Bermuda Bar Council v Walkers (Bermuda) Ltd

For statutory purposes, a requirement that a local company be controlled by Bermudians concerns control of corporate decision-making, not every form of commercial influence. The relevant question is whether non-Bermudians can control or constrain decisions ordinarily made by shareholders or directors, including through arrangements outside the company’s byelaws. Ordinary commercial bargaining power, financing, branding, management or service arrangements does not itself suffice where Bermudian shareholders and directors remain free to exercise independent judgment. Constitutional or other arrangements giving non-Bermudians voting control, a veto, or equivalent constraints can breach the requirement. A contractual entitlement to profits is not, by itself, control, and no minimum allocation of profits to Bermudians is required. On that basis, the proposed arrangements did not breach the Companies Act 1981.

Walkers (Bermuda) Ltd was incorporated as a local company whose shares were held by Bermudian barristers. It sought recognition as a professional company under section 16C of the Bermuda Bar Act 1974. Its proposed licensing, services and loan arrangements with Walkers Global, a Cayman Islands partnership, gave Walkers Global substantial commercial influence but no legal or beneficial interest in the shares.

The Bermuda Bar Council refused recognition, considering that the arrangements contravened section 114 of the Companies Act 1981. The Chief Justice allowed WBL’s appeal. The Court of Appeal for Bermuda reversed that decision, holding that the statutory concept of control included commercial control. The central issue before the Board was the meaning of “controlled by Bermudians” in Part I of the Third Schedule.

1. Disposition. Lord Hodge delivered the leading judgment, with Lord Reed, Lord Kerr and Lord Briggs agreeing. Lady Arden concurred in the result. The appeal was allowed.
2. Statutory meaning. Section 114(1)(a) of the Companies Act 1981 permits a local company to carry on business if it complies with Part I of the Third Schedule or is a wholly-owned subsidiary of a compliant company. Paragraph 1(1) is a general requirement. The specific voting, director and beneficial-ownership provisions do not confine it to voting power alone.
3. Relevant control. The statutory concept is directed to corporate decision-making. It includes voting control, constraints on the effectiveness of majority votes, and arrangements which bind shareholders or directors to act at the instance or for the benefit of non-Bermudians. The control need not be created by the company’s byelaws. Mere commercial influence or bargaining power, without a legal obligation or constraint on corporate decision-making, is insufficient. The statutory scheme and the need for certainty in the application of a criminal prohibition supported that conclusion.
4. Bermuda Cablevision Ltd v Colica Trust Co Ltd [1998] AC 198. The Board explained that the earlier decision involved constitutional arrangements giving non-Bermudians control of the board and general meetings, reinforced by a contractual profit entitlement. The profit entitlement alone was not control. It was the combination of contractual and constitutional controls that demonstrated control. The decision remained correct but was not authority that commercial influence alone was sufficient.
5. Profits. The Companies Act 1981 contains no requirement that a local company pay or attribute a minimum percentage of profits to Bermudians. The focus is beneficial ownership and corporate control.
6. Application. The proposed arrangements gave Walkers Global considerable commercial influence, but the evidence indicated that WBL’s board and general meeting remained free to make decisions independently. The arrangements therefore did not contravene section 114 or Part I of the Third Schedule. The Bar Council had erred in refusing recognition under section 16C of the Bermuda Bar Act 1974.
7. Lady Arden’s concurrence. Lady Arden agreed that the relevant level of control was that of the board and general meeting, including negative control. She would adopt a broader factual inquiry into the means of control, considering substance rather than form and potentially including non-contractual practical control and abnormal profit allocation. Her reasoning did not alter the result.

1. Privy Council — Allowed the appeal and set aside the decision of the Court of Appeal for Bermuda. The Board advised that the Bar Council had erred in refusing recognition.
2. Court of Appeal for Bermuda — Reversed the Chief Justice, holding that commercial control could prevent a local company from carrying on business without a licence.
3. Chief Justice of Bermuda — Allowed WBL’s appeal from the Bar Council’s refusal and held that the proposed arrangements did not contravene section 114 of the Companies Act 1981.