Segregated Accounts Companies Amendment Act 2002
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
1989 Revision 1
BERMUDA
2002 : 10
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
[Date of Assent: 21 May 2002]
[Operative Date: 14 June 2002]
ARRANGEMENT OF SECTIONS
1 Citation
2 General amendment
3 Repeal and replacement
of section 2 of Act
4 Amendment of section 3
of Act
5 Repeal of section 4 of Act
6 Amendment of section 5
of Act
7 Amendment of section 6
of Act
8 Amendment of section 7
of Act
9 Amendment of section 8
of Act
10 Amendment of section 9
of Act
11 Amendment of section 10
of Act
12 Repeal and replacement
of section 11 of Act
13 Repeal and replacement
of section 12 of Act
14 Repeal of section 13 of Act
15 Amendment of section 14
of Act
16 Amendment of section 15
of Act
17 Amendment of section 16
of Act
18 Repeal and replacement
of section 17 of Act
19 Amendment of section 18
of Act
20 Amendment of section 19
of Act
21 Amendment of section 20
of Act
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
2 1989 Revision
22 Amendment of section 21
of Act
23 Amendment of section 22
of Act
24 Repeal and replacement
of section 23 of Act
25 Amendment of section 24
of Act
26 Amendment of section 25
of Act
27 Amendment of section 26
of Act
28 Insertion of new section
27A in Act
29 Amendment of section 30
of Act
30 Commencement
WHEREAS it is expedient to amend the Segregated Accounts
Companies Act 2000:
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:
Citation
1 This Act which amends the Segregated Accounts Companies Act
2000 ("the Act") may be cited as the Segregated Accounts Companies
Amendment Act 2002.
General amendment
2 The Act is amended generally by deleting the words "beneficial
owner", "a beneficial owner" and "beneficial owners" wherever they
appear and substituting the words "account owner", "an account owner"
and "account owners" respectively.
Repeal and replacement of section 2
3 Section 2 of the Act is repealed and the following is substituted:
"Interpretation and application
2 (1) In this Act—
"account owner" in relation to a segregated account means any
person who is—
(a) the registered holder of shares which are—
(i) issued by the segregated accounts company, and
(ii) linked to that segregated account;
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
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(b) expressly identified in the governing instrument linked
to a segregated account as being an account owner for
the purposes of this Act in respect of that segregated
account; or
(c) expressly designated in the records of the segregated
accounts company as being an account owner in respect
of that segregated account;
and the interests of an account owner in any of the foregoing
capacities in relation to any segregated account are referred to in
this Act as "account holdings";
"appointed newspaper" means the Gazette or newspaper
appointed by the Registrar under section 2(6) of the
Companies Act 1981;
"contract" includes written agreements, instruments or other
writings (including electronic records) which create or affect
rights or obligations;
"counterparty" means any party (other than the segregated
accounts company itself, save where section 17A(1) applies)
to a transaction to which the segregated accounts company is
a party, and under which assets or liabilities are wholly or
partly linked to a segregated account, but an account owner
shall not (in that capacity) also be a counterparty;
"court" means the Supreme Court;
"creditor" means, in respect of any segregated account (and in
that regard may include a counterparty of the segregated
account) or the general account respectively, any person to
whom any liability is owed by the segregated accounts
company and such liability is linked to that segregated
account or is a liability of the general account, as the case
may be; but, except as provided for in section 18(14), an
account owner shall not (in that capacity) also be a creditor;
"general account" means an account comprising 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" means one or more written agreements,
instruments, bye-laws, prospectuses, resolutions of directors,
registers or other documents (including electronic records),
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
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setting out the rights, obligations and interests of account
owners in respect of a segregated account;
"insurance business" means insurance business as defined in
section 1(1) of the Insurance Act 1978;
"known creditors" means creditors whose identity and
whereabouts are known to, or with due diligence could be
discovered by, the company, or other persons known to the
company;
"linked" means referable by means of—
(a) an instrument in writing including a governing
instrument or contract;
(b) an entry or other notation made in respect of a
transaction in the records of a segregated accounts
company; or
(c) an unwritten but conclusive indication,
which identifies an asset, right, contribution, liability or
obligation as belonging 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 account owners of any
segregated account, has control of a segregated account;
"mutual fund" means a mutual fund within the meaning of
section 156A of the Companies Act 1981;
"officer" in relation to a segregated accounts company, includes
director and secretary;
"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
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
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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 or including entries recording data, assets,
rights, contributions, liabilities and obligations linked to such
account) of a segregated accounts company pertaining to an
identified or identifiable pool of assets and liabilities of such
segregated accounts company which are segregated or
distinguished from other assets and liabilities of the
segregated accounts company for the purposes of this Act;
"segregated accounts company" means a company which is
registered under section 6 and, unless the context otherwise
requires, references to "the company" shall be construed as
references to such company;
"transaction" means any dealing of whatever nature, which may
be evidenced by a governing instrument (in the case of a
transaction with an account owner) or contract (in the case of
a transaction with a counterparty), including the issue of any
security, by which assets or liabilities become linked to a
segregated account or by which the assets or liabilities linked
to a segregated account are otherwise affected, or, in the case
of assets linked to a segregated account which are 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, excluding section 24(1)—
(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;
(b) a segregated account shall be deemed to be solvent if it
is able to pay its liabilities (excluding obligations to
account owners in that capacity) 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
(Regulation of Trust Business) Act 2001.".
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Amendment of section 3 of Act
4 Section 3 of the Act is amended—
(a) in subsection (1), by deleting "section 4" and substituting
"section 5".
(b) by deleting subsections (2) and (3) and substituting the
following—
"(2) From the date of registration under this Act, a
segregated accounts company shall be bound by,
and may avail itself of, the provisions of this Act
and from such date it may, without in any way
limiting the generality of the foregoing, establish
one or more segregated accounts to which the
provisions of this Act shall apply.".
Repeal of section 4 of Act
5 Section 4 of the Act is repealed.
Amendment of section 5 of Act
6 (1) The heading to section 5 of the Act is amended to read—
"Notice and documents to be filed".
(2) Section 5 of the Act is amended—
(a) in subsection (1)—
(i) by deleting "under section 4",
(ii) by deleting paragraph (a) and substituting the
following—
"(a) the name of the company which, in cases
where the Registrar so directs, shall include the
expression "(SAC)";";
(b) in subsection (2)—
(i) by deleting "section 4" and substituting "subsection
(1)";
(ii) in paragraph (a)—
(A) by inserting "made by at least two directors"
after "statutory declaration",
(B) by inserting "or description" after "statement";
(C) in subparagraph (ii)—
(i) by deleting "a description of"
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(ii) by deleting "significant" and
substituting "material",
(D) by deleting subparagraph (iv) and substituting
the following—
"(iv) on registration, the company and each segregated
account will be solvent and—
(A) no known creditor of the company will be
prejudiced,
(B) the known creditors of the company have
consented in writing to the company proceeding to
register, or
(C) adequate notice has been given in accordance
with subsection (3) to all known creditors of the
company and no creditor objects to the registration
otherwise than on grounds that are frivolous or
vexations;",
(iii) in paragraph (b), by deleting "counterparties to any
undischarged or open transactions linked to a
segregated account" and substituting "creditors";
(c) by deleting subsections (3) to (7) and substituting the
following—
"(3) For the purposes of subsection (2)(a)(iv)(C) adequate
notice is given if—
(a) a notice in writing is sent to each known creditor
having a claim against the company that exceeds
$1,000; and
(b) notice is published in an appointed newspaper,
in each case stating that the company intends to register
and that a creditor of the company may object to the
registration within 28 days from the date of such notice,
or publication of such notice, as the case may be.
(4) Subject to subsection (5), an account owner or
creditor who objects to the registration of the
company may apply to the court for the annulment
of the registration of the company.
(5) An application under subsection (4) may only be
made by—
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(a) not less than 20% in number of such persons
who would, on the registration of the company, be
account owners;
(b) not less than 20% in number of such persons
who would, on the registration of the company, be
creditors; or
(c) not less than 20% in number of such persons as
are mentioned in paragraphs (a) and (b) combined
who would be account owners or creditors on
registration:
provided that an application shall not be made by any
person who has voted in favour of the registration or has
given to the company a statement in writing duly signed
that he, having had notice, consents to the registration.
(6) An application under subsection (4) shall be made
within 28 days from the date of registration, and
may be made on behalf of the persons entitled to
make the application by one or more of their
number as they may appoint in writing for the
purpose.
(7) On an application under subsection (4) the court
may make an order annulling or confirming the
registration, either wholly or in part, and on such
terms and conditions as it thinks fit, and may, if it
thinks fit, adjourn the proceedings in order that an
arrangement may be made to the satisfaction of the
court for the purchase or other disposition of the
interests of dissentient persons, and may give such
directions and make such orders as it may think
expedient for facilitating or carrying into effect any
such arrangement:
provided that no part of the capital of the company
or of any segregated account shall be expended in
the purchase or other disposition of the interests of
dissentient persons.
(8) Where a company—
(a) has conducted business prior to filing a notice
under subsection (1); and
(b) has filed such notice,
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it shall cause a copy of the notice to be
contemporaneously given to all persons who, on the
registration of the company, would be account
owners and to its known creditors.
(9) If there is any material alteration of the particulars
set out in subsection (2) between the date of the
notice filed pursuant to subsection (1) and the date
of registration, then the company shall give further
notice to the Registrar of such alteration of
particulars.
(10) The notice filed pursuant to subsection (1) 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 purpose of enabling the Minister
to exercise any functions conferred upon him by
this Act.".
Amendment of section 6 of Act
7 (1) The heading of section 6 of the Act is amended to read
"Registration and register of segregated accounts companies".
(2) Section 6 of the Act is amended in subsection (2)—
(a) in paragraph (a), by deleting "will be in compliance" and
substituting "is capable of complying";
(b) by deleting "shall" and substituting "may".
Amendment of section 7 of Act
8 Section 7 of the Act is amended—
(a) in subsection (1), by deleting "to any undischarged or
open transactions linked to segregated accounts" and
substituting "who are creditors";
(b) in subsection (2)—
(i) by deleting the words "averring that no creditor
of the segregated accounts company" and
substituting "made by a majority of the directors
of the segregated accounts company to the effect
that no creditor of the company",
(ii) by inserting the word "known" before "creditors";
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
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(c) in subsection (4), by deleting "counterparties to any
undischarged or open transactions linked to a
segregated account" and substituting "creditors";
(d) in subsection (5), by deleting "counterparty to any
undischarged or open transactions linked to a
segregated account" and substituting "creditor";
(e) in subsection (8), by deleting "counterparty to an open or
undischarged transaction linked to a segregated
account" and substituting "creditor".
Amendment of section 8 of Act
9 (1) Section 8 of the Act and the heading thereto are amended
by deleting the words "Private Act" wherever they appear and
substituting the words "private Act".
(2) Section 8 of the Act is amended—
(a) in subsection (1)—
(i) in paragraph (b), by inserting "subject to
paragraph (c)," before "any contracts",
(ii) by adding after paragraph (b) the following—
"and
(c) subsections 17A(1) to (4) shall apply with
retrospective effect to any transaction
entered into by the company in respect of
and between accounts to the same extent
that those sections would have applied to
that transaction if that company had been a
segregated accounts company under this
Act at the time of the transaction.";
(b) by deleting subsection (3) and substituting the
following—
"(3) The notice filed pursuant to subsection (2) 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 purpose of enabling the
Minister to exercise any functions conferred
upon him by this Act.
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(4) For the avoidance of doubt it is declared that,
where a private Act confers authority on a
company to operate segregated accounts but
also contains other provisions not pertaining to
the operation of such accounts, those other
provisions shall not be affected by the
registration of the company under section 6.
(5) For the purposes of this section and section 2(3)
only, the meaning of the term "transaction" and
"segregated account" provided for in this Act
shall not be strictly applied and, for the
avoidance of doubt, the meaning of the term
"segregated account" shall include "separate
accounts", "segregated reserves", "suites" or any
cognate expressions thereof importing similar
meaning (including such terms where
capitalised) which may be used in a private
Act.".
Amendment of section 9 of Act
10 Section 9 of the Act is amended—
(a) by deleting the word "and" following paragraph (a);
(b) by adding the following at the end of paragraph (b)—
"and
(c) include reference to the fact that the company is a
company registered under the Segregated Accounts
Companies Act 2000 on its letterhead and
contracts.".
Amendment of section 10 of Act
11 Section 10 of the Act is amended—
(a) in subsection (1), by adding "who shall be a person
approved by the Minister as the segregated account
representative of the company";
(b) in subsection (3)—
(i) in paragraph (a), by inserting "reasonable"
before "likelihood",
(ii) in paragraph (b)(i)(B), by deleting "or 15" and
substituting ", 15 or 16".
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Repeal and replacement of section 11 of Act
12 Section 11 of the Act is repealed and the following substituted—
"Governing instruments and contracts
11 (1) The rights, interests and obligations of account owners in a
segregated account shall be evidenced in a governing instrument and the
rights, interests and obligations of counterparties shall be evidenced in
the form of contracts.
(2) The governing instrument in relation to any segregated
account shall be deemed to be governed by the laws of Bermuda and the
parties thereto shall be deemed to submit to the jurisdiction of the courts
of Bermuda and, in relation to such governing instrument—
(a) a person shall become an account owner and shall
become bound by the governing instrument if such
person complies with the conditions, if any, for becoming
an account owner as set out in the governing
instrument;
(b) an account owner shall take such interest in a
segregated account as may be stipulated in respect of
him in accordance with the terms of the governing
instrument and, absent such stipulation or other
compelling indication (in the discretion of the directors of
the company, exercised reasonably), the extent of the
interest of such account owner shall be nil;
(c) 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;
(d) unless otherwise provided in the governing instrument,
the segregated accounts company may take any action,
including—
(i) the amendment of the governing instrument;
(ii) the appointment of one or more managers;
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
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(iii) 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 orderly
winding-up of the affairs and termination 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 account holdings that was not
previously outstanding, without the vote or approval of
any particular manager or account owner, or class,
group or series of managers or account owners;
(e) 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;
(f) unless otherwise provided in the governing instrument
in relation to a segregated account, the segregated
accounts company may in respect of that account grant
to, or withhold from, all or certain managers or account
owners, or a specified class, group or series of managers
or account owners, the right to vote, separately or with
any or all other classes, groups or series of managers or
account owners, on any matter, such voting being on a
per capita, number, financial interests, class, group,
series or any other basis;
(g) unless otherwise provided in the governing instrument
in relation to a segregated account, the segregated
accounts company in respect of that account may create
further segregated accounts to which all or any part of
the assets, liabilities, profits or losses linked to any
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existing segregated account may be transferred, and for
the conversion of the interest (or any part thereof) of all
or certain account owners in an existing segregated
account into interests of account owners in the separate
segregated account; and
(h) unless otherwise provided in the governing instrument
in relation to a segregated account, the segregated
accounts company in respect of that account may set
forth provisions therein regarding—
(i) the governance of the business (or any aspect
thereof) of the segregated account and the
rights, powers and duties of the company, any
manager and the account owner and their
respective servants, agents, employees,
successors or assigns;
(ii) the identity of the segregated account to which
the transaction and any assets or liabilities are
linked; and
(iii) the extent of the interest of the account owners
and others (if any) therein and subordination
thereof (if any).
(3) Any contract governing a transaction with a counterparty,
including those executed outside Bermuda, shall include the name of the
counterparty, and, unless otherwise provided therein, shall include an
implied term that the parties select the law of Bermuda as its governing
law and submit to the jurisdiction of the courts of Bermuda.
(4) Unless otherwise expressly agreed in writing by the parties
to the transaction—
(a) by virtue of a governing instrument or contract which is
binding on those parties in relation to the affected
segregated accounts or general account, as the case may
be, and which is executed by parties having authority in
relation to those accounts; and
(b) in the case of a mutual fund only where the document or
documents mentioned in paragraph (a) clearly indicate
an intention of the parties to extend liability to more
than one segregated account or the general account as
permitted by this section and contain a specific reference
to this subsection and to subsection 17(5),
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any contract pertaining to a transaction shall be deemed to contain a
statement that the rights of the counterparty shall not extend to, and the
counterparty will not have recourse to, the assets which are linked to any
other segregated account or to the general account.
(5) For the avoidance of doubt, it is hereby declared that any
provision of a contract or governing instrument relating to the
segregation of assets or liabilities of a segregated account shall be
governed by and construed in accordance with this Act, and the parties
may not contract otherwise in such regard.".
Repeal and replacement of section 12 of Act
13 Section 12 of the Act is repealed and the following is
substituted—
"Apportionment of assets and liabilities
12 (1) Notwithstanding any other provision of this Act, a
segregated accounts company that is not a mutual fund company (and
in the case of a mutual fund company only where the relevant contract
or governing instrument contains a specific reference to sections 11(4)
and 17(5)) may apportion an asset or liability among two or more
segregated accounts and the general account.
(2) Where a segregated accounts company has apportioned an
asset or liability pursuant to subsection (1), the extent to which the asset
or liability is linked to each segregated account shall be clearly indicated
in the contract or governing instrument effecting the apportionment.".
Repeal of section 13 of Act
14 Section 13 of the Act is repealed.
Amendment of section 14 of Act
15 Section 14 of the Act is amended by inserting after subsection (2)
the following—
"(2A) Notwithstanding any enactment to the contrary except section
66 of the Companies Act 1981, no record or register or that part of a
record or register detailing any ownership of such security shall be open
to public inspection save that any owner thereof shall be entitled to
receive a copy of the information contained therein pertaining to such
security.
(2B) For the avoidance of doubt, the provisions of section 65(6) and
66 of the Companies Act 1981 shall not apply to a segregated accounts
company that is a mutual fund.".
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Amendment of section 15 of Act
16 (1) The heading to section 15 of the Act is amended to read
"Dividends, distributions, redemptions, repurchases and reduction
of capital".
(2) Section 15 of the Act is amended—
(a) by deleting subsection (2) and substituting the
following—
"(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 shares or other account
holdings linked to a segregated account if there are
reasonable grounds for believing that—
(a) the segregated account is not, or would after the
payment not be, solvent; 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
share capital and share premium accounts.";
(b) by deleting subsection (5) and substituting the
following—
"(5) Notwithstanding subsections 42(2) and 42A(5) of the
Companies Act 1981, a segregated accounts company
may redeem or repurchase the shares or other account
holdings 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, there are reasonable grounds for
believing that the relevant segregated account is
solvent; or
(b) all creditors with claims linked to that
segregated account on that date have expressed
in writing their concurrence to the redemption or
repurchase.";
(c) by adding the following new subsections—
"(6) Sections 15(2)(b), 15(5) and 16(4) shall not apply to a
mutual fund.
(7) A segregated accounts company which is a mutual
fund may redeem or repurchase for cancellation shares
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using the assets linked to the relevant segregated
account provided that, on the date of redemption or
repurchase, there are reasonable grounds for believing
that the relevant segregated account is solvent and
would remain so after the redemption or repurchase.
(8) A segregated accounts company which is a mutual
fund on the redemption or repurchase of shares linked
to a segregated account may—
(a) repay the capital paid on such shares out of
paid in capital, additional paid in capital or
other reserves of the company linked to the
relevant segregated account;
(b) pay the premium, if any, out of realised or
unrealised profits, additional paid in capital or
other reserves of the company linked to the
relevant segregated account, on such terms and
in such manner and at such price as may be
determined having regard to the asset value of
such shares as ascertained in accordance with
the governing instrument.
(9) A segregated accounts company which is a mutual
fund on the redemption or repurchase of shares linked
to a segregated account may effect the redemption or
repurchase out of the assets of the company linked to
the relevant segregated account, on such terms and in
such manner and at such price as may be determined
having regard to the asset value of such shares as
ascertained in accordance with the governing
instrument.
(10) In any case where a segregated accounts company
in respect of a segregated account has share capital, if
authorised in a general meeting of the account owners of
the segregated account to which the shares are linked
and subject to the governing instrument in relation to
that segregated account, on such terms as it may decide,
the company may reduce its capital in any way, and in
particular, without prejudice to the generality of the
foregoing power, by—
(a) extinguishing or reducing the liability on any of
its shares in respect of capital not paid up;
(b) either with or without extinguishing or reducing
liability on any of its shares, cancelling any paid
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up capital that is lost or unrepresented by
available assets; or
(c) either with or without extinguishing or reducing
liability of any of its shares and either with or
without reducing the number of such shares,
paying off any paid up capital that is in excess of
the requirements of the company.
(11) No company shall reduce the amount of its share
capital in respect of a segregated account—
(a) unless, at a date not more than thirty days and
not less than fifteen days before the date on
which the reduction of the share capital is to
have effect, the company causes a notice to be
published in an appointed newspaper stating—
(i) the amount of the capital of the
segregated account as last determined by the
company;
(ii) the amount to which the share capital of
the segregated account is to be reduced; and
(iii) the date on which the reduction is to
have effect; and
(b) if, on the date the reduction is to be effected,
there are reasonable grounds for believing that
the segregated account is not, or after the
reduction would not be, solvent.
(12) Unless the governing instrument pertaining to the
affected segregated account otherwise provides, where
the capital of a segregated account is reduced by the
cancellation of shares and part only of a class of shares
is to be cancelled, the shares to be cancelled shall be
selected—
(a) by lot in such manner as the directors shall
determine;
(b) as nearly as may be in proportion to the number
of shares of the class registered in the name of
each account holder; or
(c) in such other manner as the directors determine
with the consent of the majority of the account
owners of the class to be cancelled.
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(13) Where shares are to be cancelled in order to reduce the
capital of a segregated accounts company in respect of a
segregated account, the shares shall be acquired at the
lowest price at which, in the opinion of the directors, the
shares are obtainable, but not exceeding an amount, if
any, stated in or determined by the governing
instrument.
(14) Where a company in respect of a segregated account
having share capital reduces the amount of that share
capital, then within thirty days after the date as from
which the reduction has effect the company shall file a
memorandum, with a copy of the notice referred to in
subsection (11)(a) in the office of the Registrar stating
that this section has been duly complied with.
(15) If any company fails to comply with subsection (11),
(12) or (13) every officer of the company shall be liable to
a fine of $5,000, and if the company fails to comply with
subsection (14) the company shall be liable to a fine of
$20 for every day during which such failure continues.".
Amendment of section 16 of Act
17 Section 16 of the Act is amended—
(a) in subsection (1)—
(i) in paragraph (a), by deleting ",and the records
shall clearly show the share capital, proceeds of"
and substituting "or other accounting principles
so that the records shall, to the best of the
knowledge, information and belief of the
directors and officers of the company, clearly
show the share capital, proceeds of rights
issues,",
(ii) in paragraph (b), by deleting "linked to a
segregated account maintained" and
substituting "entered into";
(b) in subsection (4), by inserting "or (in such capacity) the
general account" after "other segregated account";
(c) in subsection (5), by adding the following—
"provided that the account owner of a segregated
account may, for the purposes of section 88(1) of the
Companies Act 1981, agree in writing to waive his right
to have laid before a general meeting financial
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
20 1989 Revision
statements or the auditor's report thereon for an
indefinite period but such waiver shall be expressed to
be revocable at the option of such account owner.";
(d) in subsection (7), by inserting ", on application by the
affected account owner," after "court may";
(e) in subsection (9), by adding at the end thereof "and in
the case of a segregated accounts company which is a
mutual fund, the register of account owners shall not be
open to inspection by any person without the consent of
the company, provided that an account owner shall be
entitled to receive a copy of the information in the
register pertaining to his interest in the company.".
(f) by adding the following—
"(10) The register of account owners shall be prima facie
evidence of any matters by this Act directed or
authorised to be inserted therein.".
Repeal and replacement of section 17 of Act
18 Section 17 of the Act is repealed and the following is
substituted—
"Nature of segregated accounts, application of assets and
liabilities
17(1) Notwithstanding any other provision of this Act, the
establishment of a segregated account does not create a legal person
distinct from the segregated accounts company.
(2) Notwithstanding any enactment or rule of law to the
contrary, but subject to this Act, any liability linked to a segregated
account shall be a liability only of that account and not the liability of
any other account and the rights of creditors in respect of such liabilities
shall be rights only in respect of the relevant account and not of any
other account, and, for the avoidance of doubt, any asset which is linked
by a segregated accounts company to a segregated account—
(a) shall be held by the segregated accounts company as a
separate fund which is—
(i) not part of the general account and shall be held
exclusively for the benefit of the account owners
of the segregated account and any counterparty
to a transaction linked to that segregated
account, and
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
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(ii) available only to meet liabilities to the account
owners and 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 with claims linked to
segregated accounts.
(3) 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 segregated accounts company that are not linked to a segregated
account.
(4) No assets of the general account 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 is solvent or all the shareholders and
creditors of the general account on that date have expressed in writing
their concurrence to the transfer, and in the event a transfer is made to a
segregated account in breach of this subsection, on an application by an
affected party, the court may declare that the transfer is void, without
prejudice to the rights of bona fide purchasers for value without notice.
(5) Unless otherwise expressly agreed in writing by the affected
parties—
(a) by virtue of one or more contracts, governing
instruments or other documents which are binding on
those parties in relation to the affected segregated
accounts or general account, as the case may be, and
which are executed by parties having authority in
relation to those accounts; and
(b) in the case of a mutual fund only where the documents
mentioned in paragraph (a) clearly indicate an intention
of the parties to extend liability to more than one
segregated account or the general account as permitted
by this section and contain a specific reference to this
subsection and to subsection 11(4),
where a liability of a segregated accounts company to a person arises
from a transaction or matter relating to, or is otherwise imposed in
respect of or attributable to, a particular segregated account, that
liability shall—
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
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22 1989 Revision
(c) extend only to, and that person shall, in respect of that
liability, be entitled to have recourse only to, the assets
linked to that segregated account;
(d) not extend to, and that person shall not, in respect of
that liability, be entitled to have recourse to, the assets
linked to any other segregated account; and
(e) not extend to, and that person shall not in respect of
that liability, be entitled to have recourse to, the general
account.
(6) Where a liability of a segregated accounts company to a
person—
(a) arises otherwise than 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.
(7) In the event that a segregated account has insufficient
assets to pay all of its obligations in full, the order and priority of the
rights in relation to assets linked to a segregated account shall (without
prejudice to the rights of any parties holding valid security interests
against assets linked to that segregated account and any valid
preferential claims in respect of that segregated account) be determined
by the terms of the governing instrument and any contracts pertaining to
that account, and any ambiguity in respect of the order and priority
rights shall be resolved as follows:
(a) the claims of creditors shall rank ahead of the claims of
account owners;
(b) the claims of creditors inter se shall rank pari passu; and
(c) the claims of account owners inter se shall rank pari
passu.
(8) A segregated accounts company may, with the consent in
writing of all account owners of, or counterparties who are creditors with
claims linked to, a given segregated account, transfer to the general
account or another segregated account an asset from the segregated
account to which it is linked, if the segregated account to which such
asset is linked, taking into account the proposed transfer, remains
solvent, and, in the event a transfer is made to the general account in
breach of this subsection, on an application by an affected party, the
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
1989 Revision 23
court may declare that the transfer is void, without prejudice to the
rights of bona fide purchasers for value without notice.
(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) Subject to the terms of the governing instrument relating to
a given segregated account, on dissolution of the segregated accounts
company or termination of the segregated account and after paying
creditors of the segregated account, any property linked to that
segregated account shall be paid pro rata to the account owners of such
segregated account or, if there are no account owners, shall be deemed
to fall into the general account.
(11) Without prejudice to the rights of parties to resolve disputes
by reference to arbitration or to the court, where—
(a) there is, on grounds that are reasonable, uncertainty as
to whether any given interest in a segregated account is
an interest as a counterparty or an interest as an
account owner, that interest shall be deemed to be an
interest as a counterparty;
(b) a given liability is not linked to a particular segregated
account, or where there is, on grounds that are
reasonable, uncertainty as to whether the liability is
linked to a segregated account, that liability shall be
deemed to be the liability of the general account.
Internal transactions
17A (1) Notwithstanding any enactment or rule of law to the
contrary—
(a) a segregated accounts company acting in respect of the
general account may enter into transactions with the
company acting in respect of one or more segregated
accounts; and
(b) a segregated accounts company acting in respect of a
segregated account may enter into transactions with the
company acting in respect of one or more other
segregated accounts.
(2) For the avoidance of doubt—
(a) a transaction referred to in subsection(1); and
(b) any transaction between the company in respect of one
segregated account and a third party,
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
24 1989 Revision
shall have effect or otherwise (as the case may be) as the transaction
would have done under the general law if the transaction had been
entered into between the company and a third party, and without
restricting the generality of the foregoing—
(c) such a transaction shall be void, voidable, illegal or
reversible at the instance of any creditor of the company
in respect of the relevant segregated account or at the
instance of the company itself in respect of the relevant
segregated account or at the instance of any other
person if the transaction would have been void, voidable,
illegal, or reversible (as the case may be) by such person
under any rule of law (including Part IVA of the
Conveyancing Act 1993) which would have applied to the
transaction if the transaction had been entered into
between the company and a third party in the same
circumstances; and
(d) an account owner, counterparty, or receiver of any given
segregated account shall have standing to pursue, on
behalf of the relevant segregated account, any rights of
action (including recourse to arbitration under
subsection (4)) available to the segregated accounts
company in respect of that segregated account pursuant
to this section.
(3) Notwithstanding any enactment or rule of law to the
contrary—
(a) where a manager or officer of or other person on behalf
of a segregated accounts company or a segregated
account is also acting in respect of the general account
and one or more of the segregated accounts or in respect
of two or more segregated accounts which are entering
into a transaction, he may so act notwithstanding any
material interests or conflicts which may exist as
between the manager, officer or directors or which any of
them may have in acting in respect of such accounts;
and
(b) where—
(i) a given segregated account enters into a
transaction as described in paragraph (a), and
(ii) the governing instrument of the segregated
account so authorises, or a majority of the
account owners consent in writing to the entry
into of such a transaction,
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
1989 Revision 25
then the manager, officer or such other person, the
segregated accounts company and the company in
respect of any segregated accounts (as the case may be)
shall not be held liable to the company in respect of that
segregated account or any of its account owners in
respect of any conflict of interest arising in relation to
the transaction.
(4) Any dispute which arises in connection with a transaction
under subsection (1)—
(a) as between the company in respect of a given segregated
account and the company in respect of any one or more
other segregated accounts; or
(b) as between the company in respect of the general
account and the company in respect of one or more
segregated accounts;
may (notwithstanding any submission to the governing law of choice
otherwise provided for in this Act or otherwise) be referred to the court or
may be submitted to arbitration under the Bermuda International
Conciliation and Arbitration Act 1993 and (if the matter is submitted to
arbitration) as if the arbitration were an international commercial
arbitration.
(5) If the managers, officers, legal advisers or others
representing the company in respect of the separate interests of the
affected accounts cannot agree on whether a particular matter should be
referred to court or to arbitration, then that matter shall be referred to
arbitration.
Creditor enforcement rights limited to account assets
17B (1) There shall be implied (except in so far as the same is
expressly excluded in writing) in every contract and governing
instrument entered into by a segregated accounts company the following
terms:-
(a) that no party shall seek, whether in any proceedings or
by any other means whatsoever or wheresoever, to make
or attempt to make liable any assets attributable to any
segregated account of the company in respect of a
liability not attributable to that segregated account;
(b) that if any party shall succeed by any means whatsoever
or wheresoever in making liable any assets attributable
to any segregated account of the company in respect of a
liability not attributable to that segregated account, that
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
26 1989 Revision
party shall be liable to the company to pay a sum equal
to the value of the benefit thereby obtained by him; and
(c) that if any party shall succeed in seizing or attaching by
any means or otherwise levying execution against any
assets attributable to any segregated account of the
company in respect of a liability not attributable to that
segregated account, that party shall hold those assets or
their proceeds on trust for the company and shall keep
those assets or proceeds separate and identifiable as
such trust property.
(2) All sums recovered by a segregated accounts company as a
result of any such trust as is described in subsection (1)(c) shall be
credited against any concurrent liability pursuant to the implied term set
out in subsection (1)(b).
(3) Any asset or sum recovered by a segregated accounts
company pursuant to the implied term set out in subsection (1)(b) or
(1)(c) or by any other means whatsoever or wheresoever in the events
referred to in those subsections shall, after the deduction or payment of
any costs of recovery, be applied by the company so as to compensate
the segregated account affected.
(4) Notwithstanding subsections 17(4) and (8), in the event of
any assets attributable to a segregated account being taken in execution
in respect of a liability not attributable to that segregated account, and in
so far as such assets or compensation in respect thereof cannot
otherwise be restored to the segregated account affected, the company
shall—
(a) cause or procure its auditor, acting as expert and not as
arbitrator, to certify the value of the assets lost to the
segregated account affected; and
(b) in priority to all other claims against the account
transfer or pay, from the assets of the account to which
the liability was attributable to the segregated account
affected, assets or sums sufficient to restore to the
segregated account affected the value of the assets lost.".
Amendment of section 18 of Act
19 Section 18 of the Act is amended—
(a) in subsection (1), by deleting ", in respect of which" to
the end of the subsection;
(b) by repealing subsections (2) and (6);
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
1989 Revision 27
(c) in subsection (7)—
(i) in paragraph (b), by deleting the words "under
the governing instrument",
(ii) by adding the following—
"(c) exercise the same rights of set-off (if any) as
between accounts as apply under the general
law in respect of companies, including, on an
insolvent liquidation of the company, the same
rights of set-off which arise in an insolvent
liquidation of a company.".
(d) by deleting subsection (8) and substituting the
following—
"(8) The property of a segregated account is subject
to orders of the court as it would have been if
the segregated account were a separate legal
person (and notwithstanding that it is not a
separate legal person).";
(e) by deleting subsections (10) to (14) and substituting the
following—
"(10) Except to the extent it may be agreed otherwise
by virtue of the governing instrument or
contract, as the case may be, an account owner
of a segregated account and any counterparty
who is a creditor in respect of a transaction
linked to that segregated account shall have an
undivided beneficial interest in the assets linked
to a segregated account, and, after satisfying in
full the claims of creditors of the segregated
account, account owners shall share in the
profits and losses of the segregated account in
such proportions of the residual undivided
beneficial interest in the segregated account
owned by that account owner as may be
specified in any governing instrument relating to
such segregated account.
(11) An account owner's or counterparty'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 it may be agreed otherwise
by virtue of the governing instrument or
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
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28 1989 Revision
contract, as the case may be, an account owner
or counterparty has no interest in specific
segregated account property.
(13) Except to the extent it may be agreed otherwise
by virtue of the governing instrument or
contract, as the case may be, but subject to the
provisions of the Exchange Control Act 1972, an
account owner's or counterparty's beneficial
interest in the segregated account is freely
transferable.
(14) Subject to the segregated accounts company
complying with section 15, and except to the
extent it may be agreed otherwise by virtue of
the governing instrument or contract, as the
case may be, at the time an account owner or
counterparty 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 or contract may provide for the
establishment of record dates with respect to
such payment, distribution, allocation or
dividend.".
(f) in subsection (15)—
(i) in paragraph (a), by inserting "or contract" after
"governing instrument" where it first occurs and
by inserting "or contract to which that account
owner or counterparty is a party" after
"governing instrument" where it secondly occurs,
(ii) in paragraph (b), by inserting "to which the
person is a party" after "governing instrument";
(g) by deleting subsection (16) and substituting the
following—
"(16) Subject to section 17B(1)(c) and (2), the
provisions of this section and section 11 operate to the
exclusion of any rule of 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
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
1989 Revision 29
modify the operation of this Act, but nothing in this
section shall be construed so as to deny—
(a) 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 with the assets
of any other segregated account or the general
account; or
(b) any remedies available under the doctrine of
constructive trusts or similar equitable remedies
where those remedies would otherwise be
available.
(17) To the extent permitted in the governing
instruments of the affected segregated accounts, a
company in respect of a segregated account may be an
account owner of one or more other segregated accounts
of the same segregated accounts company.".
Amendment of section 19 of Act
20 Section 19 of the Act is amended—
(a) by deleting subsection (1)(a) and substituting the
following—
"(a) a particular segregated account is not solvent,
the general account is not solvent, a liquidation
has been commenced in relation to the
company, or for other reasons it appears to the
court just and equitable that a receiver should
be appointed;";
(b) in subsection (3)—
(i) in paragraph (a), by inserting "management,
sale, rehabilitation, run-off or" before
"termination",
(ii) by deleting "and" following paragraph (a) and
substituting "or";
(c) in subsection (4), by deleting "voluntary".
Amendment of section 20 of Act
21 Section 20 of the Act is amended—
(a) by deleting subsection (1)(e);
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
30 1989 Revision
(b) in subsection (2)(b), by deleting "voluntary".
Amendment of section 21 of Act
22 Section 21 of the Act is amended—
(a) in subsection (3), by deleting "fraud or dishonesty" and
substituting "misfeasance";
(b) in subsection (5), by inserting "and any liquidator" after
"managers";
(c) by adding the following—
"(6) At any time after the appointment of a receiver
in respect of a segregated account, the company
or any account owner or creditor of that account
may, where an action or proceeding against the
company in respect of that account is pending,
apply to the court for a stay of those
proceedings, and, on such an application being
made, the court may stay the proceedings
accordingly on such terms as it thinks fit.".
Amendment of section 22 of Act
23 Section 22 of the Act is amended by adding the following—
"(3) When making an order discharging the receiver, the
court may release the receiver from liability save in
respect of misfeasance.".
Repeal and replacement of section 23 of Act
24 Section 23 of the Act is repealed and the following is
substituted—
"Remuneration of receiver
23 The remuneration of a receiver and any
expenses properly incurred by him shall be payable in
priority to all other unsecured claims from the assets
linked to the segregated account in respect of which the
receiver was appointed but not from any assets of the
general account or any assets linked to other segregated
accounts.".
Amendment of section 24 of the Act
25 Section 24 of the Act is amended—
(a) by inserting after subsection (1) of the following—
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
1989 Revision 31
"(1A) For the purposes of determining whether a
segregated accounts company may be wound up on the
ground of insolvency—
(a) the test of insolvency which applies under
section 162 of the Companies Act 1981 and (in
the case of an insurance company) section 33 of
the Insurance Act 1978 shall apply; and
(b) assets and liabilities linked to segregated
accounts shall not be taken into account.".
(b) by deleting subsection (2)(b) and substituting the
following—
"(b) the segregated accounts company is solvent
under section 2(2) of this Act,";
(c) by adding the following—
"(3) A segregated accounts company shall not be
voluntarily wound up without the consent of the
Registrar.".
Amendment of section 25 of Act
26 Section 25 of the Act is amended—
(a) in subsection (1), by adding "or contract" after
"instrument";
(b) in subsection (2), by deleting "the court must first
approve that apportionment" and substituting "approved
by the court".
Amendment of section 26 of Act
27 Section 26 of the Act is amended—
(a) in subsection (1),
(i) by deleting "section 4" and substituting "section
5".
(ii) in paragraph (a), by deleting the comma after
"16";
(b) in subsection (4), by inserting "made by at least two
directors" after "declaration".
Insertion of new section 27A in Act
28 The Act is amended by inserting after section 27 the following—
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
2002
32 1989 Revision
"Effect on transaction and interests in a segregated
account of infringement of this Act
27A Subject to subsections 17(4) and (8), no
transaction or interest in a segregated account shall be
void or voidable by reason only that at the relevant time
the segregated accounts company fails to comply with,
or is in breach of, any provision of this Act.".
Amendment of section 30 of Act
29 Section 30(b) of the Act is amended by inserting "or section 9"
after "section 6(3)".
Commencement
30 This Act comes into operation on such day as the Minister of
Finance may appoint by notice published in the Gazette.
SEGREGATED ACCOUNTS COMPANIES AMENDMENT ACT
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1989 Revision i
