Walkers Fundamentals 2022

Please join us on 31 October in NYC for Walkers Fundamentals 2022 where we will explore the latest trends in Investment Funds.

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Guernsey Climbs Legal 500 Rankings

Walkers' Guernsey office is now ranked by Legal 500 as Tier 1 for legal advisers in five of its core practice areas.

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10 Walkers' Lawyers Recognised in Asia Business Law Journal's Top 50 Offshore Lawyers 2022

10 lawyers across Walkers' Bermuda, Cayman, Hong Kong and Singapore offices have been recognised in the Asia Business Law Journal’s A-List of top offshore lawyers.

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Walkers is a leading international law firm. We advise on the laws of Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Ireland and Jersey.
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Central Bank's Securities Markets Risk Outlook Report and Key Areas of Focus for Funds and their Service Providers

On 8 February 2022, the Central Bank published its Securities Markets Risk Outlook Report for 2022. This report outlines the Central Bank's supervisory priorities for securities markets in 2022 and also highlights conduct risks that the Central Bank has identified as key for securities markets. The report sets out these risks under the following eight headings: (i) misconduct risk; (ii) sustainable finance; (iii) governance; (iv) conflicts of interest; (v) financial innovation; (vi) data; (vii) cyber security; and (viii) market dynamics together with the Central Bank's expectations relating to the identification, mitigation and management of such risks by regulated financial service providers and market participants.

Our advisory focuses on the sections of the report of most relevance to funds and their service providers.

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CLO Migration from the Cayman Islands to Bermuda

The Companies Act 1981 of Bermuda (the “Companies Act”) permits a body corporate incorporated as a Cayman Islands exempted company (the “Cayman company”) to migrate to Bermuda by way of continuation as a Bermuda exempted company under the Companies Act (the “Registrant”).

Pre-conditions to registration

The Registrant must:

  1. obtain all necessary authorisations, if any, required under the laws of the Cayman Islands in order to enable it to continue as an exempted company registered in Bermuda;

  2. make an application to the Bermuda Monetary Authority (the “BMA”) accompanied by:

    (a) a statement of the proposed business of the exempted company;
    (b) information concerning the beneficial owners of the exempted company; and
    (c) a legal opinion of foreign counsel in the jurisdiction from which the Registrant is discontinuing, and

  3. provide financial statements prepared for a period ending within twelve months of the proposed date of continuance.

The BMA will grant the relevant consent where these conditions are met. Walkers has agreed an expedited process with the BMA allowing for same day consent to be granted with respect to the migration of any Cayman CLO vehicle.


Process of continuation to Bermuda

On satisfaction of the pre-conditions to registration, the Registrant must make an application for registration accompanied by:

  1. the original signed memorandum of continuance; and

  2. the relevant government fee and filing fee to the Registrar of Companies in Bermuda (the “Registrar”).

The Registrar will register the memorandum of continuance and issue a certificate of continuance if it is satisfied that the Registrant is in compliance with the Companies Act. As with the BMA, Walkers has agreed an expedited process with the Registrar allowing for same day registration upon the migration of a CLO issuer from the Cayman Islands.

The Registrant should forward a copy of the certificate of continuance to the competent authority in the Cayman Islands.


Effect of continuation in Bermuda

The registration of the continuance of a Cayman company will not be deemed to create a new legal entity or prejudice or affect the continuity of the body corporate which was formerly a Cayman company and has now become an exempted company continued in Bermuda. For example:

  1. The property of the Cayman company continues to be the property of the continued company.

  2. The continued company continues to be liable for its obligations predating its registration as a Bermuda exempted company.

  3. Any existing cause of action, claim or liability to prosecution in respect of the Cayman company is unaffected; and any civil, criminal or
    administrative action or proceeding pending by or against the Cayman company may be continued by or against the continued company.

  4. Any conviction against, or any ruling, order or judgment in favour of or against the Cayman company may be enforced by or against the
    continued company.


Whilst the continued company remains liable for its obligations when it was a Cayman company, the Companies Act is silent on the priority of any secured obligations of the continued company. It would be advisable for any secured party of the continued company to file an application with the Registrar to register any security created in the register of charges as maintained by the Registrar (the “Register of Charges”). Upon filing, that security will have priority over any other security interests which are subsequently registered in the Register of Charges and any unregistered charges in respect of that security.


Click to view advisory

Bermuda Economic Substance Update

Following consultation with industry, the Economic Substance Regulations 2018 have been amended by the Economic Substance Amendment (No.2) Regulations 2021 ("Amendment Regulations") which amends the definition of the relevant activity of "fund management" in Bermuda. Certain consequential revisions have also been made to the Economic Substance Guidance Notes ("Revised Guidance Notes"). The Amendment Regulations and Revised Guidance Notes became operative with effect from 1 January 2022.

Consequently, with immediate effect, an entity (which includes a company to which the Bermuda Companies Act 1981 applies, a Bermuda LLC and a Bermuda partnership, but excludes an entity that is resident for tax purposes in a jurisdiction outside of Bermuda that is not on Annex 1 to the EU list of non-cooperative jurisdictions for tax purposes) will be carrying on the relevant activity of "fund management" if it manages investments for an 'investment fund' (as such term is defined in the Investment Funds Act 2006) and must comply with the Economic Substance Act 2018 ("ES Act") and related regulations. Prior to the amendment, only entities with physical presence in Bermuda were regarded as carrying on "fund management" business.

"Managing investments" is construed in accordance with the Investment Business Act 2003 ("IBA") and is defined as "managing or offering, or agreeing to manage, assets belonging to another person where those assets consist of or include investments".

Post amendment, for the avoidance of doubt, where an entity is managing investments for an investment fund, it will be carrying on the relevant activity of fund management for the purposes of the ES Act whether or not it is required to be licensed to conduct such activity in accordance with the IBA. This will therefore include all entities, even if they do not have a physical presence in Bermuda. 

For entities with a financial year end of 31 December, the first reporting period where entities will have to detail their compliance with the economic substance requirements will be 30 June 2023. However, steps need to be taken now to ensure compliance with the relevant 'CIGAs' (core income generating activities).

Walkers has a dedicated global Regulatory & Risk Advisory practice group that can offer legal advice and assistance in connection with all aspects of economic substance and all other regulatory compliance. The WPS team can assist with economic substance implementation and the submission of filings. For further assistance or to discuss the economic substance requirements in Bermuda and how they may impact your business, please speak with your usual Walkers contact or one of the contacts listed below.

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Cayman Islands: Update On The Securities Investment Business Act

The Securities Investment Business Act (as amended, the “SIBA”), which is supervised by the Cayman Islands Monetary Authority (“CIMA”), provides for the regulation of entities carrying on “securities investment business”. Typical examples of persons carrying on securities investment business include investment managers, investment advisors, arrangers of deals and broker-dealers.

This advisory provides a round-up of recent developments in relation to the SIBA, including administrative fines, ongoing compliance obligations, single family offices and virtual assets.


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Offshore Perspective: Updates to HK Listings Rules

SPACs and Enhanced shareholder protection

Following market consultations, the Hong Kong Stock Exchange (HKEx) has recently published two sets of significant amendments to its Listing Rules (together with related guidance notes, the Amendments). The Amendments create a new listing regime for special purpose acquisition companies (SPACs) and enhance shareholder core protection standards for HKEx listed companies. The Amendments take effect on 1 January 2022.


Shareholder Core Protection Standards

The Amendments introduce a common set of core shareholder protection standards (the Core Standards) that will apply to all companies with shares listed on the HKEx, regardless of jurisdiction of incorporation. This approach will supersede the current regime, which broadly requires overseas issuers to afford protections to shareholders that are at least equivalent to those available in Hong Kong. The Core Standards cover a broad range of matters, including notice and conduct of shareholder general meetings and voting requirements and the appointment and removal of directors. The Core Standards are intended to be applied in a unified manner across all listed companies, and so derogation from any of the Core Standards will not ordinarily be available. Prospective issuers incorporated outside of Hong Kong and the PRC are required to demonstrate how their domestic corporate law regime, together with their constitutional documents, satisfy the Core Standards. Companies that currently have shares listed on the HKEx will be required to confirm compliance with the Core Standards not later than their second annual general meeting after 1 January 2022.

With approximately 75% of companies with shares listed on the HKEx incorporated offshore with more than 50% incorporated in the Cayman Islands), Walkers' dedicated equity capital markets team in Hong Kong is working very closely with prospective issuers, listed clients and onshore advisers on the amendments required to meet the Core Standards from a Cayman, BVI or Bermuda law perspective.

HKEx-listed SPACs

The Amendments introduce Chapter 18B to the Listing Rules, which creates a new listing regime for SPACs. Whilst some of the more restrictive proposals set out in the earlier consultation document have not been taken forward, the HKEx's SPAC listing regime will nevertheless differ from the US and European approaches in a number of key areas in relation both to the SPAC's IPO and subsequent business combination. These include:

  • limiting IPO and pre-business combination trading to professional investors (and requiring a minimum of 75 professional investors, of which at least 20 must be institutional);
  • stringent eligibility requirements for the SPAC's promoters / sponsors;
  • mandatory PIPE investment for the business combination; and
  • requiring a fresh listing application for the post-business combination combined entity.

It remains to be seen how the HKEx's SPAC listing regime will be received by market participants in light of significant competition from the US and European markets and from the Singapore Stock Exchange (SGX). Our teams across Hong Kong and Singapore have advised on a significant number of SPAC IPO and de-SPAC business combination transactions across the region, and are actively working with clients exploring both HKEx and SGX SPAC listings, with a number of these expected to come to market early in the new year.

Walkers is proud to be able to field one of the largest and most experienced dedicated offshore capital markets teams in the region, with team members based both in Hong Kong and Singapore. Contact details for the core team members are set out below and we would be delighted to discuss any aspect of the Amendments, or in relation to regional equity capital markets transactions more generally, as helpful.

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