British Virgin Islands Company Formation
Contributed by Europe Emirates
29 October, 2018
British Virgin Islands Company Formation
The British Virgin Islands Business Company format has arguably been the most popular offshore corporate vehicle of the last 20 to 30 years. A brief introduction to the BVI's legal framework as well as its tax rules, companies legislation and limited company format are included here.
The BVI – a beacon of low-tax stability
One the BVI's main selling points is its stable and predictable legal system. The BVI has been largely self-governing since independence from Great Britain in 1967 but has retained its constitutional links to the United Kingdom as a UK Overseas Territory, with the Queen as official head of state. Its colonial heritage has also bequeathed it a system of common law, familiar with investors the world over.
The Government has welcomed offshore business and it has created a legislative and regulatory structure which has attracted investors in their hundreds of thousands. However, the BVI's almost complete absence of taxation has helped to drive much of this business to the jurisdiction, and the Business Companies Act (see below) lowered the income tax rate to 0 percent for both local and international companies. There is also no capital gain tax, sales tax or VAT, withholding taxes or inheritance tax.
The BVI Business Companies Act
On 1 January 2007 the British Virgin Islands Business Companies Act 2004 (the BVI BC Act) became the sole Business Companies Act in the jurisdiction, creating an environment where financial institutions and corporations can undertake a wide range of structured asset and project finance transactions in the BVI.
Under the 1984 IBC Act, which preceded the 2004 Business Companies Act, just one corporate form was available, that of the company limited by shares. Under the new regime, several different types of companies can be incorporated. These are:
- Companies limited by shares. The most popular form of BVI company.
- Companies limited by guarantee not authorised to issue shares. This corporate form is likely to prove useful for not for profit organizations;
- Companies limited by guarantee authorised to issue shares. This 'hybrid' type of company provides greater flexibility in structuring transactions, as a result of its combined equity and guarantee membership;
- Unlimited companies authorised to issue shares. This structure provides greater transparency, as it is possible to look through the company to its shareholders; and
- Unlimited companies not authorised to issue shares. This type of company could be used to ensure effective estate planning.
The Act also allows companies to be registered as Restricted Purposes or Segregated Portfolio Companies.
Forming A BVI Private Limited Company
The BVI Business Companies Act requires every BVI business company to have a registered agent and an application to the Registry to incorporate a BVI business company may only be made by the person who will be the first registered agent of the company. Other requirements include that:
- Every company must have a registered office. The registered office is where documents may be legally served on the company. The registered office must be a real physical address in the BVI – a post box is not sufficient.
- Every company must have a memorandum and articles of association – the equivalent of a company's constitution – that complies with the Act.
- Every company limited by shares must have at least one shareholder and at least one director, who may be the same person. The registered agent has a period of 6 months from the incorporation of the company to appoint the first director(s) and it is the first director(s) who will issue the first shares in the company.
- Every company must keep accounts and other records of its financial transactions; these must be kept at the company's registered office.
The usual timescale for incorporating a BVI company is no more than one working day from the time the application was received by the Registry.
The fees for incorporating a company limited by shares, effective from January 1, 2018, are as follows:
- USD450 where the company is authorised to issue less than 50,000 shares
- USD1,200 where the company is authorised to issue more than 50,000 shares (including an unlimited number of shares)
A company will also have to pay an annual fee of the same amount, commencing in the year after its incorporation.
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