Company: MHLA
Filing Date: 2025-03-10
Form Type: 10-K
Source: 0001412100-25-000011
Chunk: 53

Company: Maiden Holdings, Ltd.
Filing Date: 2025-03-10
Form: 10-K
Item: Item 1A
Chunk 53
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 and, if so, whether the enacted reforms will positively or negatively affect us.

Legislation enacted in Bermuda in response to the EU’s review of harmful tax competition could adversely affect our operations.

During 2017, the EU Economic and Financial Affairs Council released a list of non-cooperative jurisdictions for tax purposes. The stated aim of this list, and accompanying report, was to promote good governance worldwide in order to maximize efforts to prevent tax fraud and tax evasion. Bermuda was not on the list of non-cooperative jurisdictions but did feature in the report (along with approximately 40 other jurisdictions) as having committed to address concerns relating to economic substance by December 31, 2018. In accordance with that commitment, Bermuda enacted the Economic Substance Act 2018 (as amended) of Bermuda (the “ESA”) that came into force on January 1, 2019.  As noted above under “Regulatory Matters – Certain Bermuda Law Regulations”, the ESA requires an in-scope registered entity (other than an entity which is resident for tax purposes in certain jurisdictions outside Bermuda) that carries on as a business any one or more of the “relevant activities” referred to in the ESA, to comply with economic substance requirements. 

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Under the ESA, holding entity activities (as defined in the ESA and the Economic Substance Regulations 2018, as amended) satisfy the requirement of undertaking a “relevant activity” and therefore would apply to Maiden Holdings. However, because Maiden Holdings’ primary function is to acquire and hold shares or equitable interests in other entities and it does not perform any commercial activities, we believe we are only subject to the ESA’s minimum economic substance requirements, and we file an annual economic substance declaration with the Registrar on that basis. 

Even as a pure equity holding entity, Maiden Holdings will still be required to demonstrate compliance with the ESA that we have “adequate” economic substance in Bermuda, and therefore should have adequate people for holding and managing equity participation, and adequate premises in Bermuda.

Given that the legislation is relatively new and remains subject to further clarification and interpretation, the meaning of "adequate" in this context remains unclear. It is not currently possible to ascertain the steps required to ensure our continued compliance with the ESA, which makes it difficult to predict its future impact. Any entity that must satisfy economic substance requirements but fails to do so could face financial penalties or could be ordered by a court to take action to remedy such failure. It may also be faced with a restriction of its business activities, automatic reporting by the Bermuda authorities