Bermuda’s Reformed Charities Regime

(Appleby Global) -- Bermuda’s Charities Amendment Act 2018 (Amendment Act) became operative on 10 August 2018 (Commencement Date). The Amendment Act amends the Charities Act 2014 (Act) to:

• modify the conditions that Bermuda privately funded charities must satisfy in order to be exempted from Bermuda’s charity registration requirements;

• introduce notification requirements on privately funded charities that consider themselves exempted from the requirement to apply for registration; and

• create a separate part of its register of charities specifically for registered privately funded charities- which is not available for inspection by the public.

Bermuda introduced these amendments in order to:

• ensure that its anti-money laundering and anti-terrorist financing (AML/ATF) standards in respect of charities are kept up to date with international standards (including the Financial Action Task Force Recommendations); and

• ensure that privacy concerns of registered privately funded charities are adequately respected.

Charity trustees of Bermuda privately funded charities should take steps as soon as possible to:

• ascertain whether they remain exempted from the registration requirements; and

• comply with the notification and, if applicable, registration requirements within the relatively tight timeframes prescribed.

Definition of “charity”

Under the Charities Act, a “charity” is an entity established in Bermuda for charitable purposes only. “Charitable purposes” is defined to include a wide range of activities that are carried on for the “public benefit”.  “Public benefit” has the same meaning as is given to that term under charities law in England and Wales. 

Registration of charities and exemptions

Charities are required to apply to Bermuda’s Registrar-General (Registrar) to be a “registered charity” unless they satisfy the conditions to be an “exempted charity”.

Charities that solicit funds from the public, receive funding from the Bermuda Government or from Bermuda public sources (such charities are generally referred to as “public charities”) do not satisfy the conditions to be an exempted charity and are therefore required to apply to be registered.  The Amendment Act does not change that.

However, the Amendment Act:

• modifies the conditions that privately funded charities may rely on in order to be an exempted charity; and

• requires privately funded charities that consider they satisfy the conditions to be exempted to specify to the Registrar the condition which they satisfy in order to be exempted. 

Prior to the Amendment Act, the Act did not define what a “privately funded charity” is- although the inference was that it was simply a charity established in Bermuda which was not a public charity.  The Amendment Act now clarifies that a “charity that is privately funded” (i.e. a privately funded charity) is “a charity that does not solicit funds from the Bermuda public, does not receive funding from the Bermuda Government or from Bermuda public sources”. 

The Amendment Act provides that privately funded charities are required to meet the following conditions in order to be an exempted charity:

• in the case of a trust, have at least one trustee licenced under the Trusts (Regulation of Trust Business) Act 2001; or

• in the case of a company or other legal person, have a registered office with and be subject to compliance by a person licenced under the Corporate Service Provider Business Act 2012, with regard to applicable laws, regulations or other requirements.

Notably, the Amendment Act withdraws the exemption available for charitable trusts that have a trustee that satisfies Bermuda’s “private trust business” trustee licensing exemption.  Many private trust companies (PTCs) arrange to satisfy the private trust business licensing exemption.  Prior to the Amendment Act, a charitable trust with such a PTC as its trustee would have satisfied a condition in order to be an exempted charity.

For charities not established as trusts (such as charities established as companies limited by guarantee), the Amendment Act now requires such charities to not only satisfy a registered office requirement (as was also previously required- albeit in a slightly modified form) but, additionally, to be subject to compliance by a Bermuda licensed corporate service provider.

The rationale for the conditions (as modified by the Amendment Act) to be an exempted charity is that Bermuda licenced trust companies and corporate service providers are already required to register and be supervised under Bermuda’s AML/ATF laws and, consequently, are presumed to have the capability and resources to ensure that privately funded charities they administer Bermuda’s AML/ATF laws.

Notification and transitional provisions

Prior to the Amendment Act, the Act did not impose any notification requirements on a privately funded charity that considered it satisfied a condition to be an exempted charity.

The Amendment Act provides that when a privately funded charity is established, the persons having the general control and management of the administration of the charity (referred to in the Act as the “charity trustees”) have one month from establishment, to:

• notify the Registrar of the establishment of the charity; and

• provide the name of the charity and its date of establishment; and

• indicate whether they believe the charity satisfies a condition to be an      exempted charity and, if they do:

(i) specify the condition that they consider the privately funded charity satisfies; and

(ii) supply the Registrar with the required documentation and information confirming compliance with that condition. 

If the privately funded charity is required to be registered, its charity trustees are required to apply to register the charity as soon as is practicable.

Charity trustees of existing privately funded charities (i.e. those established prior to the Commencement Date) that:

• do not satisfy the conditions to be an exempted charity, have three months from the Commencement Date to apply for registration; and

• believe they satisfy the conditions to be an exempted charity, have one month from the Commencement Date to write to the Registrar setting out the condition they satisfy.

New private part of the register of charities

Importantly, in circumstances where a privately funded charity is required to be registered, the Amendment Act expressly provides that information included on the register of charities shall:

• be kept on a new separate part of the register of charities (i.e. separate from the part of the register in respect of public charities); and

• not be available to the public.

The public only has the right to inspect the register of charities in respect of public charities, together with such public charities’ statements of accounts and annual reports.

Further, the Amendment Act precludes information on the part of the register designated for registered privately funded charities from being disclosed under the Public Access to Information Act 2010.

What information is included on the register?

The information required to be included on the register of charities with respect to a registered charity include:

• its name;

• the name of its charity trustees and principal officers;

• the name of the person who shall be the primary contact for the Registrar;

• the address of the charity (which must be an address in Bermuda that is not a PO Box);

• its telephone number and, if applicable, email address;

• its main purposes;

• the date of the end of its financial year;

• the date of its establishment and initial registration; and

• the date when its registration ceases.

What other requirements are imposed on registered charities?

Registered charities are required to, among other things:

• pay the prescribed Government registration and annual fees;

• annually file financial statements and annual reports and, subject to the applicable thresholds, audit reports in the manner prescribed under the Act and its regulations;

• notify the Registrar of changes to the terms of their governing documents and charity trustees;

• ensure all published printed materials and published electronic communications of the charity clearly state the charity’s name, that it is a registered charity, and its registration number;

• comply with AML/ATF regulations issued under the Act taking into account the guidance published by the Registrar during March 2018;

• following amendments that became effective on 3 November 2017 (subject to an exemption for registered charities with an annual gross income of BD$50,000 or less):

      o appoint a compliance officer;

      o establish and implement AML/ATF systems and controls; and

      o retain specified records for specified period.

Conclusions

Bermuda’s approach to the regulation of charities reflects Bermuda’s desire to maintain its stellar reputation as an offshore financial centre by keeping its AML/ATF regime up to date with international standards while at the same adequately protecting rights to privacy.

Charity trustees of existing privately funded Bermuda charities need to take steps as soon as possible to ascertain whether they remain exempted from the registration requirements, comply with the notification requirements and, if applicable, apply for registration.

Privately funded charities that are required to be registered will benefit from the information being included on that part of the register of charities which is not available to the public.