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Table
of Statutes
This is a non-exhaustive
list of the main British Virgin Islands statutes affecting
offshore and non-resident business. The statutes are listed
in alphabetical order - click on the statute for a fuller
description of the statute or the legal regime it forms part
of.
Anti-Money
Laundering Code of Practice (2000)
Anti-Money
Laundering Code of Practice (2008)
Banks
and Trust Companies Act 1990
British Virgin Islands Trustee Act
Companies Act 1963
BVI Business Companies Act, 2004
Financial Services (International Co-operation) Act 2000
Financial
Services Commission Act 2001
Financial
Services Commission (Amendment) Act of 2004
Hotel
Aid Ordinance
Insurance Act 1994
Insurance Regulations 1995
International Business Companies Act 1984
International Business Companies (Amendment) Act 1990
International Business Companies
(Amendment) Act 2002
International
Business Companies (Amendment) Acts of 2003 and 2004
Limited Partnerships Act 1996
Mutual Funds Act 1996
Pioneer Services
and Enterprise Ordinance
Property
(Miscellaneous Provisions) Act, 2003
Public Funds (Sub-Class) Regulations 1997
Trustee Amendment Act 1993
Trustee
Ordinance 1961
Trustee
(Amendment) Act 2003
Virgin
Islands Special Trusts Act, 2003
The British Virgin Islands (BVI) Government
established an independent regulatory body - the Financial
Services Commission (FSC) - on 1 January 2002.
The
formation of the FSC saw the division of the marketing and
regulatory functions within the BVI offshore financial services
centre. In practical terms the formation of the FSC means
maintenance of the clear regulatory standards set out in previous
legislation such as the Anti-Money Laundering Code of Practice
(2000) and the Financial Services (International Co-operation)
Act 2000. The FSC's primary functions include:
- Protecting
consumers by ensuring that all firms, individuals etc. authorised
to provide financial services in and from the BVI are competent
and financially sound;
-
Promoting improvements in public understanding of the benefits
and risks associated with financial products;
-
Instigating and pursuing action, including the imposition
of fines, and issuing "cease and desist" orders;
-
Monitoring, detecting and preventing financial crime, as
well as assisting in the prosecution of crime;
-
Pursuing these objectives in a way that is economic and
efficient and which ensures that costs and restrictions
on firms are proportionate to the benefits of regulation;
-
Facilitating innovation in Financial Services in the jurisdiction;
-
The new FSC ensures that all BVI companies comply with the
same standards. The regulator is required to do more than
simply administer and enforce the law, it is relied upon
to provide guidance within the financial services industry.
2004
saw the official launch of the Financial Investigation Agency,
marking what the government hopes is an important step towards
curbing financial crime. The agency was enacted by the Legislature
on December 30, 2003 and will function as a specialist investigative
law enforcement arm of government. Its primary focus will
be to investigate the BVI financial services industry and
support the BVI mutual legal assistance regimes.
Highlighting the agency’s launch as an example of the territory’s
dedication to upholding international initiatives to combat
financial crime, Chief Minister Orlando Smith commented: “This
commitment is the foundation of our entire financial industry
and, I can assure you, it will always be a top priority for
this Government”.
The
FIA took over the role formerly carried out by the Royal Virgin
Islands Police Force.
In
2008, the BVI updated its anti-money laundering and terrorist
financing regime with the issuance of a new code of practice
on 20th February, in accordance with powers granted under
Section 27 of the BVI Proceeds of Criminal Conduct Act, 1997.
The
Code replaces the Guidance Notes on the Prevention of Money
Laundering, issued in 1999, and mandates that relevant businesses
and professionals must take particular measures to prevent,
deter and tackle money laundering and terrorist financing.
In
a statement accompanying the announcement of the new code,
the FSC explained that:
"To
protect its integrity and reputation as a well-regulated international
finance centre, the BVI has adapted to the changing global
environment and taken necessary measures to deter and confront
financial crime.
"This
enhanced and improved regulatory regime complements the BVI’s
current robust international cooperation framework and effectively
provides a sufficient check against the activities of persons
involved in financial crimes."
The
BVI’s current legislative arsenal of protection from
financial crime now includes the Drug Trafficking Offences
Act, 1992, Proceeds of Criminal Conduct Act, 1997, Anti-Money
Laundering Regulations, 2008, Anti-Money Laundering and Terrorist
Financing Code of Practice, 2008 and the Non-financial Business
(Designation) Notice, 2008.
In
December 2008, the British Virgin Islands received praise
in a Caribbean Financial Action Task Force Evaluation Report.
The
report concluded that the BVI is largely compliant with the
FATF 40+9 Recommendations and that, as a territory, it has
maintained a robust public policy commitment to ensuring that
it plays its part in the global fight against money laundering
and the financing of terrorism.
According
to the BVI Financial Services Commission, the CFATF report
highlighted the efforts undertaken by the BVI since the last
CFATF mutual evaluation of the Territory in 2002 to ensure
compliance with established Anti-Money Laundering/Combating
the Financing of Terrorism (AML/CFT) principles and the Territory’s
commitment to the establishment of standards in legal, law
enforcement, regulatory and international cooperation matters.
The
British Virgin Islands Financial Services Commission (FSC)
has published details of its Approved Persons Regime, which
entered into force on March 2, 2009, following approval by
the Board of Commissioners on January 20 of that year.
The
guidelines, which were published by the FSC on February 18,
2009, are designed to assist the regulator in "the consideration
and approval of applications for the appointment of senior
officers, including applications relating to the approval
of actuaries, auditors and other independent officers pursuant
to any financial services legislation."
The
guidelines also outline senior officer duties and responsibilities
and incorporate a set of rules governing the process and procedure
for the approval of senior officers of a regulated person
and actuaries, auditors and other independent officers.
According
to the guidelines, a suitable candidate for a senior officer
position must be "qualified and have appropriate experience."
In order to be appointed as a senior officer, a candidate
must also demonstrate "a high level of competence and
integrity." Additionally, before granting approval of
an application for a senior officer, the Commission must be
satisfied that the candidate is "fit and proper"
in accordance with the criteria established in the Commission’s
'Guidance Notes on Fit and Proper Test.'
The
introduction to the guidelines states:
"The
Commission exercises judgement and discretion in assessing
fitness and propriety and takes into account all relevant
matters including honesty, integrity, reputation, competence,
expertise, experience, capability and financial soundness.
These criteria have equal application to the consideration
of applications for the approval of actuaries, auditors and
other independent officers, whose qualifications and experience
are generally covered under their respective applicable financial
services legislation."
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British Virgin Islands Trust Law
BVI Trusts are
formed under the Trust Ordinance 1961 (based on the English
Trustee Act 1925), as updated and amended by the Trustee Amendment
Act 1993.
Since the 1993
Act, there is no requirement for registration of trusts in
the BVI, and there is no public disclosure of information
regarding trusts. Trust duty of $50 is payable on each trust
instrument, which is achieved by buying and affixing stamps,
creating no record.
Due to the Amendment
Act, the regime for trusts in the BVI is very flexible. The
following are some of the main features of BVI trust law:
- the proper
law of a trust can be specified by the trust instrument;
in the absence of a specified jurisdiction, a trust will
be under BVI legislation if the trustee or the trust administration
is situated in the BVI;
- trusts can
migrate into and out of the BVI; but outwards migration
is only possible if the 'receiving' jurisdiction recognizes
the validity of the trust;
- purpose trusts
are permitted in perpetuity and must have at least one BVI
trustee (resident professional or equivalent);
- the perpetuity
period can be set at 100 years, but 'lives in being' is
still possible;
- 'wait and
see' provisions are included as standard;
- 'protectors'
are explicitly permitted, and their powers are clearly defined;
- forced heirship
provisions are excluded;
- trustees may
be given wide discretionary investment powers;
- BVI trusts
are exempt from all taxation provided that there is no resident
beneficiary and no BVI assets.
The
Banks and Trust Companies Law 1990 introduced licensing for
companies providing trust services. Trust licenses are as
follows:
- A General
Trust License permits services to be offered generally;
the minimium paid-up capital is $250,000 and a deposit of
$20,000 must be made as prescribed by the Governor; the
annual license fee is $10,000.
- A Restricted
Trust License restricts the provision of services to those
undertakings specified in the license. There are no minimum
capital or deposit requirements; the annual license fee
is $300.
Amendments to
the licensing legislation in 1995 incorporated 'gateways'
which provide for the disclosure of information to the regulatory
authorities and law enforcement agencies in other countries
to assist the investigation of illegal or criminal activities.
The BVI authorities however do not respond to 'fishing expedition'
enquiries from other jurisdictions.
The
BVI's trust regime was substantially updated in 2004 with
three pieces of legislation.
The
Virgin Islands Special Trusts Act, 2003 (VISTA)
The
'VISTA' law allows BVI trusts to exclude the so-called “prudent
man of business rule” which has traditionally made the
trust an unattractive vehicle to hold long-term assets and
requires trustees to monitor and intervene in the affairs
of underlying companies. The Act enables a shareholder to
establish a trust of his company that disengages the trustee
from management responsibility and permits the company and
its business to be retained as long as the directors think
fit.
The
legislation permits the entire removal of the trustee’s
monitoring and intervention obligations (except to the extent
that the settlor otherwise requires); permits the settlor
to confer on the trustee a duty to intervene to resolve specific
problems (eg a deadlocked board); and allows trust instruments
to lay down rules for the appointment and removal of directors
(so reducing the trustee’s ability to intervene in management
by appointing directors of its own choice).
Some of the features of the new Act are as follows:
-
The Act does not apply to BVI trusts generally: it only
applies where there is a provision in the trust instrument
directing the Act to apply.
-
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. The trustee will not therefore be liable for the
consequences of holding (rather than disposing of) the shares.
-
The Act specifies that, subject to any contrary provisions
in the trust instrument, unless the trustee is acting on
an “intervention call” (as defined in the Act),
the trustee may not exercise its voting or other powers
so as to interfere in the management or conduct of any business
of the company; the management or conduct of the company’s
business will be left to those appropriate to deal with
it, namely its directors, whose fiduciary duties to the
company remain intact, except to the extent that the trustee/shareholder
is refrained qua trustee from exercising some of the powers
of a shareholder.
-
The new statute also provides that the trust instrument
may include “office of director rules” specifying
how the trustee must exercise its voting powers in relation
to appointment, removal and remuneration of directors, and
the trustee is generally required to follow these rules.
Except in compliance with these rules, the trustee must
generally take no steps to procure the appointment or removal
of the company’s directors.
-
The Act further provides that the trust instrument may specify
that the trustee may intervene in the affairs of the company
in specified circumstances, ie when required to do so by
an “intervention call” by a beneficiary, an
object of a discretionary power of appointment, a parent
or guardian of either of them, the Attorney General (in
relation to charitable trusts), the enforcer (in relation
to purpose trusts) or other specified persons.
-
The Act specifies that (unless the trust instrument provides
otherwise) the trustee is permitted to dispose of designated
shares in the management or administration of the trust
fund, but can only do so with the consent of the directors
of the company (and that of such persons as are specified
in the trust instrument).
-
The new statute contains provisions enabling beneficiaries,
directors and others to apply to the court for enforcement
of the terms of the Act and, on the application of a specified
person, the court is empowered to authorise the trustee
to sell designated shares where retaining them is no longer
compatible with the wishes of the settlor.
-
The Act is confined to shares in BVI International Business
Companies and Companies Act companies.
-
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, 2003
This Act makes a substantial number of amendments to the Trustee
Act, including the following:
-
With a view to making BVI trusts significantly more attractive
in the commercial context, including a new section (which
will only apply if there is a statement to this effect in
the trust instrument) which enables trustees to create various
forms of charges of trust assets in favour of creditors.
-
The Act repeals section 83 of the Trustee Act and replaces
it with a new set of conflict of laws rules relating to
trusts. The new section contains robust, comprehensive and
carefully crafted provisions protecting BVI trusts (and
dispositions to their trustees) against “forced heirship”
claims, which also prevent foreign judgments based on such
forced heirship claims from being recognised or enforced
in the Territory.
-
The BVI’s purpose trusts legislation has been comprehensively
overhauled in the light of amendments which have been made
to other offshore jurisdictions’ legislation, various
commentaries which have been written by experts and some
issues which have arisen in practice since this legislation
was originally introduced.
- Section
92 of the Trustee Act, which deals with the payment of trust
duty has been replaced by a comprehensive new section which
makes it clear what documents are subject to trust duty
and how this must be paid.
- Trusts
which are exclusively charitable are now exempted from trust
duty; but the section includes a modest increase in duty
from $50 to $100.
- The
Act includes a number of further sections dealing with charities,
variation of trusts, illusory appointments, the power to
compromise claims, flee clauses and the jurisdiction of
the BVI’s courts.
Property
(Miscellaneous Provisions) Act, 2003
This Act abolishes the requirement that deeds executed by
individuals 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, allows trustees of VISTA trusts which
hold a shareholding in a BVI International Business Company
to disengage the trustee from management responsibilities.
It
is anticipated that the legislation will be amended to enable
applications for exemption from trust licensing to be made
when an unremunerated PTC is not offering its services to
the public.
"Once
this amendment comes into effect, the BVI financial services
industry expects a great deal of use will be made of Vista
trusts as charitable or non-charitable purpose trusts to hold
shares in PTCs," noted Christopher McKenzie, partner of law
firm Walkers.
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British Virgin Islands Banking Law
The British
Virgin Islands banking sector, which has been limited to a
small number of international banks as part of the BVI's determination
to exclude money-laundering, is regulated under the Banks
and Trust Companies Act 1990 (The Act).
Under The Act,
banks are licensed in three categories:
- A General
Banking License permits all forms of banking activity; the
minimum paid-up capital must be $2m, and the bank must deposit
$500,000 in a way prescribed by the Governor. The annual
fee is $20,000.
- A Class 1
Restricted Banking License permits international business
only; a licensee may not transact business with BVI residents,
other than another licensee or an IBC; the minimum paid-up
capital is $1m and $500,000 must be deposited as the Governor
requires. The annual license fee is $16,000.
- A Class 2
Restricted Banking License permits the conduct of banking
business only with counterparties named in the license;
the minimum paid-up capital is $1m and $500,000 must be
deposited as the Governor requires. The annual license fee
is $16,000.
Amendments
to The Act in 1995 incorporated 'gateways' into the legislation
which provide for the disclosure of information to the regulatory
authorities and law enforcement agencies in other countries
to assist the investigation of illegal or criminal activities.
The BVI authorities however do not respond to 'fishing expedition'
enquiries from other jurisdictions.
Banks
are supervised by the Inspector of Banks, Trusts and Company,
an official of the Financial Services Commission, which was
created by the
BVI Government as an independent regulatory body on 1 January
2002.
The
establishment of the FSC followed recommendations published
in 2000 by KPMG, which identified the key components of a
well-run financial centre. The establishment of an independent
regulatory authority satisfies these KPMG requirements.
The
formation of the FSC saw the division of the marketing and
regulatory functions within the BVI offshore financial services
centre. In practical terms the formation of the FSC means
maintenance of the clear regulatory standards set out in previous
legislation such as the Anti-Money Laundering Code of Practice
(2000) and the Financial Services (International Co-operation)
Act 2000 (subsequently updated with the issuance of a new
Anti-Money Laundering Code of Practice in 2008).
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British Virgin Islands Insurance Law
The Insurance
Act 1994 and the Insurance Regulations 1995 establish the
regulatory and supervisory regime for insurance, including
captives, in the BVI. Insurance licenses are issued by the
Insurance Division of the Financial Services Commission, and
distinguish between Long Term, General and 'Credit Life' insurance
companies. Insurance professionals (agent, broker, adjuster,
etc) need to have a Certificate of Authority issued by the
FSC. Day-to-day supervision of the insurance sector is exercised
by the Director of Insurance, an official of the Financial
Services Commission.
The minimum paid-in
capital required is $200,000 for Long Term business, $100,000
for General business, and $300,000 for both. 'Credit Life'
companies require capital of $10,000.
The minimum solvency
margin for Long Term business is $250,000. For General business
the margin is calculated according to Net Premium Income (NPI):
for NPI up to $1m, the margin is $100,000; for NPI between
$1m and $5m, 20% of NPI; plus 10% of any NPI above $5m.
In considering
the issue of a license, the authorities will take into account
the demonstrated skills of the proposed management, and the
viability of the business plan presented as part of the application.
Applicants must either be already incorporated, or a Lloyds
underwriter
Amendments to
BVI insurance legislation in 1995 incorporated 'gateways'
into the rules which provide for the disclosure of information
to the regulatory authorities and law enforcement agencies
in other countries to assist the investigation of illegal
or criminal activities. The BVI authorities however do not
respond to 'fishing expedition' enquiries from other jurisdictions.
Licensed insurers
must maintain a principal office in the jurisdiction and must
appoint an insurance manager resident in the BVI. Audited
annual accounts have to be filed with the Commissioner within
3 months of the end of an accounting period.
The
Insurance (Amendment) Act, 2002 makes provision for segregated
portfolio companies. A segregated portfolio company (sometimes
referred to as a protected cell company) is an entity that
allows each portfolio or cell to have legal separation of
assets. Thus, the assets and liabilities within a segregated
portfolio would be segregated from the assets and liabilities
of other segregated portfolios and those assets and liabilities
of the company that are not held in any segregated portfolio.
The creation of segregated portfolios is subject to the approval
of the Financial Services Commission.
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British Virgin Islands Mutual Fund Law
All open-ended investment funds in the BVI are regulated
under the Mutual Funds Act 1996. The Act came into force
in January, 1998 and divides open-ended investment funds
into a number of classes:
- Private
Funds, being funds sold to no more than 50 investors on
a private basis;
- Professional
Funds, being funds sold to market professionals or individuals
with net worth over $1m; and
- Public Funds,
divided into 'ordinary' mutual funds sold to the general
public and 'selective' mutual funds sold on a selective
basis through intermediaries;
and applies differing levels of regulation to the three
classes. All open-ended funds have to be 'recognised' or
registered by the Investment Services Division of the Financial
Services Commission. The Act also sets up a licensing regime
for managers and administrators of mutual funds. Umbrella
funds and funds of funds are both permitted. Closed-end
funds are not covered by the Act.
The Act applies
both to BVI funds and their administrators/managers, and to
foreign funds distributed in the BVI and their local administrators
or managers.
Private
Funds: Offerings
can be made to as many as 300 people as long as they were
specifically targeted; more than 300 targets would probably
breach the Act's definition of 'private'. Private funds
have a statutory right to recognition; but they must be
accepted as 'recognised' before commencing business.
Professional
Funds: these are funds whose shares are made available
only to professional investors, a majority of whom are initially
investing not less than $100,000 or currency equivalent. A
professional investor is someone whose ordinary business involves
transactions similar to the one being undertaken, whose net
worth is at least $1m or currency equivalent, and who has
agreed to be treated as a professional investor. Professional
funds also have a statutory right to recognition, but have
14 days after commencing business to obtain recognition.
Public Funds:
these are funds which are neither private nor professional
funds. Public funds must be registered, and may not make an
offering to the public before they have published a prospectus
which has been approved by their directors and which has been
filed with the FSC. A public fund must have a custodian who
is functionally independent of the fund's manager or administrator
and must maintain accounting records and prepare audited financial
statements yearly, keeping these records available to the
FSC and all investors.
Selected Public
Funds: The Public Funds (Sub-Class) Regulations 1997 defined
a class of select public funds which are offered by a recognised
investment provider under the BVI or another country's laws
to individuals with whom the provider has a written agreement
to offer an interest in the fund concerned. These funds benefit
from a more flexible regulatory stance on the part of the
FSC.
NB: This is an
abbreviated statement of some of the main features of the
BVI Mutual Funds Act and should not be used as the basis for
making investment decisions, which require appropriate professional
guidance.
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13/07 
