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 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.
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. 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 $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 |
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 $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.
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 USD50 to 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 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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