Security Protection - Registration, Amendment And Release Requirements In Bermuda, BVI And The Cayman Islands

This article examines the laws of Bermuda, Cayman Islands, and the British Virgin Islands (the "BVI") as such laws concern the registration, variation and release of charges and other security interests created over assets and certain rights of companies (not including charges over land, ships or aircrafts) and the impact, if any, of registration on the determination of the order of priority of competing charges.

Bermuda

Public Registration: Part V of the Bermuda Companies Act 1981 (as amended) (the "Companies Act") provides for the operation of a public register of charges, a system of registration and of priorities amongst registered and unregistered charges. It applies to any charge on the assets of a Bermudian company wherever situated and to any charge on property located in Bermuda created or acquired by a company incorporated outside Bermuda.

Registration is not mandatory and failure to register a charge does not render the security interest void or invalid against the creditors or the liquidator of the company. However, the effect of registration is to confer priority over any charge (of a similar type) registered subsequently (irrespective of the date of creation of such charge) and over any unregistered charge. Charges created before 1 July 1983 continue to have the priority they had prior to that date, irrespective of whether they were subsequently registered under the provisions of the Companies Act.

There is no time limit for registration of a charge. However, in view of the fact that priority of the charged interest is determined by the date of registration, it is advisable to register a charge as soon as possible following its creation.

In relation to assignments of life insurance policies issued by Bermuda long-term insurers, priority over the interests created by the assignment (which are choses-in-action) is determined pursuant to the Bermuda Life Insurance Act 1978. This Act provides that, subject to policies which have beneficiaries irrevocable appointed by an assignee, priority is determined according to which assignor or assignee first gives written notice of the assignment to the Bermuda long-term insurer.

Registration Filing: A certified copy of the security document and with the relevant registration form containing the particulars of the charge are required to be filed with the Bermuda Registrar of Companies (the "Bermuda Registry"). The filing may be made by the company, (as chargor) or the chargee. In practise, it is often the Bermuda counsel for the chargor that registers the charge, as a condition precedent under the underlying financing or other arrangements.

A certificate of registration of charge will subsequently be issued by the Bermuda Registry.

Amendment of Registration Filing: Where the registered charge is amended, for instance by (i) the addition, removal or replacement of a...