Deposit Companies Act 1974

or by their assignees or successors;

"deposit business" means the business of accepting deposits from the public;

"deposit company" means an incorporated limited liability com pany which is or was licensed to carry on deposit business;

"deposit moneys" means moneys held by a deposit company on deposit;

"depositor" means a person entitled, or prospectively entitled, to payment of a deposit whether made by him or not, and in cludes the holder of an investment certificate;

"exempted company" means an exempted company within the meaning of the Companies Act 1981 [title 17 item 5];

"exempted partnership" means an exempted partnership within the meaning of the Exempted Partnership Act 1958 [title 17 item 26];

"investment certificate" includes an instrument commonly known as a guaranteed investment certificate, guaranteed trust certificate or saving certificate;

"licensed" means holding a licence issued under this Act;

"local company" means any company incorporated in Bermuda other than an exempted company;

"Minister" means the Minister of Finance;

"non-resident corporate body" means a non-resident corporate body which is the holder of a permit granted under section 134 of the Companies Act 1981 [title 17 item 5];

"the public" includes any section of the public, however selected;

"unimpaired paid-up capital" means that part of the paid-up permanent share capital of a company which is unimpaired.

(2) For the purposes of this Act an advertisement which con tains information calculated to lead directly or indirectly to the deposit of money by the public shall be treated as inviting the public to deposit money.

Exemption from the Act

2 This Act shall not apply in relation to—

(a) a bank licensed under the Banks Act 1969 [title 17 item 20]; or

(b) a trust company exempted from this Act by the Minister by notice in the Gazette; or

(d) a company carrying on deposit business from a place of business in Bermuda if it does not solicit or accept de posits from persons resident in Bermuda other than ex empted companies, exempted partnerships or non-resi dent corporate bodies; or

(e) a unit trust scheme as defined for the purposes of the Exchange Control Act 1972 [title 16 item 1]; or

(f) a credit union registered under the Credit Unions Act 1977 [title 13 item 14]: or

(g) moneys paid prior to the sale of any goods or the ren dering of any service as an advance on the purchase or contract price thereof notwithstanding that interest may be paid to the person making such advance.

PART II

LICENSING OF DEPOSIT COMPANIES

Requirement for a licence

3 (1) Notwithstanding any other Act, but subject to section 2, no person shall carry on deposit business in Bermuda except a deposit company acting under and in accordance with a licence granted by the Minister under this Act.

(2) An application for a licence under this Act shall be made to the Minister in such form and in such manner as may be specified by him and shall be accompanied by a copy of the incorporating Act or memorandum of association of the company and the bye-laws thereof and such other information as the Minister may require:

Provided that nothing in this subsection shall require an appli cant to disclose information with respect to the affairs of any customer of the applicant.

(2A) The applicant shall, not less than seven days prior to an application for a licence under subsection (2), advertise in an appointed newspaper, as defined in the Companies Act 1981 [title 17 item 5], the applicant's intention to apply for a licence.

(3) Any person who contravenes subsection (1) commits an of fence

Punishment on summary conviction: a fine of $2,000;

Punishment on conviction on indictment: a fine of $10,000.

[section 3 amended by 1998 : 35 effective by notice in Official Gazette]

Granting of licence

4 (1) The Minister shall, on payment of such fee as may be pre scribed therefor under the Government Fees Act 1965 [title 15 item 18], grant a licence in respect of which application has been made under section 3 to a local company—

(a) whose incorporating Act or memorandum of association provides that it is authorised to carry on deposit busi ness; and

(b) which, in his opinion, satisfies the requirements of sub section (2),

unless in his opinion it would be undesirable in the public interest that the licence be granted and, should he be of such opinion, he may refuse to grant the licence and need not give any reason for so refusing.

(2) For the purposes of subsection (1)(b) the requirements a company has to satisfy shall be that the company —

(a) has appointed an approved auditor who has agreed to perform an annual audit on the books of the company;

(b) has, or will have as from the commencement of busi ness, adequate —

(i) management;

(ii) personnel; and

(iii) premises, to carry on deposit business;

(c) has, or will have as from the commencement of busi ness, an unimpaired paid-up share capital of not less than $250,000 or, in the case of a company carrying on deposit business in Bermuda at the commencement of this Act, will be able to comply with the requirements of section 7 as read with section 24(3)(a),

and that the management of the company is, or will be, vested in not less than five directors of whom a majority are persons ordinarily resident in Bermuda.

(3) If the Minister intends to refuse the grant of a licence on the grounds that a company does not satisfy the requirements of subsection (2) he shall give notice to the company of his intention so to do specifying therein the grounds therefor and shall afford the company an opportu nity of submitting to him written representations; and shall not issue his decision until such time, being not less than fourteen days, as may be specified in the notice, has elapsed from the date of the notice.

(4) A licence shall be granted subject to such conditions as the Minister may determine.

Minister's powers to revoke licence, prohibit acceptance of deposits etc

5 (1) The powers of the Minister under this section may be exer cised —

(a) in the event of a contravention by a deposit company of any condition of its licence or of the conviction of the company or of any of its directors of an offence under sections 404 or 405 of the Criminal Code [title 8 item 31];

(b) if, in the opinion of the Minister, a deposit company is carrying on business in a manner detrimental to its de positors;

(d) if a court or other competent authority makes an order for the winding up, dissolution or judicial management of a deposit company or of any body corporate which, di rectly or indirectly, has a controlling interest therein;

(e) if a shareholder's resolution is passed for the purpose of effecting the voluntary winding up or dissolution of a de posit company or of any body corporate which, directly or indirectly, has a controlling interest therein;

(f) if a deposit company contravenes or fails to comply with any provision of this Act or any direction or request of the Minister or the Bermuda Monetary Authority under this Act;

(g) in the circumstances referred to in section 20(c):

(h) in the event of persistent failure to pay fees payable under the Banks and Deposit Companies (Fees) Act 1975 [title 14 item 41].

[section 5(1)(h) amended by 1990:13 effective 28 March 1990]

(2) Subject to subsection (1) the Minister may, at any time, give written notice to a deposit company that he considers grounds for revo cation of its licence exist, specifying the nature thereof, and affording the company an opportunity of making representations to him to show cause why its licence should not be revoked within such time as may be speci fied in the notice, being a time reasonable in the circumstances:

Provided that where the company is in breach of any provision of this Act or of any condition of its licence the Minister may, if he is of the opinion that the company should be given an opportunity of repairing such breach, by written notice to the company, require the company to repair the breach within the time specified in the notice and, if the com pany does so repair the breach to the satisfaction of the Minister, then the licence shall not be revoked by reason of such breach.

(3) A notice under subsection (2), including any notice under the proviso thereto, may direct the deposit company to cease and desist from such of its business activities as may be specified in the notice pending the decision of the Minister on the revocation or, as the case may be, pending the repairing by the company of the breach of any pro vision of this Act or its licence, and without derogation from the general ity of this subsection, the notice may —

(a) prohibit the deposit company from accepting the deposit of, or otherwise borrowing any money;

(b) prohibit the issue by the deposit company of advertise ments of all descriptions or of any description specified in the notice; or

(c) require the deposit company to take all practicable steps to withdraw any advertisement, or any description of ad vertisement specified in the notice which is on display in any place,

and any person who fails to comply with any requirement of such a no tice, being a requirement imposed under this subsection, commits an offence:

Punishment on summary conviction: a fine of $2,000.

(4) The Minister may, upon making such enquiry in the matter as he may think fit and on considering such representations, if any, as the company may make to him and upon being satisfied that he may properly exercise his powers under this section, revoke the licence of a deposit company:

Provided that he shall not so revoke a licence prior to the expira tion of fourteen days from the service of his notice under subsection (2).

(5) Upon the revocation of its licence under subsection (4), the deposit company shall forthwith cease to carry on deposit business in Bermuda unless the Minister in his discretion authorises the company, either at the time of revoking the licence or at any time subsequent thereto, to continue to carry on such business —

(a) pending the determination of an appeal against the revo cation under section 6; or

(b) for such period as the Minister may specify for the pur pose of the winding up of the deposit business of the company.

(6) A company acting in accordance with the authority of the Minister under subsection (5) shall be deemed to be licensed for the pur poses of section 3.

(7) Notice of the revocation of a licence under subsection (4) shall be published in an appointed newspaper as defined in the Compa nies Act 1981 [title 17 item 5] and the revocation shall take effect from the date of such publication or from such subsequent date as may be specified in the notice.

Appeals to Cabinet

6 (1) [omitted] [spent]

(2) A deposit company may appeal to the Cabinet against the revocation of its licence under section 5.

(3) On an appeal under this section the Cabinet may confirm, reverse or vary the decision of the Minister.

(4) Before determining an appeal under this section the Cabi net shall give the appellant an opportunity to submit for its consideration such written representations as the appellant may think fit; and the Cabinet may further give such directions as to the procedure on such an appeal as it may consider appropriate.

PART III

MANAGEMENT OF DEPOSIT COMPANIES

Affidavit as to subscription

7 (1) Subject to section 24(3)(a), no deposit company shall carry on deposit business in Bermuda until there has been filed with the Bermuda Monetary Authority an affidavit by a director, manager, secre tary or similar officer of the Company showing that at least $250,000 of the company's share capital has been fully subscribed for and has been paid in cash by subscribers free from all liability on the part of the com pany or any of the subscribers to make repayment of the same or any part thereof to any person.

(2) Any person who knowingly and wilfully makes an affidavit for the purposes of this section which is false or misleading in any mate rial particular commits an offence:

Punishment on summary conviction: imprisonment for 6 months or a fine of $2,000.

Persons prohibited from management

8 Any person who —

(a) has been a director of, or directly concerned in the man agement of a deposit company which has had its licence revoked in accordance with section 20(c) as read with section 5, or has been wound up by a Court; or

(b) has been sentenced by a Court in any country for an of fence involving dishonesty and has not received a full pardon for that offence; or

shall not, without the express authorisation of the Minister act or con tinue to act as a director, manager, secretary or other employee of a company carrying on deposit business, and if he does so act or continue to act, he commits an offence:

Punishment on summary conviction: imprisonment for 6 months.

Offences by deposit companies

9 (1) No deposit company shall —

(a) require or permit any loan made by the company or obli gation owing to the company to be secured by the com pany's own shares, stock or other units in the equity of the company or by its debentures; or

(b) issue an advertisement for deposits which is misleading, false or deceptive or which contains any information which is misleading, false or deceptive; or

(c) issue any advertisement for deposits unless the balance sheet and statements of income and retained earnings of such company, accompanied by the report therein of an approved auditor are exhibited in accordance with sec tion 16; or

(d) lend money to a director or officer thereof, to the wife or child of a director or officer, or to a company more than one-third of the capital stock of which is owned by a di rector or officer, the wife or child of a director or officer or a combination of such persons; or

(e) permit or allow any such person as is mentioned in sec tion 8, and who has not been authorised thereto by the Minister to be a director, manager, secretary or other employee of the company; or

(f) grant to any person, firm or corporation, or to any group of companies or of other persons which group is under the control or influence of one and the same person, any advance or credit facility, or give any financial guarantee or incur any other liability on behalf of such person, firm, corporation or group so that the total value of the advances, credit facilities, financial guarantees and other liabilities in respect of such person, firm or corporation or group is at any time more than twenty-five per cen tum of the sum of the paid-up capital and published re serves of the deposit company:

Provided that this paragraph shall not apply to liabilities secured by a mortgage in favour of the deposit company or to liabilities evidenced by securities approved by the Bermuda Monetary Authority for the purposes of sub section (4) of section 10; or

(g) becomes a party to a contract which includes a term or
provision that is made unenforceable by section 8(1) of the Interest and Credit Charges (Regulation) Act 1975 [title 17 item 22].

(2) Subsection (1)(d) shall not render unlawful a loan to a per son or company specified in that paragraph where that loan is made on the security of a first mortgage on real property to the full amount of the loan and in the ordinary course of the business of the deposit company but in the event of any loss being occasioned to the company making the loan by such loan the directors of that company shall be personally, jointly and severally, liable to the company to make good such loss.

(3) Any person who contravenes subsection (1) commits an of fence:

Punishment on summary conviction: a fine of $2,000;

Punishment on conviction on indictment: a fine of $10,000.

Guaranteed Fund

10 (1) A deposit company shall at all times earmark and definitely set aside assets for the purposes of constituting a guaranteed fund.

(2) Assets from time to time comprising a deposit company's guaranteed fund shall be held by the company in trust for the benefit of the company's depositors to the extent of the deposit company's liability to them.

(3) In determining, for the purposes of this section, the value of any assets forming part of the company's guaranteed fund that are mort gaged, hypothecated or pledged by the company to secure money bor rowed by it, the outstanding amount of the company's indebtedness in respect thereof shall be deducted from that value.

(4) Every deposit company shall maintain its guaranteed fund so that at all times its assets include —

(a) an amount at least equal to 10 per centum of its current deposit liability either —

(i) held in cash; or

(ii) invested in obligations of or guaranteed by the Government of Bermuda maturing in not more than 5 years; or

(iii) held in the form of securities approved by the Bermuda Monetary Authority for the purposes of this paragraph, or any combination thereof; and

(b) a further amount at least equal to 5 per centum of its current deposit liability either —

(i) held in the manner required by paragraph (a); or

(ii) guaranteed or assured in such manner as the Bermuda Monetary Authority may require by a bank approved of by the Authority for the pur poses of this paragraph.

(5) For the purposes of this section the value of any security shall be not more than its current market value.

Investment of deposit moneys

11 (1) Not less than 50 per centum of deposit moneys shall at all times be invested in loans secured to the full amount of the outstanding balance owed to the deposit company by means of a mortgage on real property situated in Bermuda and registered under the Mortgage Regis tration Act 1786 [title 26 item 32].

(2) A deposit company shall not invest deposit moneys in ag gregate exceeding twenty times its paid-up capital otherwise than in—

(a) assets of the nature specified in section 10(4);

(b) loans of the nature described in subsection (1) where such loans are secured by means of a mortgage which is a security in which trust money may be invested under the Trustee Act 1975 [title 26 item 51].

Evidence of compliance with sections 10 and 11

12 (1) The Bermuda Monetary Authority may at any time, and from time to time, by notice to the deposit company, require it to produce evidence that it is in compliance with sections 10 and 11 and may fur ther require it to produce evidence to its satisfaction as to the manner in which deposit moneys have been invested or otherwise dealt with.

(2) A company which fails to comply with section 10 or 11 or any notice given under subsection (1) shall be deemed to be unable to pay its debts for the purpose of section 162 of the Companies Act 1981 [title 17 item 5].

Debentures

13 No deposit company may borrow money by issuing debentures or debenture stock or unsecured loan stock unless authorised thereto by the Bermuda Monetary Authority and in accordance with the terms of such authority.

PART IV

RETURNS, ACCOUNTS AND AUDIT

Distinct records of deposit business

14 A deposit company shall keep distinct records and accounts of deposit moneys and the investment thereof.

Returns

15 (1) Every deposit company shall submit to the Bermuda Mon etary Authority, in such form as that Authority shall from time to time approve, not later than thirty days after the 31st March, the 30th June, the 30th September and the 31st December in each year a statement of the assets and liabilities of the company upon such date (or, if such date is not a business day, the last business day prior thereto) and such statement shall include an analysis of the deposit liabilities of the com pany stating within what period such liabilities are payable.

(2) The Bermuda Monetary Authority may require the deposit company to submit such further information as it may deem necessary for the proper understanding of any statement or return furnished by that deposit company under subsection (1) and such information shall be submitted within such period and in such manner as the Bermuda Monetary Authority may require.

(3) Any deposit company which fails to comply with any of the provisions of subsections (1) or (2) or with any requirement of the Bermuda Monetary Authority thereunder commits an offence:

Punishment on summary conviction: a fine of $250 for each day during which the offence continues.

Publication of accounts

16 (1) Not later than four months after the close of each financial year of a deposit company or such longer period as the Bermuda Mone tary Authority may, in any particular case, permit, the deposit company shall exhibit in a conspicuous place in each of its offices and branches and forward to the Authority and to the Minister copies of its balance sheet and statements of its income and retained earnings and the full names of the directors of the company, together with a statement of which directors reside in Bermuda, and the balance sheet and state ments of income and retained earnings shall be accompanied by the re port thereon of an approved auditor.

(2) Any deposit company which contravenes this section com mits an offence:

Punishment on summary conviction: a fine of $500.

Approved auditors

17 (1) Every deposit company shall appoint annually an approved auditor whose duties shall be to make a report upon the annual balance sheet and statements of income and retained earnings, and in every such report the auditor shall state whether, in his opinion, those financial statements present fairly the financial position of the company as at the date of the balance sheet and the results of its operations for the period ended on that date in accordance with generally accepted accounting principles, applied on a basis consistent with that of the preceding period if there is a preceding period.

(2) The report of an approved auditor under subsection (1) shall be forwarded to the Bermuda Monetary Authority and to the Min ister at the same time as the statements are forwarded to them under section 16.

(3) For the purposes of this section, an approved auditor is an auditor who is a member of one of the professional bodies for the time being declared to be approved for the purposes of section 25 of the Banks Act 1969 [title 17 item 20].

(4) No person having an interest in any deposit company oth erwise than as depositor, and no director, officer or agent of any deposit company shall be eligible for appointment as an approved auditor for that deposit company; and any person appointed as such auditor to any deposit company who subsequently acquires such interest or becomes a director, officer or agent of that deposit company shall cease to be an ap proved auditor.

PART V

EXAMINATION

Examination in certain cases

18 (1) The Minister may at any time appoint one or more persons who, in his opinion, is or are qualified to make a special examination under conditions of secrecy of the books and affairs of any deposit com pany —

(a) where he has reason to believe that such deposit com pany may be carrying on its business in a manner detrimental to the interests of its depositors and other creditors or may have insufficient assets to cover its lia bilities to the public or may be contravening any of the provisions of this Act;

(b) where application is made by shareholders holding not less than one-third of the total number of shares in that deposit company for the time being issued, or by depos itors holding not less than one-half of the gross amount of the total deposit liabilities of that deposit company, and the applicants have submitted to the Minister such evidence as he may consider necessary to justify an ex amination and have furnished adequate security for the payment of the costs of the examination;

(2) The Minister may, by notice under his hand to a deposit company prohibit that company from accepting deposits while an exami nation under subsection (1) is in progress, and such notice may contain any further direction which may be given in a notice under section 5(2) by virtue of section 5(3).

Production of books, etc

19 (1) Every deposit company of which a special examination has been ordered under section 18 shall produce to the person or persons appointed under that section, at such times and in such places as such person or persons may specify (being times and places which, in the opinion of such person or persons, would not be detrimental to the con duct of the normal daily business of the deposit company) all books, ac counts and documents in the possession or custody of that deposit com pany, or of which it is entitled to possession or custody, relating to its business, and its directors and officers shall give, within such times as such person or persons may specify, such oral information concerning its business as may be required of them.

(2) If any book, account, document or information is not pro duced in accordance with subsection (1), the deposit company commits an offence:

Punishment on summary conviction: a fine of $250 for each day during which the offence continues.

(2A) If any book, account, document or information specified in subsection (1) is false in any material particular, the deposit company commits an offence:

Punishment on conviction on indictment: a fine of $5,000.

(3) As soon as may be after the conclusion of an examination under this Part, the person or persons appointed under section 18 shall submit a full report on such examination to the Minister who shall for ward a copy thereof to the deposit company.

(4) The Minister may order that all expenses of and incidental to an examination under this Part shall be paid by the deposit company examined or in respect of examinations made under section 18(1)(b), he may order that such expenses shall be defrayed by the applicants.

Powers after examination

20 If, in the opinion of the Minister, an examination under this Part shows that the deposit company concerned is carrying on its business in a manner detrimental to the interests of its depositors and other credi tors, or has insufficient assets to cover its liabilities to the public, or is contravening any of the provisions of this Act, the Minister may take such one or more of the following steps from time to time as may seem to him necessary —

(a) require the deposit company forthwith to take such re medial measures as he may consider necessary in rela tion to its business; or

(b) appoint a person who, in his opinion, has had adequate training and experience to advise the deposit company in the proper conduct of its business and fix the remuner ation to be paid by the company to such person; or

Bermuda Consolidated Legislation

Deposit Companies Act 1974