It was a blustery, grey day in Bermuda, and a clutch of Bank of Montreal executives who had flown in were huddled in a board room.

Top of the agenda for the March 2013 meeting: how to lessen the burden of flying six executives to the palm-fringed island a couple times a year — the bare bones required for tax purposes to officially keep a subsidiary there with no staff, no desks, no phones and no premises.

Two years earlier, BMO had acquired Lloyd George Management, an investment firm focused on Asia. LGM, as it's known, had most of its staff at two subsidiaries in Hong Kong and London. But its parent company was incorporated in zero-tax Bermuda — despite having nothing more there than a mailbox at a law firm specializing in offshore financial services.

To keep up the legal appearance of the company's Bermuda residency, a majority of LGM's board of directors — made up mostly of BMO senior managers — had to meet in person on the island at least twice a year. If not, there would be a risk the company could be deemed to reside elsewhere, possibly in Canada, where it may have to pay tax.

And there was the catch: It was proving tough to get enough people to jet down to Bermuda for the board meetings, according to the BMO executive chairing the gathering.

"We were having trouble getting six people to attend the meeting every time in Bermuda," said the executive, Barry Cooper, according to a transcript of the meeting.

The solution? They cut the number of people on the board from 11 to seven. Now only four directors would have to attend in person in Bermuda in order to "have fulfilled the tax guidelines," Cooper said.

Thousands of leaked files

This unprecedented glimpse behind the scenes as a big Canadian bank struggled with running one of its offshore subsidiaries comes from the Paradise Papers, the huge leak of tax-haven financial records that was made public Sunday. The leak was obtained by German newspaper Suddeutsche Zeitung and shared exclusively in Canada with CBC/Radio-Canada and the Toronto Star via the International Consortium of Investigative Journalists.

It contains thousands of documents relating to all five of Canada's big banks, most of them to do with the mundane, daily details of operating a globe-spanning financial conglomerate. Much of the material comes from Appleby, a law firm that offers offshore legal and administration services in eight tax havens around the world.

The Paradise Papers leak includes millions of records from offshore law firm Appleby and the corporate registries of 19 tax havens. (AFP/Getty Images)

Among the leaked files is a transcript of discussions during that 2013 meeting. The board members in attendance later turned their attention to concerns about potentially being hit with a big tax bill. LGM's operations in Hong Kong had been routing as much profit as possible to the offshore parent company in Bermuda.

"We booked as much of our income as we could here," said LGM's founder, according to the leaked transcript.

But times had changed. The world's biggest economies, including Canada, had united to devise measures limiting the scope of various cross-border tactics big companies can use to minimize their tax. Arrangements openly employed by companies like Apple, Starbucks and banks, see businesses legally route profits through low-tax jurisdictions or exploit loopholes in foreign tax laws.

'How long are we possibly liable?'

LGM had recently scaled back its profit shifting, and board members were worried the Hong Kong tax authorities might notice and go back and scrutinize previous fiscal years — possibly demanding more tax be paid.

'Hopefully, we just let these things run off and times run out.' - A BMO executive

"How long are we possibly liable?" asked one of them, whose identity is not clear from the transcript.

Another board member mentioned that Hong Kong has a statute of limitations to reassess old tax returns. "I think it's six years," the board member said.

Some discussion ensued.

"Hopefully, we just let these things run off and times run out," a BMO executive said.

"No news is good news," another unidentified board member chimed in.

They resolved to take a wait-and-see approach.

'No active clients'

In a statement to CBC and the Toronto Star, BMO acknowledged that its LGM Bermuda operation has "no active clients." The bank did not directly address questions about why, then, it keeps the island shell corporation going or what tax advantages it derives.

"We have robust governance in place for our subsidiaries, including strategic oversight of the business by their respective boards as well as oversight to ensure compliance with tax and all other laws," the bank said.

BMO also wouldn't say why it felt the need to change LGM's accounting to book more of its profits in Hong Kong, and in particular, whether the previous practice was flawed. All the bank would say is that it "reviewed LGM's arrangements" before and after acquiring it "to ensure they conformed to BMO's policies."