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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 (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."
In
January, 2010, the Financial Services Commission announced
the coming into force of the Financing and Money Services
Act, 2009, which
lays a legislative framework for the licensing, regulating
and supervision of persons who engage in the provision of
money or value transfer services. The Act will bring the BVI
into full compliance with the Financial Action Task Force’s
Recommendation 23, which inter alia requires that natural
and legal persons who provide money or value transfer services
or money or currency-changing services should be licensed
or registered.
The Financing
and Money Services Act established a transition period of
six months from the date the Act came into force for existing
business to make the required application for licensing to
the Commission.
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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 $16,000.
- 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 $500.
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.
In
July, 2010, the Financial Services Commission noted amendments
to the Banks and Trust Companies Act, 1990, and the Companies
Management Act, 1990.
Among
the legislative amendments proposed, of particular note are
powers to enable the Commission to review licenses granted
in respect of trusts regulated in the British Virgin Islands.
The move, the Commission said, is to be made to bring the
territory’s regime in line with international best standards.
The new provisions, the Commission said, would improve synergies
between the Banks and Trusts Companies Act, 1990, and the
Companies Management Act, 1990.
In particular,
the amendment will allow the FSC to revoke and re-evaluate
licenses granted in respect of trusts. Licenses could be altered
on request or where certain factors initiate such a move,
namely: changes in the activities of the licensee; competence;
compliance culture; or other ‘relevant factors’.
Other amendments to the Acts would review vesting provisions,
to address the transfer, sale or disposition of any of a licensee’s
operations.
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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 $50,000.
- 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 $32,000.
- 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 $32,000.
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.
In January,
2010, the Financial Services Commission announced the coming
into force of the Insurance Act, 2008. The new Insurance Act
replaces the Insurance Act, 1994. The Insurance Regulations,
2009, which were gazetted on December 22 replace the Insurance
Regulations, 1995. The Insurance Regulations were made by
Cabinet, acting on the advice of and in consultation with
the Commission, according to powers granted by section 82
of the Insurance Act, 2008.
The Insurance
Regulations, 2009, provide more details for classifications
for insurance business, maintenance of registers, and specifications
for what constitutes public record.
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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.
In
2010, the Mutual Funds Act 1996 was replaced by Part Three
of the Securities and Investment Business Act (SIBA), having
largely the same effect. The new Act retains the same classification
of funds. It is expected that Regulations will be issued under
the new Act, which will include an audit requirement and the
introduction of authorised representatives for funds without
a significant presence on the BVI. Conyers Dill and Pearman
said that hedge
funds that are already recognized or registered under the
Mutual Funds Act, 1996, need not take any action in respect
of their existing licenses.
In
June, 2010, the Financial Services Commission (FSC) sought
industry input on the proposed Public Funds Code, which was
being drafted pursuant to section 63(1) of the Securities
and Investment Business Act, 2010 (SIBA).
When
finalized, the Public Funds Code was to codify rules surrounding
the impending introduction of public funds in the island,
regulated by the Commission.
The Commission
invited industry practitioners and other stakeholders to review,
evaluate and comment on the proposed code, which was available
on the Commission’s website, with a deadline of June
30, 2010.
With the
review complete, the Financial Services Commission published
the Public Funds Code 2010 in January, 2011. The Code will
come into force on 31 March 2011 and a transitional period
for existing public funds to comply with the new regime will
end on 30 June 2011.
The document
codifies rules that will apply to Public Funds in such as
areas as:
- Corporate
governance;
- Policies
and procedures;
- The
segregation and safekeeping of Fund property;
- Valuation
and pricing;
- Dealing
and managing with functionaries;
- Record
keeping;
- Relationship
with, and reporting to, the Commission; and
- Disclosure
to investors.
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