuda exempted companies, at a cheaper cost and without some of the corporate governance restrictions of an exempted company. Nevertheless, the LLC is occasionally overlooked as a structuring option. One application of a Bermuda LLC that has increased in popularity is for private equity structures, particularly as a general partner of a limited partnership.
Bermuda’s LLC legislation, introduced in 2016, was closely modelled on Delaware’s LLC statute. This ensures a high level of familiarity for those who have used Delaware LLCs before. Concepts and documentation need not change very much. An LLC, like an exempted company, has legal personality separate from its members who, like the members of a limited company, are liable up to the amounts they have agreed to contribute to the LLC, but no more. Existing benefits of a Bermuda corporate structure are extended to LLCs with no loss of limited liability protection.
In common with a partnership, however, the affairs of a Bermuda LLC are governed by an agreement rather than by statutorily mandated constitutional documents. This affords greater flexibility, as the Bermuda LLC Act, like the Delaware legislation, expressly provides that maximum effect be given to the principle of freedom of contract in relation to LLC agreements. This ability to tailor the constitution and the corresponding simplified corporate governance of Bermuda LLCs make them ideal for complex financial structures.
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The Bermuda LLC: a Cost-Effective and Flexible Vehicle for Private Equity