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 has been 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 will pay the same
fee as a non-bearer share company. On 31 December
2009, the memorandum of a bearer share former
IBC will be deemed to be amended to prohibit
the issue of bearer shares, and the company
will become a non-bearer share company. It
will be open to any bearer share former IBC
to elect to disapply this deeming provision.
As a consequence, the vast majority of former
IBCs need to do nothing, according to the
FSC.
The
full text of the BVI Business Companies Act
2004 can be found in the Tax
News Resources section.
The
remainder of this page deals with the company
formation regime in the BVI as it existed
prior to the implemenation of the BVI Business
Companies Act 2004, which began the next year.
The
vast majority of companies formed in the BVI
for offshore purposes were traditionally incorporated
under the International Business Companies
Act 1984 (see below). However this law did
not supersede the existing Companies Law 1963,
also known as Cap. 285, which was based on
English law and is used to form various types
of company used by businesses trading in the
BVI, and also for certain other special purposes.
Companies
formed under the Companies Act 1963 were often
referred to as 'CAC', 'CapCo', or 'Cap. 285'
companies. They could be private companies
limited by shares, by guarantee, or hybrid;
or they could be unlimited, but that is rare.
Public companies can also be formed under
the Act. For all these types of company, Memorandum
and Articles of Association must be filed
at the Companies Registry, along with the
registration fee. For companies limited by
shares the Articles of Association can follow
the Memorandum - 'Table A' applies if no Articles
are registered.
Foreign
companies can re-establish themselves in the
BVI without the necessity for reciprocal arrangements
in the original country of incorporation.
An IBC wishing to leave the BVI may do so.
Responding
to international pressure, the BVI Government
legislated to restrict bearer shares. The
International Business Companies (Amendment)
Acts of 2003 and 2004 provided the legal framework
for immobilising bearer shares.
British
Virgin Islands Ordinary Resident Company
(Superseded)
An ordinary resident company limited by shares
was usually formed for the purposes of carrying
on local business. It must:
- have
two or more members;
-
restrict the transfer of its shares;
- not
invite the public to subscribe for its shares;
and
- must
not have more than 50 members.
Residence
depends on the location of management and
control; usually, if more than half of the
directors are resident in the BVI, then so
is the company. If a resident company carries
on business in the BVI it must obtain a Trade
License, and will pay a license fee depending
on whether the shareholders are residents
or foreigners. The fee due on incorporation
is $200 plus $15 for each $10,000 of nominal
capital in excess of $10,000. Annual registration
fees are from $25 to $10,000 depending on
the gross value of the company's external
(non-BVI) assets.
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British Virgin Islands Ordinary
Non-Resident Company (Superseded)
An ordinary non-resident company limited by
shares is subject to the same rules as a resident
company; see Offshore
Legal and Tax Regimes for details of the
taxation of non-resident companies. Fees on
incorporation are as for resident companies;
the annual registration fee is $250.
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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.
Companies
limited by guarantee can be resident or non-resident,
as for those limited by shares. The fee payable
on incorporation is $100, 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.
Hybrid
companies can be resident or non-resident,
as for companies limited by shares. 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.
Existing
IBCs will be able to amend their Memoranda
of Association to state that they are authorised
to issue only registered shares and that these
may not be exchanged for bearer shares. They
will be required to file this statement with
the BVI Registrar of Companies, along with
a declaration that they have no bearer shares
in issue.
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.
Other statutory
requirements however 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 $350 for capital up
to $50,000 and $1,100 thereafter. The annual
license fee is:
| Authorised
Capital |
Fee |
| Up
to $50,000 |
$350 |
| Over
$50,000 |
$1,100 |
| No
authorised capital |
$350 |
| Below
$50,000 and some or all of the shares
have no par value |
$350 |
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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 $500 and there is an annual license fee,
also $500.
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 has increased from $50 to $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
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 has had 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.
The
FSC announced in July 2007 that it expected
regulations enabling the establishment of
private trust companies to come into force
during the course of coming month. The Order
made by the Executive Council anticipated
this by setting the fees that will be payable
by private trust companies.
According
to the Order, the incorporation fee and annual
fee for a private trust company will be:
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