ADT 2005 Annual Report Download - page 95

Tax Legislation
The United States Congress has in the past considered legislation affecting the tax treatment of
U.S. companies that have undertaken certain types of expatriation transactions. In October 2004, the
United States Congress enacted such legislation, which did not, however, retroactively apply to the 1997
acquisition of Tyco International Ltd. by ADT Limited. Legislation passed by the U.S. Senate on
November 18, 2005 would modify parts of the American Jobs Creation Act of 2004, but would not
retroactively apply to the 1997 acquisition of Tyco International Ltd. by ADT Limited. We expect
various tax proposals to be introduced in the United States Congress in the future and cannot provide
assurance that these proposals would not have adverse effects on Tyco if enacted. Such adverse effects
could include substantially reducing the tax benefits of our corporate structure, materially increasing
our tax burden or otherwise adversely affecting our business.
Negative Publicity
There is continuing negative publicity regarding, and criticism of, U.S. companies’ use of, or
relocation to, offshore jurisdictions, including Bermuda. As a Bermuda company, this negative publicity
could harm our reputation and impair our ability to generate new business if companies or government
agencies decline to do business with us as a result of the negative public image of Bermuda companies
or the possibility of our customers receiving negative media attention from doing business with a
Bermuda company.
Bermuda law differs from the laws in effect in the United States and may afford less protection to holders
of our securities.
We are organized under the laws of Bermuda. It may not be possible to enforce court judgments
obtained in the United States against us in Bermuda based on the civil liability provisions of the U.S.
federal or state securities laws. In addition, there is some doubt as to whether the courts of Bermuda
would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers
based on the civil liabilities provisions of the U.S. federal or state securities laws or hear actions against
us or those persons based on those laws. We have been advised that the United States and Bermuda do
not currently have a treaty providing for the reciprocal recognition and enforcement of judgments in
civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any
U.S. federal or state court based on civil liability, whether or not based solely on U.S. federal or state
securities laws, would not automatically be enforceable in Bermuda.
As a Bermuda company, Tyco is governed by the Companies Act 1981 of Bermuda, which differs
in some material respects from laws generally applicable to United States corporations and
shareholders, including, among others, differences relating to interested director and officer
transactions, shareholder lawsuits and indemnification. Likewise, the duties of directors and officers of
a Bermuda company are generally owed to the company only. Shareholders of Bermuda companies do
not generally have a personal right of action against directors or officers of the company and may only
exercise such rights of action on behalf of the company in limited circumstances. Under Bermuda law,
a company may also agree to indemnify directors and officers for any personal liability, not involving
fraud or dishonesty, incurred in relation to the company. Thus, holders of Tyco securities may have
more difficulty protecting their interests than would holders of securities of a corporation incorporated
in a jurisdiction of the United States.
Item 1B. Unresolved Staff Comments
None.
2005 Financials 19