However,
in July 2007, the British Virgin Islands
Financial Services Commission (FSC) announced
that several amendments were being readied
to the new Business Companies Act that would,
among other things, establish new, simplified
provisions for the transitioning of bearer
share companies to non-bearer share companies.
The
original transitional provisions required
companies to fully immobilise their shares
by 31 December 2010. However, the FSC said
that it had become aware of industry concerns
that compliance with the transitional arrangements
would place a huge burden on the sector,
given the recent introduction of new companies
legislation and a new online companies registry.
"Perhaps
even more important, it would cause considerable
inconvenience to the directors and owners
of former IBCs who will have to pass resolutions
amending their memoranda of association,"
the FSC observed.
"The
BVIBCA and the IBC Act before it were designed
to provide a legal mechanism for incorporating
companies without unnecessary administrative
burdens. The effort that would be required
to comply with the existing transitional
provisions is not consistent with this underlying
philosophy," the Commission noted.
The
FSC said that it had listened to the representations
that it had received from industry, and
had tried to find a workable solution that
would achieve the immobilisation of all
bearer shares before 2010, but which would
impose the minimum administration on BVI
companies.
An
Order by the Executive Council attempted
to achieve this by deeming that the memorandum
of every former IBC will be amended with
effect from the transition date to prohibit
the issue of bearer shares, unless the company
elects that the deeming provision should
not apply; and by abolishing the staged
increases in annual fees between 2008 and
the transition date.
The
FSC announced that, given this will make
the transitioning of most bearer share companies
to non-bearer share companies a straightforward
process, the transition date was brought
forward one year from 31 December 2010 to
31 December 2009.
During
the years 2008 and 2009, a former IBC that
is a bearer share company paid the same
fee as a non-bearer share company. On 31
December 2009, the memorandum of a bearer
share former IBC was deemed to be amended
to prohibit the issue of bearer shares,
and the company became a non-bearer share
company. It was open to any bearer share
former IBC to elect to disapply this deeming
provision. As a consequence, the vast majority
of former IBCs needed to do nothing, according
to the FSC. An IBC that wished to continue
to issue bearer shares had to disapply the
provisions of the new Act.
The
full text of the BVI Business Companies
Act 2004 can be found in the Tax
News Resources section.
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British Virgin Islands
Company Limited by Guarantee (Updated: See
Above)
Under
the Companies Act, a company limited by
guarantee must have a minimum of two members;
the Memorandum of Association contains a
statement of the amount up to which the
members guarantee the company's debts. The
Articles can provide for the members to
have differing 'shares' of the assets and
liabilities.
The
Company Limited by Guarantee has certain
advantages, including that there is no list
of members on the annual return, and that
control over assets can be achieved without
the use of shares; in some jurisdictions,
profits realised from such companies are
classified as capital gains rather than
as income. Specialist advice is required
by anyone considering the use of a company
limited by guarantee.
The
fee payable on incorporation is USD100,
and annual registration fees are as for
companies limited by shares.
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British Virgin Islands Hybrid
'Cap 285' Company (Updated: See Above)
A hybrid company under the Companies Act
usually has a group of shareholding members
which is distinct from the group of guarantors.
The shareholders can have 100% of the voting
power, and can execute a trust deed in respect
of their shareholdings; under the BVI's
trust legislation (see Law
of Offshore) a trust Protector can be
appointed to oversee the trustees' actions.
The result, if the company is set up correctly
(specialist advice needed!), is to separate
control and membership of the company from
beneficial interest, which is sometimes
desirable.
The fee payable on incorporation and the
annual registration fees are as for companies
limited by shares.
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British Virgin Islands
Public Company
A public company formed under the Companies
Act is similar to a private company limited
by shares except that it must have 5 or
more members, and the restrictions listed
above do not apply.
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British Virgin Islands International Business
Company (Updated:
See Above)
The
International Business Company was the most
widely used vehicle for offshore operations
in the BVI; it normally took the form of
a private company limited by shares. The
governing legislation is the International
Business Companies Act 1984, updated by
the International Business Companies (Amendment)
Act 1990 and the International Business
Companies (Amendment) Acts of 2003 and 2004,
which immobilise bearer shares (see above)
and impose record-keeping requirements on
professional intermediaries. The
Memoranda of Association of existing IBCs
were deemed to have been amended to state
that they are authorised to issue only registered
shares and that these may not be exchanged
for bearer shares.
Under
the International Business Companies (Amendment)
Act 2003, from December 31, 2004, all international
business companies (IBCs) located in BVI
are required to establish and maintain a
Register of Directors, and must appoint
their first director within 30 days of the
IBC's incorporation. As from 2007, all IBCs
are known as BVI Business Companies. Other
statutory
requirements remain minimal, and flexible:
- Only one
director and one shareholder are required;
- Shareholders,
directors and officers need not be resident
in the BVI and there is no stipulation
as to their nationality;
- There is
no minimum capital requirement; shares
may be either registered or bearer and
may be issued in any currency (bearer
shares now have to be deposited with an
authorised intermediary, who must record
the identity of the beneficial owner);
- Accounts
need not be kept; however, if they are
kept there is no requirement for an audit;
- No returns
are needed of shareholders, directors
or officers;
- Shareholders'
and directors' meetings need not be held
in the BVI and can be held by telephone;
- The Memorandum
and Articles of Association are the only
documents to be held on the public record.
IBC status
is granted subject to certain conditions:
- No business
may be transacted with residents in the
BVI;
- No ownership
interest in real property in the BVI is
permitted; property may be leased for
office use only;
- Banking
or trust business may be carried on only
if an appropriate license is issued;
- Likewise,
a licence is required to carry on insurance
or re-insurance business;
- Engaging
in the business of company management
or providing registered facilities for
BVI incorporated companies is not permitted.
IBCs are permitted
to own shares in other BVI companies, maintain
bank accounts in the jurisdiction and employ
the services of local professionals. IBCs
are exempt from BVI taxes by statute.
It is usual
to use a registered agent in the BVI to
incorporate an IBC (eventually it is obligatory
to appoint one anyway; there are about 70
of them, licensed by the Government). Fees
for incorporation of an IBC are based on
the company's authorised share capital.
Normally, the incorporation process takes
no more than one day; however, for banks,
trust companies and insurers the process
is lengthier (see Offshore
Legal and Tax Regimes).
Statutory incorporation
fees are USD350 for capital up to USD50,000
and USD1,100 thereafter. The annual license
fee is:
| Authorised
Capital |
Fee |
| Up
to USD50,000 |
USD350 |
| Over
USD50,000 |
USD1,100 |
| No
authorised capital |
USD350 |
| Below
USD50,000 and some or all of the shares
have no par value |
USD350 |
IBCs
which disapplied the bearer share regulations
of the new Business Company Act pay higher
fees.
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British
Virgin Islands Limited Partnership
BVI Limited
Partnerships are governed by the Limited
Partnerships Act 1996; as regards general
partnerships this act reproduces almost
exactly the common law provisions of the
English Partnership Act 1980, but the clauses
dealing with limited partnerships follow
modern US Delaware precedent.
Formation of
a limited partnership is normally carried
out by a registered agent (it is obligatory
to nominate one on formation in any event).
The agent files the Memorandum and Articles
of Association with the Registrar of Limited
Partnerships, who issues a Certificate of
Limited Partnership; the partnership then
exists; but if there is no certificate,
the partnership will be deemed to be a general
partnership. The fee payable on registration
if USD500 and there is an annual license
fee, also USD500.
The rights
and limitations of limited partnerships
under the Act mirror those of the International
Business Company (see above); however the
Act distinguishes between local and international
partnerships - local partnerships may transact
local business but are not tax-exempt, while
international partnerships are tax-exempt
but barred from local business.
The BVI limited
partnership legislation was designed to
facilitate the use of such vehicles in investment
and mutual funds. As is usual in limited
partnerships, there are one or more general
partners with unlimited liability and management
responsibility, while limited partners are
liable only to the extent of their capital
contributions, and their identity does not
need to be disclosed. It is possible for
the same person to be both a general and
a limited partner in the same partnership.
A limited partner's interest in the partnership
is assignable. There are no minimum capital
requirements or prescribed debt:equity ratios.
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British Virgin Islands Trusts
The trust
law of the British Virgin Islands is based
on English trust law. The Trustee Amendment
Act 1993 (the "Amendment Act") updated the
original British Virgin Islands Trustee
Act (itself largely based on the English
Trustee Act 1925).
The Amendment
Act introduced a fixed perpetuity period
not exceeding 100 years, and has modern
'wait-and-see' provisions to deal with interests
that might vest outside the perpetuity period.
The Amendment Act also introduced purpose
trusts. See Law
of Offshore for a fuller description
of the legal regime for Trusts in the BVI.
BVI trusts
are exempt from registration under the Registration
and Records Act, and trustees are exempt
from any need to file annual returns and
from any other reporting requirements.
The majority
of BVI trusts are exempt from all taxes
provided there are no beneficiaries resident
in the BVI, and that the trust does not
conduct any business in the BVI or own any
land in the jurisdiction; see Offshore
Legal and Tax Regimes for further
details. A trust duty of $50 is imposed
on each trust instrument subject to BVI
proper law.
The Amendment
Act provided for the appointment of a 'protector
of trust', effectively a supervisor of the
trustee(s), and also managing and custodian
trustees. A company offering trust services
must obtain a licence under the Banks and
Trust Companies Act 1990 and conform to
various conditions. See Offshore
Business Sectors: Trust Management.
With
effect from 1 March 2004, three new pieces
of Trust Legislation came into force in
the BVI:
- The
Virgin Islands Special Trusts Act (VISTA);
-
The Trustee (Amendment) Act; and
-
The Property (Miscellaneous Provisions)
Act.
The
Vista Act allows trustees of VISTA trusts
which hold a shareholding in a BVI International
Business Company to disengage the trustee
from management responsibilities. The use
of trusts to cater for the succession of
shares in companies has historically been
impeded by the 'prudent man of business'
rule of English trust law which is designed
to help preserve the value of trust investments.
The new legislation leaves the responsibility
for managing the company to the directors
of the company.
The new Act applies only where there is
an enabling provision in the trust instrument.
Where the new Act applies, designated shares
will be held on “trust to retain”
and the trustee’s duty to retain the
shares as part of the trust fund will have
precedence over any duty to preserve or
enhance their value. It is also possible
to amend existing trusts to allow the provisions
of the VISTA Act to apply to them.
The Act is confined to shares in BVI International
Business Companies and Companies Act companies;
and the trustee of a VISTA trust must be
a company which holds a licence to undertake
trust business under the Banks and Trust
Companies Act, 1990.
The Trustee (Amendment) Act makes a number
of amendments to the BVI Trust law. These
include: new regulations improving the BVI's
purpose trusts regime and some amendments
in relation to conflicts of laws provisions,
including robust, comprehensive and carefully
crafted provisions protecting BVI trusts
(and dispositions to their trustees) against
“forced heirship” claims.
Trust
duty is USD100.
The
Property (Miscellaneous Provisions) Act
provides that deeds executed by individuals
no longer need to be sealed.
In
July, 2005, the BVI said it would amend
its trusts legislation so that special trust
vehicles can hold shares in private trust
companies (PTCs), thus broadening the appeal
of the vehicles.
The
Virgin Islands Special Trusts Act (VISTA),
which came into effect in March 2004, allowed
trustees of VISTA trusts which hold a shareholding
in a BVI International Business Company
to disengage the trustee from management
responsibilities.
The
British Virgin Islands introduced new laws
on private trust companies from January
1, 2007.
According
to Robert Mathavious, Managing Director
and Chief Executive Officer of the BVI Financial
Services Commission, speaking in November
2006, the legislation has been introduced
by amending the Financial Services Commission
Act and issuing a new Regulatory Code under
that Act which enables certain categories
of companies to apply, on a fast-track basis,
for exemptions from the licensing requirements
and other provisions of the BVI’s
Banks and Trust Companies Act.
The
changes were applauded by the Society of
Trust and Estate Practitioners (STEP), which
has said that the introduction of the measures
would make the BVI a highly attractive jurisdiction
to use for the incorporation of private
trust companies.
Deputy
Chairman of STEP-BVI, Christopher Mckenzie
observed that that the element of certainty
that would be created by the new measures
would attract those who are seeking a reputable
jurisdiction in which to set up these sorts
of structures.
On
1 August 2007, regulations enabling the
establishment of private trust companies
(Financial Services Exemption Regulations
2007) came into force. A private trust company
is exempt from obtaining a trust license.
An Order made by the Executive Council,
in anticipation of the new regulations,
set the fees payable by private trust companies.
According
to the Order, the incorporation fee and
annual fee for a private trust company are
as follows:
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