ADT 2006 Annual Report Download - page 82

Risks Relating to Our Jurisdiction of Incorporation
Legislation and negative publicity regarding Bermuda companies could increase our tax burden and
affect our operating results.
Legislation Relating to Government Contracts
We continue to assess the potential impact of various U.S. federal and state legislative proposals
that would deny government contracts to U.S. companies that move their corporate location abroad.
The legislative proposals could cover the 1997 acquisition of Tyco International Ltd., a Massachusetts
corporation, by ADT Limited (a public company that had been located in Bermuda since the 1980’s
with origins dating back to the United Kingdom since the early 1900’s), as a result of which ADT
changed its name to Tyco International Ltd. and became the parent to the Tyco group.
In addition, the U.S. federal government and various other states and municipalities have proposed
or may propose legislation that would deny government contracts to U.S. companies that move their
corporate location abroad. We are unable to predict with any level of certainty the likelihood or final
form in which any such proposed legislation might become law, the nature of regulations that may be
promulgated under any future legislative enactments, or the financial impact such enactments and
increased regulatory scrutiny may have on our business.
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 U.S. Treasury Department studies to be released and 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
20 2006 Financials