British Virgin Islands Law of Offshore

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.

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:

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 will take over the role formerly carried out by the Royal Virgin Islands Police Force.

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.

The Banks and Trust Companies Law 1990 introduced licensing for companies providing trust services. Trust licenses are as follows:

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 '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).

This Act makes a substantial number of amendments to the Trustee Act, including the following:

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.

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).

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 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.

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.