Bermuda's Bank Of Butterfield Will Be Exempt From 60/40 Rule

by Mandy Robinson, Tax-news.com, London

20 April 2001

Bermuda's Minister of Finance, Eugene Cox, has instructed the Registrar of Companies Department to prepare a section 114B licence for the Bank of NT Butterfield & Son, which means that the bank will soon be relieved of its requirement to uphold the 60/40 Bermudian ownership rule.

The 60/40 ownership rule means that any company which is listed as a local company must be owned by a 60 per cent majority of Bermudians or Bermudian companies - the other 40 per cent can be owned by people or institutions from outside Bermuda. But the protectionist rule has prevented the bank from gaining access to international capital via a US Nasdaq listing.

In a press release the bank said that although it is well capitalised and has a strong and highly liquid balance sheet, relief from the requirements of the 60/40 rule will enable the bank to raise additional capital should it be required to facilitate further acquisitions overseas or in Bermuda.

The move follows the Bermudian government's decision to relieve the Bank of Bermuda from the 60/40 rule in December of last year and there has been some speculation that the decision was influenced by pressure from the OECD, which wants all offshore centers to create a level playing field for domestic and foreign players by removing two-tier tax and legal structures. Previously the Bermudian media quoted Eugene Cox as saying: 'The OECD has stated very clearly that it considers the existence of two tiers of business structures within a jurisdiction, with different rules and restrictions applying to each, to be a potentially harmful tax practice.'

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