Sun, Safety and Start-up Structure

A few years ago I wrote a blog for a former company where I explained exactly why I was such a fan of Bermuda as a place for FinTech start-ups to domicile.

My conviction about Bermuda has only become stronger over time. The island has weathered the Covid-19 pandemic extremely well through a combination of strong leadership and being naturally rather “socially distanced” from the rest of the world.

Further positives have been the graduation of the first companies out of the Bermuda Monetary Authority’s FinTech sandbox, coupled with a Government sponsored push to welcome an interesting and diverse set of new “Digital Nomad” visitors.

People have jumped upon the ability to set up temporary residence on island and in doing so have realized just how good both the lifestyle and the business opportunities are here. Add to this a recent push to provide a pilot program offering long-term residency in return for economic investment into businesses in Bermuda and you have a situation where the seeds that were first sown by the Government a few years back are starting to bear fruit within the start-up sector as a whole.

Carefully Crypto-Friendly

When the Bermuda Government first enshrined its Digital Asset Business Act in September 2018 the goal was to create a robust legislative framework for digital asset business and services to be operated within a regulated environment in or from within Bermuda. We have now seen the first success stories and are witnessing the formative years of the blockchain and cryptocurrency scene on the island.

It is also worth noting that a new Crypto Asset Bank is only months away from launching their Bermuda based banking infrastructure for digital assets, which points to the probability of a huge rise in adoption of fully-regulated next generation financial products and services. Where better to innovate than a friendly, safe, well-respected jurisdiction which has opened its welcoming arms to the FinTech sector.

Aside from the more publicized initiative attracting people and businesses to the island, there are other more pragmatic and dare I say “grown-up” reasons for wanting to consider domiciling in Bermuda.

Flexible structures which are perfect for start-ups

As well as the BMA sandbox for licensing the commercialization of digital asset products, the island provides a lesser-known sandbox, that of corporate administration.

At the beginning of a start-up, you are constantly testing the water. You purposefully release updates to your product early and often, both to gather customer feedback and to create greater certainty about your general commercial direction. You don’t always know where your customers are going to be located, or how you’re going to commercialize your product. Even so, you still have to plant a stake in the ground with regards to your corporate structure.

Bermuda is a tax neutral jurisdiction, which is something that the global tax authorities view as a benefit when promoting the flow of capital to create liquidity in the capital markets. It just means that investors won’t run into situations where their capital could be in danger of getting taxed twice.

This tax neutrality allows a start-up the ability to essentially apply the same type of R&D to its financial affairs as it does to its products.

By having your corporate headquarters in a tax neutral jurisdiction like Bermuda you have the complete freedom to change your overall corporate structure without incurring any tax complications once you know more about where the heartland for your business is going to be. When you’re small and don’t generate any revenues, the benefits of this may seem marginal, but once you’re generating revenues or (fingers crossed) thinking about your exit, Bermuda’s tax neutrality can provide a significant boost to your return on investment.

Boots on the ground; our minds augmenting your management

Furthermore, when you’re small you have the opportunity to do something that bigger more established companies simply can’t justify to the tax authorities. If you can satisfy economic substance requirements by having the right team on the ground in Bermuda, you can both generate and hold IP in the jurisdiction which means that once you’re ready to start commercializing your product, you can benefit from the current favorable tax rates.

It should be caveated that this is complicated stuff to get right and it will require some investment in specialist external counsel to set up your structure correctly, but helping people understand how to inject a commercial boost into their corporate affairs without breaking the bank was part of our original vision for [Y]our Partners.

Another key part of the vision was giving people access to our senior Mind and Management capabilities located in Bermuda, London and New York. There would be no rubber stamping of decisions, however, we wanted to be able to watch our clients’ backs like it was our own business. This includes integrating with our clients to bring our wealth of cross-discipline start-up experience to help fine tune the decision-making process.

Wherever you decide to plant your corporate flag in Bermuda or somewhere else, [Y]our Partners can help you to achieve your vision faster.

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