Brunei: Offshore Business Sectors

• Diversify, expand into and grow the value added financial service sector of the economy of Brunei and the Asia Pacific Region (APR) as a Tier One Player.
• Provide a secure, cost-effective, sensibly regulated IFC facility, which will offer a safe harbour for the conduct of significant regional and international business for corporate and private clients.
• Provide well-qualified Bruneians with purposeful, challenging and rewarding careers, following their educational advantages.
• Attract overseas professionals to assist in running the IFC to the highest standards.
• Encourage expatriate professionals to become involved in training and development of rewarding opportunities for professionally qualified and trained Bruneians in the International Business Sector.
• Increase returns for the hospitality, transport and amenity industries, including eco-tourism, culminating in an holistic result for the country’s economy.
• Position Brunei as an equal partner in the globalisation of financial and commercial activity, and thereby, to generate greater communication with and between other nations.

The Minister of Finance is the responsible minister under all BIFC legislation. The Authority is appointed by His Majesty The Sultan And Yang Di-Pertuan of Brunei Darussalam and is personified by the Permanent Head of the Ministry of Finance. The BIFC division is multi-disciplinary, led by the Head of Supervision, Brunei IFC, and includes banking, trust and insurance supervisors and support staff.

Brunei Banking

• a full international licence for the purpose of carrying on international banking business generally;
• an international investment banking licence for the purpose of carrying on international investment banking business;
• an international Islamic banking licence for the purpose of carrying on international Islamic banking business, granted in respect of full, investment or restricted activities.
• a restricted international banking licence for the purpose of carrying on international banking business subject to the restriction that the licensee may not offer, conduct or provide such business except to or for persons named or described in an undertaking embodied in the application for the licence.

• providing consultancy and advisory services relating to corporate and investment matters, industrial strategy and related questions, and advice and services relating to mergers and restructuring and acquisitions, or making and managing investments on behalf of any person;
• providing credit facilities including guarantees and commitments;
• participation in stock, or share issues and the provision of services relating thereto: or
• the arrangement and underwriting of debt and equity issues.

International banks will pay no tax, and neither will their staff, customers or products.

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Brunei Investment Funds

The Mutual Funds Order, 2001 ('MFO') applies to domestic and international funds and their promoters/managers/custodians. Provision is made for Public Funds, Private Funds and Professional Funds. Islamic Funds are provided for and are defined as funds which do not offend against the Religion of Islam. A Shari'ah Council must be appointed in respect of an Islamic fund. Mutual funds may be in the form of a body corporate, a unit trust, a limited partnership or other arrangement whereby participants (investors) may benefit from the pooling of funds, diversification and the spreading of risk. No bearer shares may be issued.

An increasing number of mutual fund providers are using the jurisdiction to register their (Brunei) collective investment schemes under the Mutual Funds Order.

The MFO provides 'for the regulation of mutual funds in Brunei Darussalam, the supervision and licensing of such funds and of persons promoting and providing services in connection therewith and for other matters relating to mutual funds'.

Provision is made for Public Funds, Private Funds and Professional Funds, Islamic Funds are specifically defined as funds which do not offend against the Religion of Islam.

Mutual Funds may be in the form of a body corporate, a unit trust, a limited partnership or other arrangement whereby participants (investors) may benefit from the pooling of funds, diversification and the spreading of risk. No bearer shares may be issued without the specific consent of the Minister.

No mutual fund may be established, domiciled, offered to the public, traded listed, managed or administered from within Brunei Darussalam unless it holds the appropriate licence or permission issued by the Authority.

Managers, administrators, custodians and trustees (together referred to as “operators”) are required to be appropriately licensed or permitted. Trust companies licensed under the Registered Agents and Licensed Trustees Order, 2000 and appropriately licensed banks (domestic or international) are permitted operators.

Applications for licences are made to the Authority in the manner required, with full disclosure to the Authority of particulars of participants. There is a requirement for the appointment of an appropriate Syari’ah Council in the case of an Islamic fund.

A person cannot be both (i) a manager and (ii) a trustee or custodian of the same fund.

Provisional licensing is accommodated on terms permitted by the Authority, which may also impose conditions on the terms of licensing of both funds and operators.

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Brunei Securities Trading

Securities is very widely defined under the Securities Order, 2001 ('SO') which provides a framework for the establishment of a financial exchange or exchanges in Brunei, and for the licensing of "dealers". The latter may, or may not, be members of an exchange licensed under this Order. The terms 'investment adviser' is also very widely defined. No person or company, whether based in Brunei or visiting, may offer any form of financial product or investment in any form of security without holding a license granted under the SO.

The Securities Order is "An Order to make provision with respect to financial exchanges, dealers and other persons providing advice in respect of, managing or dealing in securities, for certain offences relating to securities, and for other purposes connected therewith”.

The responsible Minister is the Minister of Finance, and the Order is administered by the Authority appointed by His Majesty the Sultan and Yang Di-Pertuan Negara Brunei Darussalam. The Minister may establish or cause to be established within Brunei Darussalam a body or bodies corporate to be exchanges. An exchange shall, with the approval of the Authority, make rules which provide for the conditions of entry and admission into membership and for the regulation generally of the conduct of trading members in connection with the business of an exchange. The secretary of the exchange shall keep a register of the trading members. The register of trading members shall be made available for inspection at the registered office of an exchange during business hours. An exchange shall provide such assistance to the Authority, as the Authority reasonably requires for the performance of the Authority’s functions and duties.

The Minister may by order published in the Gazette require that an exchange shall establish and keep such fidelity fund as he may determine to be administered by the committee on behalf of that exchange. The assets of fidelity fund shall be the property of the exchange but shall be separated from all other property and shall be held in trust for the purposes set out in this Part. Provision is also made for appropriate insurance.

The Authority may, where it appears to be in the interests of Brunei Darussalam, issue directives to an exchange with respect to trading, the manner in which that exchange carries on its business, including the manner of reporting off-market purchases, and any other matter which the Authority considers necessary for the effective administration of this Order and such exchange shall forthwith comply with that directive.

Except as permitted pursuant to the Order, a person shall not carry on the business of a dealer or hold himself out as carrying on such a business unless he is the holder of a dealer’s license granted under Part III. A person shall not act as a dealer’s representative, who in Part III is referred to as the "representative", unless he is the holder of a dealer's representative's license granted under that Part.

Except as permitted pursuant to the Order, a person shall not act as an investment adviser or hold himself out to be an investment adviser unless he is the holder of an investment adviser's license granted under Part III. A person shall not act as an investment representative, who in this Part is referred to as the "representative", unless he is the holder of an investment representative's license under that Part.

Under the Securities Order, an investment adviser is very widely defined, and includes all persons (including companies) who in or from within Brunei Darussalam carry on the business of advising others concerning securities or of investments or of investments or portfolio management. Also included are those who as part of a regular business issue or promulgate analyses or reports concerning securities. Certain institutions are exempted, for example licensed banks, registered newspapers and licensed broadcasters. In the latter two cases it is giving of advice, which is relevant.

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Brunei Insurance

Comprehensive and imaginative legislation, coupled with a flexible regime to suit sophisticated business and personal international insurance and insurance related activities are governed by the International Insurance and Takaful Order, 2002 ('IITO)'.

There are 7 types of licenses available, which include general insurance, life insurance, life and general insurance and captive insurance businesses and International Insurance Manager, International Underwriting Manager and International Insurance Broker. Applicant can be a company including an established foreign or domestic insurance company or licensed registered agent and trust company in Brunei acting as representative for the purpose of license application.

Special provision is made for Financial Unit-linked and Reinsurance (access to domestic market). All long term products are protected against creditors in the absence of fraud and the concepts of insurable interest and ability of a beneficiary to enforce a contract enjoy constructive modification.

International insurance business (i.e. non-domestic business, conducted with non-residents, with the exception of re-insurance) must be carried on by an IBC or a foreign international company incorporated under the International Business Companies Order, 2000 (“IBCO”), a company incorporated under the (domestic) Companies Act (Chapter 39) or a company registered under Part IX of the Companies Act (Chapter 39), which holds a valid licence under IITO (see Forms of Companies).

Further, no person (including a corporation) may carry on any business as an international insurance manager, international underwriting manager or international insurance broker unless he holds a licence relating to such business.

Every application must include a business plan for the first three years of operation; copies of the applicant’s constituent documents, where applicable a copy of the applicant's audited annual accounts for the 3 consecutive years immediately preceding the application, and in the case of a takaful or re-takaful provider, the names of the Shari'ah Council duly appointed to advise that provider. The Authority may request further or other information or documents.

Licence applications for international insurance managers, underwriters and brokers must satisfy the Authority that the controllers, directors and chief executive officers of the applicant are fit and proper persons having knowledge of the insurance related activities proposed to be conducted and is able to maintain sufficient funds to cover its expenses in the proposed activities for the period covered by its business plan.

Prior written consent of the Authority is required to open an office or establish any subsidiary in Brunei Darussalam or elsewhere. (section 24)

Services offered by a licensee are limited to those specified in the licence granted and may be provided only to other licensees under the Order. Services can not be offered relating to domestic insurance business, but a licensed international insurance broker may, notwithstanding any other written law, handle the re-insurance of domestic insurance business.

No taxes or duties of any description are levied, withheld or collected in respect of international insurance business of any licensee (includes insurer, managers, brokers, underwriters) of shares, and no filing or presentation of documents with or to any taxing or analogous authority in Brunei Darussalam is required. The tax/duty exemption may, at no extra charge, be evidenced by a certificate issued by the Minister, any such certificate to be valid for a period of 10 years from its date.

Dedicated Cell Companies ("DCC") are established pursuant to Part XIIA of IBCO, and subject to the prior consent of the Authority, may be initially established or reconstituted as a DCC. A DCC is a single legal person and may establish one or more cells for the purpose of segregating and protecting dedicated assets. The assets are either dedicated assets or general assets, and separate records and protection of dedicated assets by way of segregation and identification must be maintained.

Creditors are restricted in their rights to the cell in respect of which they have made funds available or have a claim.

See Law of Offshore for further details of the regulatory and prudential basis of the insurance sector, and Offshore Law and Tax Regimes for details of fees payable.

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Brunei Trust Management

The Registered Agents and Licensed Trustees Order, 2000 ('RATLO') restricts the provision of 'international business services' to companies licensed under that Order. All establishment and compliance documents (including Certificates of Due Diligence) of International Business Companies (and Limited Partnerships) are filed by these licensed trustees.

There are now 11 (2009) Registered Agents and Licensed Trust Companies registered under RATLO.

RATLO covers “International companies management business” which includes:

• acting as registered agent for the incorporation or registration of International Business Companies ("IBCs") and Foreign International Companies (“FICs”) under the International Business Companies Order, 2000 (“IBCO”), the conversion of overseas companies into IBCs, and the merger, consolidation, continuation, renewal, extension of the duration of, or migration of IBCs.
• providing registered offices, share transfer offices or administration offices for the receipt of post or other articles, IBCs and FICs.
• providing or appointing persons to perform the functions of directors, (mandatory) resident, secretary, nominees, preparing, keeping or filing books, accounts, registers, records, and other matters relating to corporate administration including the establishment of IBCs as Dedicated Cell Companies or Limited Life Companies.

All documents to be filed with the Registrar of International Business Companies (and Limited Partnerships) are filed by licensed registered agent and trusts companies.

Similarly, trust companies must be involved in all International Limited Partnerships (ILP) and “qualifying” trusts – i.e. International Trusts formed pursuant to the ITO and trusts which are established under the laws of other jurisdictions but administered in Brunei.

Trust companies and banks are also involved in the Mutual Funds Order. Trust licenses are made by application to the Authority, made by institutions, professional groups and independent trust groups. A comprehensive licensing process and approval of senior personnel is involved. Ongoing supervision includes the filing of audited accounts of the trust companies (but not their clients) with the Authority. Notifications and approvals of appointments and changes of Key Personnel apply.

Comprehensive information on capital requirements, fees and charges can be found here.

Licensees are, with the approval of the Authority, permitted to establish wholly-owned subsidiaries (whose operations are fully guaranteed by the licensee). Such a subsidiary may be an IBC (as may the licensee itself) and may for the purpose of the licensee’s business act as a trustee, nominee, secretary or director in respect of international business services. The aim is to permit accountable flexibility and segregation in, for example, Collective Investment Schemes, Private Trust Companies, Special Purpose Vehicles and offshore / Headquarters facilities.

Trust companies (including overseas trust companies establishing a branch in Brunei) as well as the entities they administer, are totally exempted from all tax in respect of Brunei operations. Again, their officers, customers and products are not taxed.

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