British Virgin Islands Summary - BVI International Business Company

The International Business Company is the most widely used vehicle for offshore operations in the BVI; it normally takes 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. Existing IBCs will be able to amend their Memoranda of Association to state that they are authorised to issue only registered shares and that these may not be exchanged for bearer shares. They will be required to file this statement with the BVI Registrar of Companies, along with a declaration that they have no bearer shares in issue.

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. Other statutory requirements however 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).

BVI 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 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.

Asset Protection Trust

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. See Offshore Business Sectors: Trust Management.

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 $50 to $100.

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, 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.