Bermuda bid to net Chinese catch
Bermuda is stepping up its efforts to attract Chinese and Hong Kong companies to use the territory as their base of incorporation, in the face of intense competition from other low-tax jurisdiction rivals such as the British Virgin Islands and the Cayman Islands.
Wayne Furbert, Bermuda's Minister of Business Development and Tourism, was in Hong Kong as part of the island's marketing drive to lure more companies to register themselves in Bermuda. That followed the Bermudan's first official trip to the mainland in April to woo business there. Out of the 15,000 companies registered in Bermuda, about 700 are from China while 146 are from Hong Kong. They lag the number of US and British companies registered there, but Bermuda officials think the mainland holds a lot of potential.
Peter Hughes, managing director of Apex Fund Services, which helps Chinese companies and funds set up in Bermuda, said he had five to six registration applications each week, which he said was significantly more than in previous years.
The islands, dominated by a 40 square kilometre, fish hook-shaped main island, are located off the southeast coast of the US and make up one of the four jurisdictions whose registered companies were the first allowed to list on the Hong Kong stock exchange (HKEx). The others were Hong Kong, China and the Cayman Islands. Other locations have since been approved, including low-tax jurisdictions such as Guernsey.
By the end of last year there were 456 Bermuda-incorporated companies on the HKEx main board, making up about a third of all listings.
An hour-and-a-half's flight from New York and roughly six hours from London, the British overseas territory used to mainly rely on tourism, until it started to play up the idea in the 1930s that Bermuda could become a business centre offering low tax benefits. In the lead-up to the handover of Hong Kong from Britain to China in 1997, Hong Kong companies, anxious about protecting their assets, fled to various overseas jurisdictions. Jardine Matheson, one of the territory's oldest companies, moved its headquarters to Bermuda where it remains.
When talking about the difference between the Cayman Islands, the British Virgin Islands and Bermuda, Business Bermuda chief executive Cheryl Packwood contends that cost is no longer an issue. Packwood heads an agency that helps market Bermuda as a place to base international companies. She says that with an annual fee of about US$2,000, Bermuda's registration charge is lower than that of the Cayman Islands, but more expensive than the British Virgin Islands. Setting up a company would only take a few days, while a fund could take a couple of weeks, Packwood added. Bermuda had fewer registered companies than other low-tax jurisdictions because it had a vetting process that looked into the authenticity of the companies' business and the source of money, Packwood said. She said international companies could also appeal to Britain's Privy Council in times of dispute, adding a layer of legal comfort.
'[But] Cayman and British Virgin Islands vehicles are still the most popular,' particularly in Asia, due to flexibility and fees, said Ashley Davies, Hong Kong-based partner at Walkers, which specialises in the offshore legal industry and does most of its business with those two offshore tax havens.
The annual growth in business that Bermuda's business minister hopes to see coming from China