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 LICENSING

 
The Trusts (Regulation of Trust Business) Act 2001 provides for the issue of two types of license:

An unlimited license authorises the licencee to carry on trust business and to solicit business from the public generally.

limited license does not allow the holder to act as sole trustee and restricts the trustee to holding trust assets not exceeding $30 million unless the Authority agrees to a higher aggregate amount. In exercising this discretion, the Authority has regard to the Government’s policy approach in the Act, in particular in seeking to promote the use of a trust company structure where a trustee manages material amounts of assets. Where an applicant for a limited trust license or an existing holder of such a licence subsequently wishes to seek consent for a larger amount than $30 million of assets to apply to his or her business, an application for a higher figure must be made to the Authority. In considering such an application, the underlying objective of the Authority is to determine the point at which the nature and scale of the applicant’s business will be such as to indicate that a trust company should instead be established for the conduct of business in question. In assessing applications, the Authority has regard to the interaction of a number of factors including: demonstrable need for limited licensing; the integrity and professional skills appropriate to the nature and scale of trustee activity to be undertaken; absolute amount of the assets to be administered by the trustee; the nature and range of the trust business being carried on; the number of individual trust relationships involved; the variety and complexity of the trust responsibilities which are to be conducted and the resources that the undertaking has at its disposal. Broadly, the more varied and complex the trust responsibilities being conducted, the more restrictive the Authority’s stance in approving limits greater than $30 million.

Only companies may apply for an unlimited trust license.

Minimum Criteria

Applicants must meet the minimum criteria as set out in the First Schedule to the Act. The minimum criteria include the following:

  1. the controllers, directors and officers of the undertaking must be fit and proper persons;
  2. the business must be directed by at least two individuals, unless otherwise approved by the Authority;
  3. the composition of the board of directors must be appropriate;
  4. the business must be conducted in a prudent manner. This includes (although is not limited to) maintaining adequate:
    1. accounting records;
    2. systems and controls;
    3. insurance; and
    4. capital (minimum net assets of $250,000 in the case of an undertaking that is a company; $25,000 in any other case; or such larger amount as the Authority may require).

In determining whether an undertaking is conducting its business in a prudent manner, the Authority shall take into account any failure by the undertaking to comply with the provisions of the Act, other provisions of law and any code of practice.

The position of the undertaking within the structure of any group to which it belongs or its links with any related companies shall be such that it will not obstruct the conduct of effective consolidated supervision.

The business of the undertaking must be carried out with integrity and skill.

Exempted Persons and Certification by Private Trust Companies

The restriction on carrying on trust business without a licence does not apply to any person exempted by or under an exemption order, and excluded by or under an exclusion order so granted by the Minister of Finance, on the advice of the Authority. The Trusts (Regulation of Trust Business) Exemption Order 2002 came into force on 9 August 2002, and an exclusion order came into force on 6 February 2003.

Exemptions include:

  1. Members of recognised professional bodies, who hold a certificate issued, for the purpose of the order, by that body; (the professional body having been declared by the Minister of Finance under a “recognition order” as a professional body)
  2. Co-trustees of licensed trustees;
  3. Professional persons who appoint a specified licensed trust company (as defined in paragraph 6(2) of the Order) to maintain trust records;
  4. Bare trustees;
  5. Pension plans registered under the National Pension Scheme (Occupational Pensions) Act 1998;
  6. Pension trust funds registered under the Pension Trust Fund Act 1966;
  7. Collective investment schemes approved by the Authority under the Bermuda Monetary Authority (Collective Investment Scheme Classification) Regulations 1998; and
  8. Private Trust Companies.

Exclusions include:

Trustees of a trust which is administered from a place outside Bermuda AND whose trustees satisfy the conditions of residence. Residence defined as: in the case of a corporate trustee that the place of incorporation is outside of Bermuda, and the majority of the directors are ordinarily resident outside Bermuda. In the case of individual trustees, the majority of the trustees are ordinarily resident outside of Bermuda.

Private Trust Companies are required by the Exemption Order to “certify” that they qualify for an exemption. In order to do this the Company must provide the Authority with a letter, marked for the attention of the Banking. Trust, Corporate Services & Investments Department. This letter must be executed by the Director(s). Companies may opt to attach a certificate of incumbency. The letter should state that: It is providing the services of a trustee only to the trusts specified in its Memorandum of Association; or in the case of an overseas company, in its permit; and to other such trusts as the Minister has approved, and it therefore, qualifies for exemption under paragraph 3 of the Exemption Order. The letter should also confirm that the company will notify the Authority of any change in the nature and scope of the trust business that has been approved by the Minister, as soon after approval as is practicable. Exempted companies should certify to the Authority that they qualify for an exemption within three months of the date of the Order; or in the case of companies registered or granted a permit under the Companies Act 1981 after the date of this Order coming into force, as soon as is practicable, but no later than within three months of its registration or the granting of a permit. Companies that fail to meet this deadline are required to provide an appropriate explanation in writing to the Authority.

The description above is intended to be a brief summary of the Trusts (Regulation of Trust Business) Act 2001 and should be used as a guide only. Interested parties should obtain and read the full text of the legislation for complete information. Texts of Bermuda’s public legislation may be accessed at Bermuda Laws.