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Securing Debts in Bermuda: A Guide to the Process and Laws

In Bermuda, securing debts is a common practice that allows lenders to protect their interests and borrowers to access credit. In this article, we will delve into the various types of security interests that can be granted over assets in Bermuda, as well as the rules and regulations governing their enforcement.

A share charge is a common type of security interest granted over shares in a Bermuda company. This allows the lender to obtain a lien over the shares and ensures that they are paid back if the borrower defaults on their debt obligations. Legal mortgages are less common, but share charges typically provide for a power of sale, allowing the lender to sell the shares if the borrower fails to repay the loan.

Allows lenders to protect their interests
Provides a lien over shares in a Bermuda company
Power of sale allows lenders to sell shares if borrower defaults

Mortgages Over Land and Other Assets

A mortgage over land or other assets in Bermuda must be filed with the Registrar of Lands and Surveys. This requires submitting a copy of the fully executed charge instrument, along with the appropriate filing fee. The Registrar will issue a certificate of registration recording the effective date of registration.

Must be filed with the Registrar of Lands and Surveys
Requires a copy of the fully executed charge instrument and filing fee
Certificate of registration issued by the Registrar

Enforcement of Collateral by Secured Lenders

Secured lenders have several options for enforcing their security interests in Bermuda. These include:

Appointing a receiver to gather and realize assets
Selling collateral under an express power of sale
Taking possession of the asset

Foreign Law and Jurisdiction

Contractual agreements governing law and jurisdiction outside Bermuda are common. While these arrangements are generally enforceable in Bermuda, there may be limited circumstances where they are not upheld.

Priming Liens

Recent transactions involving Bermuda entities have seen an increase in debtor-in-possession loans with existing secured lenders primed by exit lenders. These are typically structured by onshore counsel and involve ancillary Bermuda involvement.

Conclusion

Securing debts in Bermuda is a complex process that requires careful consideration of the laws and regulations governing security interests. By understanding these requirements, borrowers and lenders can navigate the process more effectively and ensure their rights are protected.