The Bermuda Government’s bid to set up a limited liability companies framework has been welcomed by professionals.

Grant Gibbons, the Economic Development Minister, tabled legislation to allow LLCs as a new commercial structure on the island in the House of Assembly on Friday.

David Cooke, head of corporate at law firm Conyers Dill & Pearman, said that, while limited companies were the Bermuda standard, times had changed.

He explained: “That’s been the vehicle of choice for so long and used to be the vehicle of choice in the US.”

Mr Cooke added: “We in the private sector have been hearing calls for this for a number of years and it’s been a very big project to get this done.

“We are hoping that it will not only increase the number of entities on the island, but will also show that Bermuda is open for business. Bermuda used to be seen as on the cutting edge of international business and we’re getting that back.”

Mr Cooke explained: “LLCs are a cross between a limited partnership and a corporation. They’re very flexible entities and what the Americans tend to use these days.”

CDP was one of the driving forces behind the tabling of the new Limited Liability Company Act, which is modelled on legislation in the US state of Delaware.

Mr Cooke said: “A very large proportion of our business comes from the US.

“The drive here was to provide an entity which is recognisable and more useful for American lawyers.”

LLCs have recently been introduced in offshore jurisdictions like the Cayman Islands and are also used in the Isle of Man, Anguilla and the Marshall Islands in the Pacific.

But Mr Cooke said the Caymans legislation was “less closely aligned” with existing Delaware law, so their legislation presented more difficulty to US lawyers and companies.

Dr Gibbons told the House on Friday that LLCs, if approved, would be the first new commercial structure in Bermuda for more than 100 years.

He said: “This new structure is a tremendous step forward ensuring that Bermuda has corporate products that are modern and innovative, but also familiar to many prospective clients.”

Dr Gibbons added: “LLCs are typically viewed as hybrid entities because they offer characteristics and advantages of both partnerships and corporations.

“The fundamental similarity to partnerships is that LLCs are managed and operated pursuant to a contractual agreement among the members, who are owners of the LLC.

“This provides significant flexibility for LLC members to determine the most appropriate terms and conditions for administration and governance of the LLC.

“LLCs are also similar to corporations, in that LLC members generally enjoy limited liability, so any personal liability is limited to the value of each member’s capital contribution to the LLC.

“This limitation on liability typically remains in place even if LLC members actively participate in the management of an LLC.

“In fact, the ability of the members to both manage the day-to-day operations of an LLC while retaining their limited liability are two cornerstones of this structure and are particularly attractive to investors.”

Mr Cooke added: “The principal advantage is the flexibility — rather like a partnership, the LLC if governed by an agreement rather than by corporate statute and Chancery rules and that sort of thing.

“Primacy is given to freedom of contract rather than the corporate rules.”