British Virgin Islands: Types of Company
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 US$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 US$100.
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 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:
- where the company is authorised to issue 50,000 shares or less, US$750 instead of the normal fee of US$350
- where the company is authorised to issue more than 50,000 shares, US$1,500 instead of the normal fee of US$1,100.