Segregated Accounts Companies Act 2000

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Segregated Accounts Companies Act 2000
SEGREGATED ACCOUNTS COMPANIES ACT 2000

1

BERMUDA
2000 : 33

SEGREGATED ACCOUNTS COMPANIES ACT 2000

[Date of Assent 22 August 2000]

[Operative Date 1 November 2000]

ARRANGEMENT OF SECTIONS

PART 1
INTERPRETATION AND

APPLICATION

1 Citation
2 Interpretation and

application

PART 11
REGISTRATION

3 Application for
registration to operate
segregated accounts

4 Companies to notify
Registrar

5 Documents to be filed
6 Register of segregated

accounts companies

7 Removal from the register
8 Provisions relating to

operation of segregated
accounts pursuant to
Private Act

PART III
MANAGEMENT AND
ADMINISTRATION

9 Company to inform
persons they are dealing
with segregated accounts
company

10 Segregated account
representative

11 Governing instrument

SEGREGATED ACCOUNTS COMPANIES ACT 2000

2

12 Apportionment of assets
among segregated
accounts

13 Amalgamations and
consolidations

14 Issue of securities linked
to a segregated account

15 Dividends, distributions,
redemptions and
repurchases

16 Accounts, records and
registers

17 Nature of segregated
accounts; application of
assets and liabilities

18 Rights and obligations
with respect to segregated
accounts

PART IV
RECEIVERSHIP AND

WINDING UP

19 Receivership orders
20 Application for

receivership orders

21 Functions and powers of
receiver

22 Discharge and variation of
receivership orders

23 Remuneration of receiver
24 Winding up of segregated

accounts companies
25 Application of assets

PART V
GENERAL

26 Directions of Minister to
modify the provisions of
this Act

27 Minister may make
regulations

28 Suits and actions against
Registrar and Official
Receiver

29 Registrar and Official
Receiver to be indemnified
in respect of foreign suits

30 Offences
31 Fees
32 Commencement

WHEREAS it is expedient to provide for the registration and
regulation of companies that operate segregated accounts:

Be it enacted by The Queen's Most Excellent Majesty, by and
with the advice and consent of the Senate and the House of Assembly of
Bermuda, and by the authority of the same, as follows:

PART I

INTERPRETATION AND APPLICATION

Citation
1 This Act may be cited as the Segregated Accounts Companies Act
2000.

SEGREGATED ACCOUNTS COMPANIES ACT 2000

3

Interpretation and application
2 (1) In this Act—

"beneficial owner" means any person who is—

(a) identified in or by reference to a governing instrument as
having a legal or beneficial interest in a segregated
account;

(b) the registered holder of any security linked to a
segregated account; or

(c) designated as having a beneficial interest in a segregated
account in the records of a segregated accounts
company;

and includes that person's successors in title or assigns;

"counterparty" means any party (other than the segregated
accounts company itself), or any person deriving any interest
or title from a party, to a transaction to which the company is
a party, which transaction does not by its terms go to the
beneficial ownership of a segregated account;

"court" means the Supreme Court;

"general account" means an account maintained under section
16(1)(c) which records all of the assets and liabilities of a
segregated accounts company which are not linked to a
segregated account of that company;

"general shareholder" means any member of a segregated
accounts company not being the holder of a share linked to a
segregated account;

"governing instrument" in relation to a segregated account,
means a written instrument evidencing a transaction and
conforming to the provisions of section 11;

"insurance business" means insurance business as defined in
section 1(1) of the Insurance Act 1978;

"linked" means linked by means of an entry made in the records
of a segregated accounts company used in the preparation of
the financial statements of the company in accordance with
generally accepted accounting principles and made in respect
of a transaction which—

(a) records movement in value or changes in characteristics
necessarily consequent on that transaction; and

SEGREGATED ACCOUNTS COMPANIES ACT 2000

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(b) identifies assets, rights, liabilities, obligations or
contributions as belonging to or pertaining to a
segregated account;

"manager" means any person who, by virtue of the terms of a
governing instrument or otherwise with the consent of a
segregated accounts company and the beneficial owners of
any segregated account, has control of a segregated account;

"operative date" means the date on which this Act comes into
force;

"the Minister" means the Minister of Finance;

"register" means the register of segregated accounts companies
maintained under section 6;

"registered" means registered under section 6;

"Registrar" means the Registrar of Companies appointed under
section 3 of the Companies Act 1981;

"security" in relation to a segregated accounts company, means
any share, note, bond, debenture, evidence of indebtedness,
certificate, unit, warrant, or right conferring an option to
acquire shares or any other right issued by or pertaining to
the company, but does not include a contract of insurance
unless the terms of the contract so provide;

"segregated account" means a separate and distinct account
(comprising entries recording data, assets, liabilities, rights
and obligations linked to such account) of a segregated
accounts company maintained in respect of a beneficial
owner or a counterparty in accordance with this Act;

"segregated accounts company" means a company which is
registered under section 6;

"transaction" means any dealing of whatever nature, including
the issue of any security, by which the assets or liabilities
linked to a segregated account are affected, or, in the case of
assets intended by the parties to be applied to a risk of any
nature, any dealing which exposes such assets to liability or
loss.

(2) For the purposes of this Act—

(a) a segregated accounts company shall be deemed to be
solvent if the general account is able to pay its liabilities
as they become due;

SEGREGATED ACCOUNTS COMPANIES ACT 2000

5

(b) a segregated account shall be deemed to be solvent if it
is able to pay its liabilities as they become due.

(3) Nothing in this Act shall be construed as requiring a
company which operates segregated accounts under the authority of a
Private Act or otherwise to be registered.

(4) For the avoidance of doubt it is declared that,
notwithstanding section 18, a segregated accounts company is not by
reason only of the operation of segregated accounts carrying on trust
business in or from within Bermuda for the purposes of the Trust
Companies Act 1991.

PART II

REGISTRATION

Application for registration to operate segregated accounts
3 (1) Any company to which the Companies Act 1981 applies—

(a) if it is engaged in insurance business; or

(b) if it is not so engaged, with the approval of the Minister,

may, by filing a notice under section 4, apply to be registered under
section 6.

(2) From the date of registration of a segregated accounts
company the provisions of this Act shall apply thereto and the company
may enter into transactions.

(3) The establishment of a segregated account does not create a
legal person distinct from the segregated accounts company.

Companies to notify Registrar
4 (1) Where a company intends to operate segregated accounts,
the company shall file with the Registrar a notice thereof in writing not
less than 28 days before establishing the segregated accounts.

(2) Notice given pursuant to subsection (1) shall not of itself
confer any power under this Act, and the company shall not be entitled
to avail itself of the provisions of this Act until it has been registered
under section 6.

Documents to be filed
5 (1) The notice under section 4 shall be in such form as the
Registrar may determine but shall contain the following information—

SEGREGATED ACCOUNTS COMPANIES ACT 2000

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(a) the name of the company, which, subject to a direction
from the Minister pursuant to section 26, shall include
the expression "(SAC)";

(b) a statement that the company intends to operate
segregated accounts;

(c) the address of the registered office of the company;

(d) the name and address of the segregated account
representative of the company;

(e) the nature of the business of the company;

(f) the date of incorporation of the company; and

(g) a statement that the company has made provision to
account for segregated accounts in the manner set out
in section 16.

(2) Where the company has conducted business prior to its
registration, the company, in filing a notice under section 4, shall—

(a) file with the Registrar a statutory declaration as at the
date of the notice setting out a true and accurate
statement of—

(i) the assets and liabilities of the company as at a
date within three months prior to the date of the
notice;

(ii) a description of any transaction or event which, as
of the date of the notice, has occurred, or is
expected to occur, between the date of the
statement of assets and liabilities prepared
pursuant to subparagraph (i) and the date of
registration of the company as a segregated
accounts company which, if it had occurred before
the date of that statement, would have caused
significant changes to the assets and liabilities
disclosed therein; and

(iii) the segregated accounts the company intends to
operate and the assets and liabilities which the
company proposes to assign to each of those
segregated accounts;

and declaring that—

(iv) on registration, the company will be solvent in
respect of each segregated account and the general

SEGREGATED ACCOUNTS COMPANIES ACT 2000

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account as if each segregated account and the
general account were a separate legal entity;

(v) no creditor of the company will be prejudiced; or

(vi) the creditors of the company have consented in
writing to the company proceeding to register; and

(b) attach evidence of the consent in writing to registration
of 75% in number of those persons who would, on the
registration of the company, be the beneficial owners of
the segregated accounts of the company and 75% in
number of those persons who would, on the registration
of the company, be counterparties to any undischarged
or open transactions linked to a segregated account.

(3) Any person who, on the registration of the company, would
be a beneficial owner or counterparty to an open or undischarged
transaction and who does not consent to the registration of the company
as a segregated accounts company under this Act may, within one
month of the date of the notice under section 4, apply to the court for an
order that such notice shall not have effect and that the company shall
remain unregistered for the purposes of this Act.

(4) Without prejudice to the provisions of subsection (2)(b) and
subsection (3), a beneficial owner or counterparty to an open or
undischarged transaction linked to a segregated account who is
aggrieved by a notice under section 4 may, within 21 days of receipt of
the notice, apply to the Registrar to refuse to register the company.

(5) Where a company—

(a) has conducted business prior to filing a notice under
section 4; and

(b) has filed such notice,

it shall cause a copy of the notice to be contemporaneously given to all
beneficial owners and to all counterparties to any open or undischarged
transactions linked to a segregated account.

(6) If there is any material alteration of the particulars set out
in subsection (2) between the date of the notice filed pursuant to section
4 and the date of registration, then the company shall give further notice
to the Registrar of such alteration of particulars.

(7) The notice filed pursuant to section 4 and any documents
accompanying that notice shall be treated as confidential by the
Registrar and all public officers having access thereto, but this
subsection does not preclude the disclosure of information for the

SEGREGATED ACCOUNTS COMPANIES ACT 2000

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purpose of enabling the Minister to exercise any functions conferred
upon him by this Act.

Register of segregated accounts companies
6 (1) The Registrar shall maintain a register of segregated
accounts companies.

(2) Upon application and upon payment of such fee as may be
prescribed under the Government Fees Act 1965, the Registrar, if
satisfied—

(a) that the company will be in compliance with this Act;
and

(b) in the case of a financial institution as defined in section
1(1) of the Bermuda Monetary Authority Act 1969, that
the Bermuda Monetary Authority has no objection to the
registration,

shall register the company as a segregated accounts company.

(3) The Registrar may—

(a) impose such conditions on the registration of a company
as he may consider necessary to ensure the reputation
of Bermuda and in particular, to vet the beneficial
owners of segregated accounts and to ensure compliance
with this Act;

(b) require the company to take certain steps or to refrain
from adopting or pursuing a particular course of action
or to restrict the scope of its segregated accounts
business in a particular way.

(4) The Registrar may revoke or vary any condition or
requirement imposed under subsection (3) by giving notice thereof to the
company.

(5) After registering a company pursuant to subsection (2), the
Registrar shall issue a certificate showing the date of registration.

(6) The Registrar shall place a copy of the certificate referred to
in subsection (5) on the public file maintained by him in respect of the
company.

(7) The register shall be available for inspection by members of
the public.

(8) Where the Registrar refuses to register a company pursuant
to subsection (2), he shall not be bound to assign any reason for his

SEGREGATED ACCOUNTS COMPANIES ACT 2000

9

refusal and his decision shall not be subject to appeal or review in any
court.

Removal from the register
7 (1) Subject to this section, the Registrar, on receipt of a request
in writing by a segregated accounts company attaching thereto evidence
of the consent in writing of 75% in number of the beneficial owners of the
segregated accounts of the company and of 75% in number of any
counterparties to any undischarged or open transactions linked to
segregated accounts, shall remove the company from the register and the
provisions of this Act shall cease to apply to the company.

(2) A request under subsection (1) shall be in such form as the
Registrar may determine, but shall include a statutory declaration
averring that no creditor of the segregated accounts company will be
prejudiced by, or that the creditors have consented in writing to, the
removal of the company from the register and shall have attached to the
declaration a true and accurate statement of—

(a) the assets and liabilities of the company as at a date
within the three months prior to the date of the request;

(b) a description of any transaction or event which, as of the
date of the request, is expected to occur between the
date of the statement of assets and liabilities prepared
pursuant to paragraph (a) and the date of the removal of
the company as a segregated accounts company which,
if it had occurred before the date of the statement of
assets and liabilities, would have caused significant
changes to the assets and liabilities disclosed therein;
and

(c) the segregated accounts which the company has
operated and the assets and liabilities which were linked
to each of those segregated accounts.

(3) If there is any material alteration of the particulars set out
in subsection (2) between the date of the request given pursuant to
subsection (1) and the removal of the company from the register, the
company shall give notice to the Registrar of such alteration in
particulars.

(4) A segregated accounts company shall circulate contem-
poraneously with the request to the Registrar under subsection (1) notice
of that request to all beneficial owners of the segregated accounts
company and to all counterparties to any undischarged or open
transactions linked to a segregated account.

SEGREGATED ACCOUNTS COMPANIES ACT 2000

10

(5) A beneficial owner of a segregated account or any
counterparty to any undischarged or open transaction linked to a
segregated account who is aggrieved by a request made pursuant to
subsection (1) may, within 21 days of receipt of notice of the request,
apply to the Registrar to refuse to remove the segregated accounts
company from the register or, if the removal has already occurred, to
reinstate the company on the register.

(6) Where an application has been made under subsection (5)
and the Registrar has made a decision on the application, any person
who is aggrieved by that decision may, within 21 days of the decision,
appeal to the court and the court shall hear the matter and make such
order as it thinks fit.

(7) The making of a request pursuant to subsection (1) shall
not of itself effect the removal of a segregated accounts company from
the register and the Registrar in his absolute discretion shall determine
whether to give effect to the removal of the company from the register
and, in this regard, may require such information from the company as
he considers necessary to render such decision.

(8) Without prejudice to the provisions of Part VIII of the
Companies Act 1981 (which relates to the powers of the Minister to
investigate the affairs of a company), the Registrar may, whether on his
own initiative or on application by a beneficial owner or a counterparty,
remove a segregated accounts company from the register where the
company has materially breached—

(a) the provisions of this Act or a condition or requirement
imposed under section 6(3); or

(b) the terms of any direction given pursuant to section 26
or regulation made under section 27,

but the rights and obligations of any beneficial owner and of any
counterparty to an open or undischarged transaction linked to a
segregated account shall be unaffected by the removal, and the powers of
the company shall continue in respect of such accrued rights and
obligations but solely for the discharge thereof.

(9) Where the Registrar intends to remove a segregated
accounts company from the register pursuant to subsection (8), he shall
give the company notice of that intention and, before giving effect to the
removal of the company from the register, he shall take into account any
representations made by the company within such period as may be
specified in the notice.

SEGREGATED ACCOUNTS COMPANIES ACT 2000

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Provisions relating to operation of segregated accounts pursuant to
Private Act
8 (1) Where a company has operated segregated accounts by
virtue of authority conferred by a Private Act and the company has
registered—

(a) the provisions of this Act shall apply to that company
and, to the extent of any inconsistency between this Act
and the provisions of that Private Act, the provisions of
this Act shall prevail;

(b) any contracts to which the company was a party on the
date of registration shall be construed in accordance
with the Private Act but contracts renewed or entered
into after the date of registration shall be construed in
accordance with this Act.

(2) A company which has by virtue of authority conferred by a
Private Act the right to operate segregated accounts shall, within six
months from the operative date or, in the case of a Private Act that
comes into force after the operative date, within six months of the coming
into force of the Private Act, give notice of that fact in writing to the
Registrar, attaching thereto a copy of the Private Act together with a copy
of its most recent financial statements.

(3) For the avoidance of doubt it is declared that any provision
of a Private Act that confers authority on a company to operate
segregated accounts which does not go to the operation of such accounts
shall not be affected by the registration of the company.

PART III

MANAGEMENT AND ADMINISTRATION

Company to inform persons they are dealing with segregated
accounts company
9 A segregated accounts company shall—

(a) inform any person with whom it enters into a
transaction that it is a segregated accounts company;
and

(b) where the transaction relates to a segregated account,
for the purposes of that transaction identify or specify
that segregated account.

SEGREGATED ACCOUNTS COMPANIES ACT 2000

12

Segregated account representative
10 (1) A segregated accounts company shall appoint and maintain
a segregated account representative in Bermuda.

(2) The particulars of the segregated account representative of
a segregated accounts company shall be included in the register of
directors and officers of the company maintained pursuant to section
92A of the Companies Act 1981.

(3) It is the duty of the segregated account representative
within 30 days of—

(a) his reaching the view that there is a likelihood of a
segregated account or the general account of a
segregated accounts company for which he acts
becoming insolvent; or

(b) it coming to his knowledge or his having reason to
believe that the segregated accounts company for which
he acts—

(i) has failed to comply with—

(A) any requirement or condition imposed under
section 6(3),

(B) any requirement imposed by section 11 or 15,

(C) any direction given under section 26, or

(D)any regulation made under section 27; or

(ii) has become involved in any criminal proceedings in
Bermuda or elsewhere,

to make a written report to the Registrar setting out all the particulars of
the case that are available to him relating to the insolvency, failure or
involvement.

Governing instrument
11 (1) A transaction which is effected in connection with a
segregated account shall be evidenced in a governing instrument which
may consist of one or more agreements, instruments or other writings
and may include or incorporate by reference bye-laws or other
documents containing provisions setting out—

(a) the beneficial ownership of the segregated account
linked to that transaction;

(b) the governance of the business of the segregated
account;

SEGREGATED ACCOUNTS COMPANIES ACT 2000

13

(c) the conduct of its affairs and the rights, powers and
duties of the company, any manager and the beneficial
owner and their respective servants, agents, employees,
successors or assigns;

(d) the identity of the segregated account to which the
transaction and any assets or liabilities (and the
respective proportions thereof as provided in section 12)
are linked; and

(e) the extent of the interest of the parties therein and
subordination thereof (if any).

(2) The governing instrument of a transaction which goes to the
beneficial ownership of a segregated account shall provide that—

(a) the transaction is governed by Bermuda law;

(b) a person shall become a beneficial owner and shall
become bound by the governing instrument if such
person complies with the conditions for becoming a
beneficial owner as set out in the governing instrument;

(c) a beneficial owner shall take such interest in a
segregated account as is stipulated in respect of him and
that, absent such stipulation, the extent of the interest
of such beneficial owner shall be nil;

(d) if no other provision for management is specified in the
governing instrument, the segregated accounts company
shall manage the segregated account and may—

(i) appoint and supervise the officers, managers,
employees and other persons who have
management of the segregated account; and

(ii) enter into financial arrangements for payment
for services including the charging of fees,
disbursements and other charges which the
manager shall be authorized to withdraw from
the segregated account;

(e) unless otherwise provided in the governing instrument,
the segregated accounts company may take any action,
including—

(i) the amendment of the governing instrument
subject, in relation to contracts of insurance and
other contracts with third parties, to the consent
of those parties;

SEGREGATED ACCOUNTS COMPANIES ACT 2000

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(ii) the accomplishment of an amalgamation or
consolidation pursuant to section 13;

(iii) the appointment of one or more managers;

(iv) for the benefit of the segregated account only,
the sale, lease, exchange, transfer, pledge or
other disposition of all or any part of the assets
of the segregated account, or the dissolution of
the segregated account;

or may provide for the taking of any action to create
under the provisions of the governing instrument a
class, group or series of beneficial interests that was not
previously outstanding, without the vote or approval of
any particular manager or beneficial owner, or class,
group or series of managers or beneficial owners;

(f) the segregated accounts company may grant to, or
withhold from, all or certain managers or beneficial
owners, or a specified class, group or series of managers
or beneficial owners, the right to vote, separately or with
any or all other classes, groups or series of managers or
beneficial owners, on any matter, such voting being on a
per capita, number, financial interests, class, group,
series or any other basis;

(g) the segregated accounts company may, if and to the
extent that voting rights are granted under the governing
instrument, set forth provisions relating to—

(i) notice of the time, place or purpose of any
meeting at which any matter is to be voted on;

(ii) waiver of any such notice;

(iii) action by consent without a meeting;

(iv) the establishment of record dates;

(v) quorum requirements;

(vi) voting in person, by proxy or in any other
manner; or

(vii) any other matter with respect to the exercise of
any voting rights;

(h) the segregated accounts company may create further
segregated accounts to which all or any part of the
assets, liabilities, profits or losses linked to any existing

SEGREGATED ACCOUNTS COMPANIES ACT 2000

15

segregated account may be transferred, and for the
conversion of beneficial interests in an existing
segregated account into beneficial interests in the
separate segregated account; and

(i) any property linked to a segregated account which, on
dissolution of the segregated accounts company, is
found not to be linked to a beneficial owner, shall
become bona vacantia and escheat to the Crown.

(3) The governing instrument of a transaction which does not
go to the beneficial ownership of a segregated account shall provide—

(a) the name and the extent of the interest of the
counterparty and that the company is a segregated
accounts company and that the transaction is to be
linked to a segregated account and whether or not the
transaction is subject to abatement pursuant to
paragraph (d);

(b) unless otherwise provided in the governing instrument,
that the transaction is governed by the laws of Bermuda,
and that the parties shall submit to the jurisdiction of
the Bermuda courts;

(c) that the counterparty to the transaction shall only have
recourse to the assets which are linked to the segregated
account to which the transaction relates;

(d) subject to subsection (4), that the liabilities linked to a
segregated account shall abate proportionately (either
equally or otherwise in accordance with the terms of the
transaction) if the assets linked to that segregated
account prove insufficient to meet those liabilities.

(4) Where it is intended by the segregated accounts company
and counterparty that there shall be no abatement as provided in
subsection (3)(d), the governing instrument evidencing the transaction
shall, and, if it does not do so, shall be deemed to contain a statement
that in the event of the exhaustion of the assets linked to a segregated
account the counterparty shall not have recourse to the assets which are
linked to any other segregated account or to the general account.

(5) The provisions of this section shall operate to the exclusion
of any law relating to trusts treating with the same subject matter, and
no rule of law relating to trusts may be pleaded by any person to
augment or modify the operation of this Act, but nothing in this section
shall be construed to deny the remedy of tracing in law and in equity the

SEGREGATED ACCOUNTS COMPANIES ACT 2000

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assets or the proceeds of the assets of any segregated account where
such assets or proceeds have been commingled.

(6) Where a transaction was entered into and the governing
instrument does not comply with subsection (1), (2) or (3), the court may,
either on the winding up of the segregated accounts company or on the
application of any party to the transaction, declare that the provisions of
subsection (1), (2) or (3) were implied terms of the transaction and, upon
such declaration, they shall be deemed to be implied terms.

(7) In any proceedings before the court for a declaration
pursuant to subsection (6), the onus of proof shall be on the party
moving the court.

Apportionment of assets among segregated accounts
12 (1) A segregated accounts company may apportion an asset or
liability among two or more segregated accounts.

(2) Where a segregated accounts company has apportioned an
asset or liability pursuant to subsection (1), the proportion in which the
value of the asset or the extent of the liability is linked to each segregated
account shall be clearly shown, by way of a percentage, in the governing
instrument of the transaction linked to each segregated account.

Amalgamations and consolidations
13 (1) A segregated accounts company may by agreement in
writing amalgamate or consolidate a segregated account with or into one
or more segregated accounts formed, organized or existing under the
laws of any jurisdiction, or with such other segregated accounts
company as the agreement shall provide.

(2) In relation to the amalgamation or consolidation of a
segregated account pursuant to subsection (1), section 105 of the
Companies Act 1981 shall have effect with the following modifications:—

(a) references to "memorandum" or "bye-laws" shall be
construed as including references to "governing
instrument";

(b) references to "director" shall be construed as including
references to "manager";

(c) references to "shares" shall be construed as including
references to "securities".

(3) Unless otherwise provided in the governing instrument, an
amalgamation or consolidation shall be approved by the managers of

SEGREGATED ACCOUNTS COMPANIES ACT 2000

17

each segregated account which is to be amalgamated or consolidated
and by all of the beneficial owners of that segregated account.

(4) In connection with an amalgamation or consolidation,
rights or securities or interests linked to a segregated account which is a
party to the amalgamation or consolidation may be exchanged or
converted into cash, property, rights or securities of, or interests in, the
resulting segregated account or, in addition to or in lieu thereof, may be
exchanged for or converted into cash, property, rights or securities of, or
interests in, a segregated account in the amalgamation or consolidation.

(5) Notwithstanding prior approval, an agreement of amal-
gamation or consolidation may be terminated or amended pursuant to a
provision for such termination or amendment contained in the
agreement.

(6) An amalgamation or consolidation of a segregated account
with some other segregated account shall be effected in the same manner
as a long-form amalgamation under Part VII of the Companies Act 1981
(which relates to arrangements, reconstructions and amalgamations),
except that where Part VII refers to any member or creditor of the
company it shall be construed as a reference to the beneficial owners or
counterparties to an open or undischarged transaction, as the case may
be, linked to the relevant segregated account.

Issue of securities linked to a segregated account
14 (1) A segregated accounts company may create and issue
securities in one or more classes linked to the same segregated account,
the proceeds of issue of which shall be included in the assets linked to
that segregated account.

(2) Where a segregated accounts company has effected a
transaction by issuing a security linked to a segregated account, the
issue of the security shall be identified as being linked to the segregated
account in the accounts, books and records required to be kept by the
company pursuant to this Act.

(3) The proceeds of the issue of shares or other securities, other
than securities linked to a segregated account, shall be included in the
general assets of the segregated accounts company only and the general
shareholders shall have no rights to the assets of any segregated account
by reason only of being a general shareholder.

Dividends, distributions, redemptions and repurchases
15 (1) A segregated accounts company may pay a dividend or
make a distribution in respect of securities of any class linked to a
segregated account whether or not a dividend or distribution is declared

SEGREGATED ACCOUNTS COMPANIES ACT 2000

18

on any other class of securities linked to the same or any other
segregated account or any other securities issued by the company.

(2) Notwithstanding any other provision of this Act, a dividend
shall not be declared or paid, or a distribution declared or made, in
respect of securities linked to a segregated account if there are
reasonable grounds for believing that—

(a) the segregated account is, or would after the payment
be, unable to pay its liabilities as they become due; or

(b) the realisable value of the assets of the segregated
account would thereby be less than the aggregate of its
liabilities and its issued shared capital and share
premium accounts.

(3) Dividends or distributions in respect of securities linked to a
segregated account shall be paid or made on or in respect of those
securities by reference only to the assets and liabilities of the segregated
account linked to those securities, and not by reference to the general
account or any other segregated account, and otherwise in accordance
with the rights of such securities.

(4) Section 54 of the Companies Act 1981 does not apply to a
segregated accounts company in relation to a dividend or distribution in
respect of a segregated account, declared, paid or made under this
section.

(5) Subject to subsections 42(2) and 42A(5) of the Companies
Act 1981, a segregated accounts company may redeem or repurchase a
security using the assets linked to the relevant segregated account
provided that—

(a) on the date of redemption or repurchase, after taking
into account the redemption or repurchase, the relevant
segregated account is solvent; or

(b) any counterparties to open or undischarged transactions
linked to that segregated account on that date have
expressed in writing their concurrence to the redemption
or repurchase.

Accounts, records and registers
16 (1) A segregated accounts company shall—

(a) maintain records in accordance with generally accepted
accounting principles used in the preparation of the
financial statements of the company prepared in
accordance with section 84 of the Companies Act 1981,

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19

and the records shall clearly show the share capital,
proceeds of securities, reserves, assets, liabilities,
income and expenses, dividends and distributions that
are linked to each segregated account;

(b) maintain a record of each transaction linked to a
segregated account maintained by the company; and

(c) maintain a general account which records in accordance
with this Act all of the assets and liabilities of the
company which are not linked to a segregated account
and which discloses any assets intended by the parties
to be applied to a risk of any nature, and which therefore
exposes such assets to liability or loss.

(2) For the purposes of subsection (1)(a), "reserves" includes
retained earnings, contributed surplus and share premium.

(3) The records referred to in subsection (1) shall be kept in
accordance with section 83 of the Companies Act 1981, provided that in
the case of a segregated accounts company to which the Insurance Act
1978 applies, the records may be kept at the principal office.

(4) The records maintained with respect to a segregated
account may be inspected by any beneficial owner of that segregated
account, but a beneficial owner shall not have a right to inspect the
records relating to any other segregated account.

(5) A segregated accounts company shall prepare or cause to
be prepared financial statements in respect of each segregated account.
and the provisions of sections 84, 88 and 90 of the Companies Act 1981
shall apply, with the necessary modifications, to the preparation of
financial statements under this section and any reference in those
provisions to "member" shall be construed as a reference to the beneficial
owner of the segregated account.

(6) Subject to subsection (5), a copy of the financial statements
of a segregated account shall be made available to the beneficial owner of
a segregated account at such intervals and for such periods as are
agreed between the segregated accounts company and the beneficial
owner of the segregated account, but in any event shall be made
available not less frequently than once in each financial year.

(7) If—

(a) the records maintained with respect to a segregated
account; or

SEGREGATED ACCOUNTS COMPANIES ACT 2000

20

(b) the financial statements of a segregated account,

are not made available for inspection by any beneficial owner of that
segregated account, the court may by order compel immediate
production of the records or financial statements.

(8) A segregated accounts company shall maintain a register of
beneficial owners setting out their respective interests in any segregated
account together with the particulars required in respect of members of
the company as set out in section 65(1) of the Companies Act 1981.

(9) The register of beneficial owners shall not be open to public
inspection.

Nature of segregated accounts; application of assets and liabilities
17 (1) Notwithstanding any enactment or rule of law to the
contrary, any asset which is linked by a segregated accounts company to
a segregated account—

(a) shall be held by the company as a separate fund which
is not part of the general account exclusively for the
benefit of the beneficial owner of the segregated account
and any counterparty to a transaction linked to that
segregated account and in such proportions as may be
specified in the governing instrument and shall only be
available to meet liabilities to the creditors of that
segregated account; and

(b) shall not be available or used to meet liabilities to, and
shall be absolutely and for all purposes protected from,
the general shareholders and from the creditors of the
company who are not creditors in respect of the
particular segregated account identified in the governing
instrument.

(2) For the purposes of this Act, the Companies Act 1981 and
otherwise at law, the assets recorded in the general account shall be the
only assets of a segregated accounts company available to meet liabilities
of the company that are not linked to a segregated account.

(3) No assets may be transferred from the general account to a
segregated account unless, on the date from which the transfer is to be
effective, and taking into account that transfer, the general account of
the segregated accounts company is solvent or all the general
shareholders and creditors entitled to the assets thereof on that date
have expressed in writing their concurrence to the transfer.

(4) Where a liability of a segregated accounts company to a
person arises from a matter relating to, or is otherwise imposed in

SEGREGATED ACCOUNTS COMPANIES ACT 2000

21

respect of or attributable to, a particular segregated account, that
liability—

(a) shall extend only to, and that person shall, in respect of
that liability, be entitled to have recourse only to, the
assets attributable to that segregated account;

(b) shall not extend to, and that person shall not, in respect
of that liability, be entitled to have recourse to, the
segregated account assets linked to any other segregated
account; and

(c) unless the parties otherwise provide, shall not extend to,
and that person shall not in respect of that liability, be
entitled to have recourse to, the general account.

(5) Where a liability of a segregated accounts company to a
person—

(a) arises otherwise than from a matter in respect of a
particular segregated account; or

(b) is imposed otherwise than in respect of a particular
segregated account,

that liability shall extend only to, and that person shall, in respect of that
liability, be entitled to have recourse only to, the general account.

(6) Where—

(a) the governing instrument of a segregated account so
provides; and

(b) the aggregate entitlements of the beneficial owners or
counterparties, as the case may be, exceed at any given
time the value of the assets linked to that account,

the entitlement of each beneficial owner or counterparty shall, to the
extent of the excess, be reduced pro rata.

(7) The order and priority of the paying out of funds from a
segregated account shall be determined by the terms of the governing
instrument of that segregated account taken together, and failing a
sufficient statement of particulars governing the priority of those
payments, they shall be made in order of the dates of the respective
transactions, so that the first in time shall be first to be paid.

(8) A segregated accounts company may, with the consent in
writing of any relevant beneficial owner or counterparty, transfer to the
general account an asset from the segregated account to which it is
linked, if—

SEGREGATED ACCOUNTS COMPANIES ACT 2000

22

(a) the terms of the governing instrument so allow; and

(b) the segregated account to which such asset is linked,
taking into account the proposed transfer, remains
solvent.

(9) Any asset transferred in accordance with subsection (8)
shall cease to be linked to the segregated account from which it was
transferred on the date of the transfer.

(10) Any asset linked to a segregated account which, on a
dissolution of the segregated accounts company is found not to be linked
to a beneficial owner, shall become bona vacantia and escheat to the
Crown.

Rights and obligations with respect to segregated accounts
18 (1) Notwithstanding any enactment or rule of law to the
contrary, any asset of a segregated accounts company which is linked to
a particular segregated account is deemed to be owned by the company
as a separate fund which is not part of the general account and which is
not part of the company's own assets, in respect of which the company
has the powers and the duties as managers pursuant to section 11(2)(d)
and for which the company is accountable pursuant to the terms of the
governing instrument.

(2) The governing instrument may provide that no creditor of a
beneficial owner of a segregated account shall have any right or interest
in any asset linked to that segregated account, and such provision shall
have like effect for all purposes except that the provisions of section 36A
to section 36G of the Conveyancing Act 1983 (which relate to fraudulent
conveyances) continue to apply.

(3) To the extent provided in the governing instrument any
person (including a beneficial owner) may give directions to the
segregated accounts company or other persons in the management of
the segregated account and the managers shall have regard to such
directions.

(4) Except to the extent otherwise provided in the governing
instrument but subject to subsection (7)(b), neither the power to give
directions to the segregated accounts company or other persons nor the
exercise thereof by any person (including a beneficial owner) shall cause
the person giving directions to be a trustee or officer of the company.

(5) Except to the extent otherwise provided in the governing
instrument, the beneficial owners are entitled to the same limitation of
personal liability as is enjoyed by members of companies limited by
shares under section 158(d) of the Companies Act 1981.

SEGREGATED ACCOUNTS COMPANIES ACT 2000

23

(6) Except to the extent otherwise provided in the governing
instrument but subject to subsection (7)(b), neither the segregated
accounts company nor any of its officers, agents or employees is liable to
any person other than the beneficial owners of the segregated account
and any counterparty to a transaction to which that segregated account
is linked for any contractual obligation of the segregated account or any
act or omission of such officers, agents or employees.

(7) A segregated accounts company may—

(a) sue and be sued in respect of a particular segregated
account, and service of process upon the company in
accordance with subsection (9) shall be sufficient;

(b) be sued for debts and other obligations or liabilities
contracted or incurred by the company in respect of a
particular segregated account under the governing
instrument, and for any damages to persons or property
resulting from the negligence of the company acting in
the performance of duties with respect to that account.

(8) The property of a segregated account is subject to orders of
the court as if it were a separate body corporate.

(9) A segregated accounts company may be served with process
in the manner prescribed in section 62A of the Companies Act 1981 in
all civil actions or proceedings involving or relating to the activities of a
segregated account or a breach by the company of a duty to the
segregated account, or to any beneficial owner thereof or to a
counterparty to a transaction linked thereto.

(10) Except to the extent otherwise provided in the governing
instrument, a beneficial owner has an undivided beneficial interest in the
assets linked to a segregated account by the relevant transaction and
shall share in the profits and losses of the segregated account in the
proportion (expressed as a percentage) of the entire undivided beneficial
interest in the segregated account owned by that beneficial owner.

(11) A beneficial owner's beneficial interest in a segregated
account is personal property notwithstanding the nature of the property
of the segregated account.

(12) Except to the extent otherwise provided in the governing
instrument, a beneficial owner has no interest in specific segregated
account property.

(13) Except to the extent otherwise provided in the governing
instrument, a beneficial owner's beneficial interest in the segregated
account is freely transferable.

SEGREGATED ACCOUNTS COMPANIES ACT 2000

24

(14) Except to the extent otherwise provided in the governing
instrument, at the time a beneficial owner becomes entitled to receive a
payment, distribution, allocation or dividend pursuant to any governing
instrument, he has the status of, and is entitled to all remedies available
to, a creditor of the segregated account with respect to the payment,
distribution, allocation or dividend, and the governing instrument may
provide for the establishment of record dates with respect to such
payment, distribution, allocation or dividend.

(15) To the extent that, at law or in equity, a segregated
accounts company or manager has duties (including fiduciary duties)
and liabilities relating to a segregated account or to a beneficial owner or
to a counterparty—

(a) that company or manager acting under a governing
instrument is not liable to the segregated account or to
any beneficial owner or counterparty for the company's
good faith reliance on the provisions of that governing
instrument; and

(b) the company's or manager's duties and liabilities may be
expanded or restricted by provisions in a governing
instrument.

(16) The provisions of this section and section 11 operate to the
exclusion of any law relating to trusts treating with the same subject
matter, and no rule of law relating to trusts may be pleaded by any
person to augment or modify the operation of this Act, but nothing in
this section shall be construed to deny the remedy of tracing in law and
in equity the assets or the proceeds of the assets of any segregated
account where such assets or proceeds have been commingled.

PART IV

RECEIVERSHIP AND WINDING UP

Receivership orders
19 (1) Subject to the provisions of this section, if, in relation to a
segregated accounts company, the court is satisfied that—

(a) without regard to any abatement provisions contained in
the governing instrument, the assets linked to a
particular segregated account are or are likely to be
insufficient to discharge the claims of creditors in
respect of that segregated account; and

(b) the making of a receivership order under this section
would achieve the purposes set out in subsection (3),

SEGREGATED ACCOUNTS COMPANIES ACT 2000

25

the court may make a receivership order in respect of that segregated
account.

(2) A receivership order may be made in respect of one or more
segregated accounts.

(3) A receivership order shall direct that the business and
assets linked to a segregated account shall be managed by a receiver
specified in the order for the purposes of—

(a) the orderly termination of the business of, or
attributable to, the segregated account; and

(b) the distribution of the assets linked to the segregated
account to those entitled thereto.

(4) No resolution for the voluntary winding up of a segregated
accounts company of which any segregated account is subject to a
receivership order shall be effective without leave of the court.

Application for receivership orders
20 (1) An application for a receivership order in respect of a
segregated account may be made by—

(a) the segregated accounts company;

(b) the directors of the segregated accounts company;

(c) any creditor of the segregated accounts company in
respect of that segregated account;

(d) any beneficial owner of that segregated account;

(e) any counterparty to any open or undischarged
transactions linked to that segregated account; or

(f) the Registrar.

(2) The court, on hearing an application—

(a) for a receivership order; or

(b) for leave, pursuant to section 19(4), for a resolution for
voluntary winding up,

may make an interim order or adjourn the hearing conditionally or
unconditionally.

(3) Notice of an application to the court for a receivership order
in respect of a segregated account shall be served upon—

(a) the segregated accounts company;

SEGREGATED ACCOUNTS COMPANIES ACT 2000

26

(b) the Registrar; and

(c) such other persons (if any) as the court may direct,

each of whom shall be given an opportunity to make representations to
the court before the order is made.

Functions and powers of receiver
21 (1) The receiver of a segregated account—

(a) may do all such things as may be necessary for the
purposes set out in section 19(3); and

(b) shall have all the functions and powers of the directors
and managers of the segregated accounts company in
respect of the business and assets linked to the
segregated account.

(2) The receiver may at any time apply to the court for—

(a) directions as to the extent or exercise of any function or
power; or

(b) the receivership order to be discharged or varied.

(3) In exercising his functions or powers the receiver is deemed
to act as the agent of the segregated accounts company in respect of the
segregated account, and does not incur personal liability except to the
extent that his conduct amounts to fraud or dishonesty.

(4) Any person dealing with the receiver in good faith is not
concerned to enquire whether the receiver is acting within his powers.

(5) During the period of operation of a receivership order the
functions and powers of the directors and managers of the segregated
accounts company cease in respect of the business and assets linked to
the segregated account in respect of which the order was made.

Discharge and variation of receivership orders
22 (1) The court shall not discharge a receivership order unless it
appears to the court that the purpose for which the order was made has
been achieved or substantially achieved or is incapable of achievement.

(2) The court, on hearing an application for the discharge or
variation of a receivership order, may make any interim order it thinks fit
or adjourn the hearing, conditionally or unconditionally.

Remuneration of receiver
23 The remuneration of a receiver and any expenses properly
incurred by him shall be payable in priority to all other claims from the

SEGREGATED ACCOUNTS COMPANIES ACT 2000

27

assets linked to the segregated account in respect of which the receiver
was appointed but not from any other assets of the segregated accounts
company.

Winding up of segregated accounts companies
24 (1) Subject to this section, a segregated accounts company
shall be wound up in accordance with the provisions of this Act, the
Companies Act 1981 and any other Act which applies to the winding up
of a company, save that in the event of any conflict, the provisions of this
Act shall prevail.

(2) Where—

(a) a petition for the winding up of a segregated accounts
company is presented pursuant to Part XIII of the
Companies Act 1981 (which relates to winding up); and

(b) the general account is otherwise solvent for the purposes
of section 162 of that Act,

the court shall not proceed on the petition on any ground provided for in
paragraph (a), (b), (c) or (d) of section 161 of that Act and shall not
proceed unless the court is satisfied that to proceed would be just and
equitable in all the circumstances.

Application of assets
25 (1) Notwithstanding any statutory provision or rule of law to
the contrary, in the winding up of a segregated accounts company the
liquidator shall deal with the assets and liabilities which are linked to
each segregated account only in accordance with this Act and
accordingly the liquidator shall ensure that the assets linked to one
segregated account are not applied to the liabilities linked to any other
segregated account or to the general account, unless an asset or liability
is linked to more than one segregated account, in which case the
liquidator shall deal with the asset or liability in accordance with the
terms of any relevant governing instrument.

(2) The remuneration to be paid to the liquidator shall be
apportioned by the liquidator to each segregated account and the general
account in such amounts as would best reflect the duties performed by
the liquidator and the court must first approve that apportionment.

(3) The liquidator, or any person affected by a decision of the
liquidator, may apply to the court for directions in relation to the
remuneration of the liquidator.

SEGREGATED ACCOUNTS COMPANIES ACT 2000

28

PART V

GENERAL

Directions of Minister to modify the provisions of this Act
26 (1) The Minister may, on the application, or with the consent in
writing, of any segregated accounts company or any company intending
to file a notice pursuant to section 4, direct that—

(a) any or all of the provisions of sections 5, 7, 11 and 16,
shall not apply to such company; or

(b) those provisions or any of them shall apply to it subject
to such modifications as may be specified in the
direction.

(2) A direction under this section may be made subject to
conditions.

(3) A direction under this section may be revoked by the
Minister at any time provided that the company shall be given an
opportunity to make representations to the Minister before the revocation
takes effect.

(4) An application for a direction under this section shall be
supported by a statutory declaration to the effect that no creditor of the
company or of any segregated account thereof shall be prejudiced by the
effect of the direction, if given, or that each creditor has consented in
writing to the giving of such direction.

(5) A direction under this section is a public document
available for inspection on the records maintained by the Registrar in
respect of the company.

(6) A direction under this section is not a statutory instrument
having legislative effect.

(7) Where a direction is given under subsection (1), the relevant
provision shall have effect subject to the direction.

Minister may make regulations
27 (1) The Minister may make regulations for the better carrying
out of the provisions of this Act.

(2) The negative resolution procedure applies to regulations
made under subsection (1).

Suits and actions against Registrar and Official Receiver
28 (1) No suit or action shall lie against the Registrar or Official
Receiver or any person acting on their behalf in respect of anything done

SEGREGATED ACCOUNTS COMPANIES ACT 2000

29

or omitted to be done in their official capacity in good faith without
negligence.

(2) Nothing in subsection (1) shall be deemed to interfere with
applications or references to the court under Part XIII of the Companies
Act 1981 (which relates to winding up).

Registrar and Official Receiver to be indemnified in respect of
foreign suits
29 Neither the Registrar nor the Official Receiver shall be required to
prosecute, defend or take part in any proceedings outside the jurisdiction
of the court unless he is indemnified by or on behalf of the person who
wishes him to act against any judgment, order or costs that may be
awarded against that person by deed, guarantee or deposit, as he may
require.

Offences
30 Any person who—

(a) for any purpose under this Act makes a statement or
declaration that he knows or has reasonable grounds to
believe to be false, deceptive or misleading in a material
particular;

(b) fails to comply with a condition or requirement under
section 6(3); or

(c) being a segregated account representative, fails to
perform his duty under section 10(3),

is guilty of an offence and is liable on summary conviction to a fine of
$5000 or imprisonment for 12 months, or both.

Fees
31 The Fifth Schedule to the Companies Act 1981 is amended by
the addition of the following—

"C SEGREGATED ACCOUNTS COMPANIES

In addition to the annual fee or tax otherwise payable under this
Schedule a segregated accounts company registered under section 6 of
the Segregated Accounts Companies Act 2000 shall pay an annual fee of
$250 in respect of each segregated account operated by the company,
subject to a maximum annual fee of $1000 in the aggregate.".

Commencement
32 This Act comes into operation on such day as the Minister may
appoint by notice published in the Gazette.

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30