Want to set up a firm in the British Virgin Islands? We can assist you in starting a business or in buying a shelf company in the BVI with a full package of necessary documents, legal advice and follow-up support. Incorporation of a firm in the British Virgin Islands includes provision of a registered office (for at least 1 year in any of our service plans), an apostilled set of constitutional documents, secretarial services and assistance with compliance fee and pre-approval for opening an account in banks of the British Virgin Islands. The total price of company formation in the BVI includes all necessary fees and charges for the first year of operation, as well as full one-year nominee service (package Optimum).
The BVI legal system is based on English common law. The constitution was adopted in 1967. The corporate legislation was based on The Companies Act (Cap. 285) and The International Business Companies Act, 1984 (Cap. 291).
However, the BVI Business Companies Act, 2004 and its further amendments became the only corporate law in the BVI on January 1, 2007. The said Act (hereinafter, the Act) deleted the differences between offshore and onshore companies. The expression “international business company” (‘IBC’) was changed for a “business company” (‘BC’). The IBC’s limitations for the types of activities were abolished. The BVI BC is permitted to trade with the BVI residents and acquire property in the BVI.
According to the Act, the principal forms of business organization in the BVI are:
The most common structure is the company with its liability limited by shares, or Business Company (BC or BCA, “Business Companies Act Company”). The Registry timescale to incorporate a new company is 1 to 5 days. The timescale for a new turnkey entity in the BVI is two weeks.
Suffixes to denote limited liability in company names are ‘Limited’, ‘Corporation’, ‘Incorporation’, ‘Société Anonyme’, ‘Sociedad Anónima’, ‘Gesellschaft mit beschrankter Haftung’ or the abbreviations ‘Corp., ‘Ltd.’, ‘Inc.’, ‘S.A.’ или ‘GmbH’. For an unlimited company the abbreviation will be ‘Unltd’. The specific type of other companies must be indicated in their names. For example, restricted purposes companies need to add “SPV” to their names, while segregated portfolio companies need to include such phrase or the abbreviations “SPC” before the required name ending.
In the BVI the company name may consist of the phrase “BVI Company Number” plus the relevant number. The company may also have an alternative name, written with non-Latin alphabet symbols. The adoption of such name requires notarized translation of the name and the approval of the same by the Registrar. If a company is registered with an additional foreign character name the Memorandum must have a statement indicating so.
The required name must first be approved by the Registrar of Companies following the agent’s request. The name shall be available and acceptable. Following the approval, the name may be reserved for the company for 90 days. The Registrar of Companies may refuse the registration of any particular name of a BVI BC if such name already exists or suggests the patronage of the Royal Family or the Government of the British Virgin Islands. The BVI BC Act now recognizes re-registration of company names that were previously used, if those company names were for companies that have been dissolved or discontinued or changed their names (at any time after the expiry of seven years from the date of certificate of discontinuance, dissolution or change of name). Besides, affiliate companies may be registered under similar names.
The following names or their derivatives or equivalents in other languages require the approval or license from the Registrar:
arbitrage, assurance, banc, bancorp, bank, banque, bourse, broker, building society, bureau, casino, change, chartered, cooperative, credit, currency, exchange, fiduciary, fund, imperial, insurance, life, loan, lottery, municipal, mutual, mutual fund, provident, reinsurance, risk, royal, saving(s), trust, trustee company, university.
Every BVI company must maintain a registered office in the BVI. The registered address will be provided by the registered agent (there are about 70 registered agents in the BVI now). The following information and documents shall be kept at that address: register of directors and shareholders; register of charges, book of mortgages, copies of Memorandum and Articles of Associations and an impression of the company’s seal (which the company is required to have by law).
In case of any changes introduced in the registers of director or shareholders, the registered agent shall be notified accordingly within 15 days from the date of such changes. The registered agent shall be also provided with the written confirmation of the actual place where the company’s records and seal is kept. In case such address is changed the registered agent shall be notified within 14 days.
The re-domiciliation of companies both to and from the BVI is possible, the procedure involving both incorporating a company on the BVI and the completion of all formalities in the previous jurisdiction, as well as the corresponding changes to the company's structure according to the owner's requirements.
1) The company submits to the relevant authorities all the required accounts, dues, etc., that are current at the time of redomicile.
2) The company compiles and signs the <i>Articles of Continuation</i>. This is a specific document confirming the company's decision to redomicile to the BVI.
3) The Articles of Continuation, together with the Certificate of Good Standing, both apostilled, shall be sent to the BVI with the initial Memorandum and the Articles of Association of the company.
4) Once the Memorandum and the Articles of Continuation have been filed with the database of the BVI Registrar of Companies, a corresponding Certificate of Continuation is obtained there, confirming that from the day on which the Certificate has been obtained, the company is registered on the BVI, and that it complies with the relevant legislation. When the Certificate is obtained, all the procedures to delete the company from the previous Register can be carried out.
5) After having been deleted from the Register in the previous jurisdiction, the company is only governed by the BVI legislation and, therefore, has the right to reduce the number of its directors to one, as well as to undertake other necessary changes. Corresponding minutes to that effect should be signed by both the former and current directors.
When the company is domiciled out of the BVI, the Registrar shall issue the notice that the company has ceased its existence in the BVI and to strike to company off the Register. Therefore, the company shall submit the documents confirming its valid registration in another jurisdiction; otherwise, the company will continue to be treated as if it were a BVI company, even if it is struck off the Register for non-payment of annual fees.
Business Companies are permitted to own shares in other BVI companies, maintain bank accounts in the jurisdiction and employ the services of local professionals. BCs are exempt from BVI taxes by statute.
A BVI company limited by shares is required to have a minimum of one director who can be a natural persons or a body corporate. There is no legal requirement that the director be the BVI resident. The company’s first director shall be appointed by the registered agent within 6 months from the date of the registration. The first shares in the company are issued by its first director. The company can not start trading unless the first director is appointed and at least 1 share is issued.
The subsequent directors shall be appointed by the company’s shareholders or by the directors, if permitted by the memorandum or articles. Director’s details are disclosed to the local agent, but do not appear on the public file unless the company chooses to do so. The sole director of the company may appoint an alternate director to act in his place in case the sole director dies. Nobody can be appointed director without his previous written consent. If a company does not have any directors, the Act states that any person who manages, or who directs or supervises the management of the business and affairs of the company is considered to be a director and will be liable for the company’s debts.
The Act contains a number of provisions regarding the duties of a director and the standard of conduct required of a director. The most important obligations set out in the Act are that a director must:
The Act provides that a person, including a company, can be a director unless that person:
The directors can delegate most of their powers to committees of directors or agents but certain important powers cannot be delegated, e.g. the power to amend the memorandum or articles, the power to appoint agents and the power to appoint directors.
Notwithstanding any provisions in the memorandum or articles to the contrary the directors of a company have no power whatsoever, (i) to restrict the power of the members to amend the memorandum or articles, (ii) to change the percentage of members required to pass a resolution to amend the memorandum or articles, or (iii) in circumstances where the memorandum and articles cannot be amended by the members.
The new Act also allows a director of a subsidiary to act in the best interests of its holding company even though it may not be in the best interests of the company, provided he is expressly permitted to do so by the memorandum or articles, and has the prior agreement of all shareholders where the company is not a wholly owned subsidiary. And, finally, in the context of joint company, the director may act in the best interests of a shareholder or shareholders, even if it is not in the best interests of the company.
Anyone can obtain the details of current director(s) publicly by making an application to the Registrar. Confidential: address, nationality, date of birth and other personal information.
There is no requirement for the BVI companies to appoint a secretary, though the director may be appointed as secretary. There are no special requirements for qualifications of the company’s officers. They may be both natural persons and bodies corporate.
THE BVI companies may have one or more shareholder, individual or corporation of any nationality or residence. Shareholders’ details are disclosed to the local agent, but do not appear on the public file, unless the company chooses otherwise. General meetings may be held anywhere in the world, as often, as the shareholders may think fit, by telephone or other means of communications.
The frequency and location of general meetings of shareholders are determined by the directors. The meetings can be held by proxies, via telephone or any other means of communication.
In general, shareholders will have the rights conferred on them in the memorandum (with the provision for their variability or cancellation). The Act specifies that a shareholder has the right to one vote, the right to an equal share of any dividend, and the right to an equal share in the distribution of surplus asset. When distributions are made, the directors shall make sure that the company will be able to pass the “solvency test” right after such distribution. For this, the net worth of the company’s assets shall exceed its liabilities, so that the company would be able to pay them when due.
The shareholders of a share limited company are only liable for the company’s debts to the extent of the amount outstanding on their shares.
There is no longer a concept of authorized share capital, or indeed of share capital, under the Act. The memorandum of such companies must state the maximum number of shares they are authorized to issue. The company is to issue at least one share; the payment deadline shall be defined in the memorandum or articles. Shares may be issued in any currency, with any par value or without it. Usually the maximum number of shares the company is authorized to issue is 50 000 (the maxim amount of shares for the minimum stamp duty), the shares are issued in American dollars at the minimum price of 1 dollar.
1. the shares shall be issued immediately after the first director has been appointed (that is, within 6 months from the company’s incorporation).
2. the company may provide in its memorandum for the issuance of shares with or without par value, of different classes and series.
3. it is not obligatory that the shares are fully paid by the moment of their issuance. Still, the shareholder is liable before the company with the sum unpaid on shares; therefore, his obligations will be transferred if the ownership in shares is transferred.
4. the shares are deemed issued at the date shown in the register of shareholders.
Unless it is otherwise stated in the memorandum, a company or a segregated portfolio company may not issue bearer shares, convert or exchange registered shares to bearer shares. The companies in breach of this provision are liable to the fine of $10 000.
Pursuant to the Law, the companies registered under the International Business Companies Act (1984) and having issued bearer shares, shall deposit their shares with a custodian or re-register them as registered shares before the “transition date". The custodian shall be a legal holder of the company’ shares and is to be provided with the name of the beneficial owner of the shares or any other person having the right to such share of the company’s capital. The "transition date” has been removed from December, 31 2010 to December, 31 2011 (BVI Business Companies (Amendment of Schedules) Order 2007). After the transition date the company loses its right to issue bearer shares and convert registered shares into bearer shares.
If a company intends to retain the right to issue bearer shares, a notice of disapplication should be filed with the BVI Registrar of Companies, along with a declaration on how the company has dealt with its bearer shares (ie, which of the options above has been followed). Unless a company files the notice with the registrar by the transition date, it may no longer issue bearer shares and any bearer share already issued will be 'disabled', meaning that the bearer share will cease to carry any rights and entitlements which it would otherwise carry (ie, the right to vote or to receive dividends), and any transfer of an interest in the share shall be void. The bearer share shall cease to be disabled when it is delivered to and held by a custodian that has agreed to hold such bearer share.
The licence fee for companies incorporated prior to January 1 2005 that can issue bearer shares and that elect to disapply the deeming provision before the transition date will, as of January 1 2010, increase to $1,100 a year (or $1,350 a year if the company is authorized to issue more than 50,000 shares).
Acquisition by the company of its own shares
A company is allowed to purchase, redeem or otherwise acquire its own shares in accordance with two distinct regimes: either under provisions in the new Act or in accordance with its own memorandum or articles. The acquisition of its own shares is treated as a distribution to shareholders which places an important restriction on the company: the directors must be satisfied on reasonable grounds that the company will satisfy the solvency test for distributions immediately after the acquisition, and a resolution authorising the distribution must contain such a statement. However, there is no need to satisfy the solvency test where the acquisition is pursuant to a shareholder’s right whether under the statutory provisions or under the memorandum or articles.
The identity of the beneficial owner of a BVI company is treated as strictly confidential and must be disclosed only to the local agent as part of the obligatory due diligence. The agent may only disclose such information in the cases stipulated by law and following statutory procedure.
The documents kept at the registered office of a company shall be confidential and not available for public inspection. The documents may only be disclosed to:
• BVI law-enforcement authorities, pursuant to the Court’s order;
• BVI Financial Services Commission, which, in its turn, is only allowed to make the information and documents public in certain cases stipulated by Financial Services Commission Act.
Public records of Business Companies consist only of the Certificate of Incorporation, Memorandum and Articles of Association, name and address of the registered agent, the record of payments of the annual fees, amendments to the Memorandum and Articles of Association or agreements concerning arrangements, mergers or consolidations, winding-up or dissolution of a BC. Optionally, the public record may contain other document as the company may wish to place there, such as a Register of Mortgages Charges and other Encumbrances, Registers of Directors, Registers or Members, and Registers of Officers, but these are not required. They are filed at the sole option of the Company.
The BVI companies are renewed annually and the renewal normally includes: payment of fees for nominee directors and shareholders (if any), secretary, registered office and government fee.
The companies registered from January 1st till June 30th shall be renewed before May 31st of the following year, whereas the companies incorporated within the period from July 1st till December 31st are renewed before November 30th of the following year. Companies are labile to fees for non-payment of annual charges. After 5 months of non-payment, the company is struck off the Register.
The ultimate dissolution of the company may be either voluntary, under the Business Companies Act, or involuntary, under Insolvency Act.
Voluntary liquidation is available for companies in "good standing", that is a solvent company without debts. The Directors or shareholders shall pass the resolution about the company’s liquidation, issue the declaration of solvency and dissolution plan and to appoint a liquidator. All liquidation documents shall be filed to the Registrar within a month form the appointment of a liquidator and to announce its liquidation in "Gazette" within the same period.
1. Liquidation as a voluntary process requires a resolution of members or, in certain circumstances, a resolution of directors. When a company enters liquidation under the Act, an individual who must be independent of the company is appointed as the “voluntary liquidator” of the company.
The main tasks of the voluntary liquidator are:
A company may only be liquidated under the Act
If a company does not satisfy both of the above conditions, it is regarded as insolvent and it cannot liquidate voluntarily under the Act. Winding up of an insolvent company is governed by «Insolvency Act», 2003.
A voluntary liquidator cannot be appointed under the Act if the company is in administration or liquidation under the Insolvency Act, or if an application for the appointment of an administrator or Insolvency Act liquidator has been made to the Court, but not decided.
Declaration of solvency and dissolution plan
Before a company can be put into liquidation under the Act, the directors must make a declaration of solvency in the form approved by the Commission in which they must state their opinion that the company is solvent, and approve a plan for the liquidation setting out a number of matters, such as:
The dissolution plan must be approved no more than 6 weeks before the date that the members or directors pass a resolution to appoint the voluntary liquidator.
The declaration of solvency must be made no more than 4 weeks prior to the date that the members or directors resolve to appoint a voluntary liquidator and must have attached to it a statement of the company’s assets and liabilities as at, or shortly before, the date of the solvency declaration.
It is a criminal offence for a director to make a declaration of solvency without having reasonable grounds for believing it to be true. A director who permits a company to trade whilst it is insolvent may become personally liable for some or all of the company’s debts and the Court may make an order prohibiting him from being a director of, or taking part in the management of, any company for a substantial period of time.
After approval of the dissolution plan by the directors (shares not issued) and, if required, by the members, the Company must execute the Articles of Dissolution, containing the dissolution plan and the manner, in which it was authorized. The Articles are submitted to the Registry for registration together with the relevant fee (current fee - $100).
Termination of a voluntary liquidation
A liquidation under the Act can be terminated:
Completion of liquidation
When the liquidator has completed the liquidation, he files a statement with the Registrar who strikes the company off the Register of Companies and dissolves the company. The Registrar will issue a certificate of dissolution and the voluntary liquidator must advertise the dissolution in the Gazette.
From the point that the company is dissolved, it ceases to exist as a legal entity.
Where the voluntary liquidator of a company forms the opinion that the company is insolvent, he must send a notice to the Official Receiver and he commits an offence if he does not do so. The liquidation then must proceed as liquidation under the Insolvency Act. The voluntary liquidator must then call a meeting of the company’s creditors who will appoint a licensed insolvency practitioner as the liquidator of the company. only an individual who is licensed by the Financial Services Commission as an insolvency practitioner may act or be appointed in an insolvency proceeding under the Insolvency Act.
2. For insolvent companies liquidation there are two entry points: first, the passing of the requisite resolution by shareholders and secondly, by applying to the Court for the appointment of a liquidator. Such application can be made by one or more of the following:
The grounds for the appointment of a liquidator may be the company’s insolvency or public interest. Only the Attorney General and the Financial Services Commission can apply on the grounds of public interest.
Liquidation of Foreign Companies
According to the Act, the BVI Court now has jurisdiction to appoint liquidators over a foreign company i.e. a company formed outside the BVI. However, this jurisdiction can only be exercised if the company has a "connection" with the BVI.
The Effect of Liquidation
The purpose of liquidation is for the liquidator to realize the assets of the company and declare a dividend for creditors (and, in the unlikely event that there is a surplus, to return that to the members).
The liquidator has custody and control of the company’s assets, which become subject to a statutory trust to apply them in accordance with the Act for the benefit of the general body of creditors. Overseas assets would also be included in such a trust which will have implications in cross-border insolvency situations.
Although the directors remain in office, they cease to have any powers, functions or duties other than those required by the Act. Proceedings cannot be commenced or continued against the company without the leave of the Court, and no alterations can be made to the status or liabilities of members, nor can members exercise any powers under the Memorandum and Articles of Association, nor can these be altered.
Termination of Liquidation
Liquidation terminates when the liquidator, after completing his duties, prepares his final report together with a statement of realizations and distributions that is sent to creditors and members and filed with the Registrar. These obligations can be modified by the Court, which can exempt the liquidator from sending the documents to creditors and members.
Liquidation can also be terminated earlier by the Court, on an application by the liquidator, a creditor, director or member, or the Official Receiver, if the Court considers it is just and equitable to do so.
The final step after liquidation is the dissolution of the company.
Rescission of the winding up
A company may submit to the Registrar a copy of directors’ or members’ resolution as to rescission of the Articles of Dissolution. Within 30 days of the rescission the Company must place a corresponding notice in the Gazette, in a local paper and a publication in the country, where the company has its principal office. The dissolution can not be rescinded if the Certificate of Dissolution has already been given.
Strike Off. Grounds for Strike Off
The Registrar may, in certain circumstances, strike a company off the Register of Companies even though it has not been through a liquidation process. There are number of grounds for administrative strike off including the failure of a company to appoint a registered agent, to file documents that are required to be filed or to pay annual fees. The Registrar may also strike a company off the Register where satisfied that the company has ceased to carry on business. A company is not dissolved until 5 years after the date on which it was struck off the Register.
The principal differences between liquidation and strike off are as follows:
A company that has been liquidated is dissolved immediately, whereas a company that has been administratively struck from the Register will not be dissolved for a further 5 years.
However, the Registrar would not usually strike a company off administratively if the Registry had reason to believe that a company is trading or has any property. In such circumstances the Registrar has the power to refer the company to the Financial Services Commission for further investigation.
Procedure for administrative strike off
Unless the company has failed to pay its annual fee or a late payment penalty, the Registrar must send it a notice warning the company that it will be struck from the Register on a specific date no less than 30 days after the date of the strike off notice and publish a notice of intended strike off in the Gazette. The Registrar is not required to send an intended strike off notice to a company that has failed to pay its annual fee and will not usually do so.
If the Registrar does not receive a response to the notice, the company will normally be administratively struck off the Register of Companies.
Effect of administrative strike off
A company that is administratively struck off the Register is not immediately dissolved.
The company therefore retains its legal status but is incapacitated. Whilst a company is struck off the Register, the company may not
The directors and members may not act in any way with respect to the affairs of the company.
Furthermore, the fact that the company is struck from the Register does not prevent the company incurring liabilities or any creditor from making a claim in the Court against the company. The administrative strike off of a company does not affect the liability of the members, directors, officers or agents of the company. Strike off does not relive a company from the payment of its annual fees or late payment penalties. If there is a need to restore the company at some point in the future, all back fees and penalties will have to be paid to the Registrar as well as the restoration fee.
A company that has been administratively struck from the Register is dissolved 5 years after it was struck off, provided that it has not been restored to the Register in the meantime.
A company that has been struck off cannot deal with its property. In the circumstances, once a company has been struck off, it will not be possible for moneys in its bank account to be accessed whether to pay the debts of the company or to make a distribution to members. The company will not legally be able to sell or pass title to its assets. Any property that a company has when it is dissolved is transferred into the ownership of the Crown (ie the BVI Government), although the property or its value should be returned to the company if it is restored.
If a company that has been struck off has assets, it will be necessary to have the company restored for the company to access them.
Advantages of liquidation
The voluntary liquidator will undertake an investigation aimed at identifying all the property and liabilities of the company so that they can be properly dealt with, which reduces the chance of property being overlooked. The voluntary liquidator will be able to commence and defend legal proceedings in the company’s name, realize and deal with its assets and make payments. As soon as the liquidation has been completed, the company will be dissolved and from that point on, the liability for fees and penalties ceases. Any liabilities of the directors or members to the company will cease on the company’s dissolution (although its subsequent restoration may reactivate them).
Restoration to Register
Company struck off but not dissolved
A company that has been administratively struck off the Register, but not dissolved, may be restored to the Registrar by the Registrar on the application of one of the following:
As indicated above, any fees and penalties outstanding when the company was struck off, the fees and penalties accrued for the years that the company has been struck off and the restoration fee will all have to be paid. A company that is restored to the Register by the Registrar is treated as if it had never been struck off the Register.
Once a company has been dissolved it can only be restored to the Register by the Court, which must first declare the dissolution of the company to be void. An application to Court must be made within a 5 year period following the dissolution of the company. After that, a dissolved company cannot be restored to the Register at all.
Restoration fees, paid to the Registrar
(i) $375, if the application has been filed within 6 months from the date of when the Company was struck off the register;
(ii) $775, if the application has been filed upon the expiration of 6 months from the date of when the Company was struck off the register;
(iii) $750.00, if the company has been restored to the Register by Court’s decision.
To certify, that the company is in the register and legally exists, the Registrar issues a Good Standing Certificate.
The BVI trust legislation is based on English trusts law. The establishment of trusts in the BVI is regulated by the Trustee Act, Cap.303, which was amended by the Trustee (Amendment) Act, 2003. The Trustee Act establishes the characteristics of the Trust:
Since 1993, it is not necessary to register a Trust established in the BVI with the Financial Services Commission or another governmental agency. When a trust is established or a "chargeable instrument" is created, it is simply necessary to affix the necessary stamp (stamp duty) to the document without presenting the instrument to the Treasury, Post Office or other public body. There are formalities which should be followed with respect to the Declaration of Trust or Deed of Trust, but these are minimal. There are no annual government fees payable for BVI trusts which have been duly established. Trustees are exempt from any need to file annual returns and from any other reporting requirements.
The majority of BVI trusts is 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. A trust duty of $100 is imposed on each trust instrument subject to BVI proper law.
Traditionally, trusts have been an inappropriate vehicle for holding company shares; because of a rule of English trust law which is designed to help preserve the value of trust investments (“prudent man of business rule”). Furthermore, where a trust holds a business interest, the trustee is usually required by law to monitor (and where necessary intervene in) the management of the company.
The Virgin Islands Special Trusts Act
Three new legal acts within the frames of trust legislation have become effective on March 1, 2004:
The VISTA trust is a form of purpose trust made possible by the Virgin Islands Special Trusts Act 2003 and applicable only to the BVI. The purpose of the legislation is to enable trustees to retain shares in BVI business companies (BVI BCs) and local companies. The Act enables a shareholder to disengage the trustee from management responsibility and permits the company and its business to be retained as long as the directors think fit.
Trustee shall be a body corporate and have a license to conduct trust business in the BVI under the Banks and Trust Companies Act, 1990. It may not be a trustee of other trust. There is no requirement that such a company must be a BVI company, or to administer trusts from, or have a physical presence in, the BVI.
1. The trustee cannot use its voting powers to interfere with the management of the Company under trust, to remove and appoint directors. 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. Thus, the trustee will not be liable for the consequences of holding (rather than disposing of) the shares.
2. The supervision of the management of the underlying company is not permitted. A VISTA trust may have an enforcer, a protector and an appointed enquirer who may all be deemed to be ‘interested persons’. The trust instrument may set out the grounds or circumstances under which an interested person may request an intervention by the trustees (‘intervention call’). Once the specific situation to which the intervention call related is over, the trustee must return to his role of nonintervention.
3. Both beneficiaries and directors have the right to apply to the court if trustee fails to comply with the requirements for non-intervention or the requirements for director appointment and removal;
4. The trustee, if required, may have the power to sell the shares with the consent of the directors (and/or that of such persons as are specified in the trust instrument).
Office of director rules
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. The rules effectively enable settlors to create a succession mechanism for directorships.
Office of director rules may also guarantee that the settlor will not be removed by the trustee once the VISTA shares are placed under trust.
Duties of directors
The company law duties of directors remain unchanged and the Act does not in any way alter the restraints placed on directors and others by criminal law.
Authority of the court
Beneficiaries, directors and others may 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 authorize the trustees to sell designated shares where retaining them is no longer compatible with the wishes of the settler.
Saunders v Vautier
Under the rule Saunders v Vautier the beneficiaries of a trust can collectively bring the trust to an end. Saunders v Vautier will not apply (for a maximum of 20 years) to VISTA trusts where such rule has been excluded by the trust instrument. It is important if the trust contains a small number of beneficiaries, and the Settlor is concerned that the trust not be brought to a premature end.
The purposes for establishing VISTA trusts are: retaining control; retention of shares or any assets under trust; minimizing Trustee involvement; securitisation and off-balance sheet transactions; holding shares in Exempt Private Trust Companies; higher investment risk, inappropriate for the trustees of a non-VISTA trust;
Private Trust Companies
Any BVI company conducting “trust business” (other than as a bare trustee - the trustee of a bare trust, hat has been reduced to holding the trust property at the absolute disposal and benefit of the beneficiaries.) needs to be licensed under the BVI Banks and Trust Companies Act, 1990.
The Financial Services (Exemptions) Regulations, 2007 amend the law in the BVI in relation to private trust companies (“PTCs”). As a result, it is now possible to obtain statutorily exempt private trust company status in the BVI for qualifying companies. No licensing application is required, and so structures can be put in place with the minimum impact on confidentiality, and at high-speed. There is no requirement for a local director, or a qualified director, to be appointed. There are no capitalization requirements and no need for a physical presence in the BVI. The trust information is provided only to the registered agent, and not to the regulator.
To qualify for exemption, the company must
A PTC, which carries on trust business for specified groups of individuals and entities where the parties are related and the trustee is not compensated for its services, is exempt from obtaining a trust license under the BVI’s Banks and Trust Companies Act, 1991.
The Memorandum & Articles of Association of a BVI Business Company is filed with the Registrar together with a certificate from its first Registered Agent. The Memorandum of Association must state that the company is a private trust company.
“Unremunerated trust business” - no compensation payable to the PTC in consideration for the trust services provided. A PTC will be treated as carrying on “related trust business” if it acts as trustee of (i) a single trust, all the beneficiaries of which are charities or have certain specified blood, marital or adopted relationships to the settlor, or (ii) more than one trust, each of the settlors of which have those relationships to each other and all the beneficiaries of which have those relationships to the settlors of the trusts (or are charities)). A company may, however, act as a bare trustee without applying either for a trust license or for exemption as a PTC.
• A PTC must have a licensed Registered Agent who holds a Class 1 trust license (under the Bank and Trust Companies Act, 1990, as amended).
• The Registered Agent shall satisfy itself that the PTC meets the requirements of the Law both on its formation and on an ongoing basis. If the Registered Agent forms the opinion that the PTC is not in compliance with the statutory requirements governing PTCs it is required to report such non-compliance to the BVI Financial Services Commission.
• The Registered Agent is required to ensure that up to date copies of the following records are kept at its offices in the BVI in relation to each PTC for which it acts as Registered Agent:
(i) The trust deed or any document creating or evidencing the trust (and any deed or document varying its
terms); (ii) The documentation on which it has relied to satisfy itself that the PTC has not solicited trust business from the public, is only carrying on “unremunerated trust business” or “related trust business.
The incorporation and annual renewal fee increases to $1,500 if the PTC is authorized to issue more than 50,000 shares.
The BVI Mutual Funds Act (as amended, extensively, by the Mutual Funds Amendment Act 1997) (together "the Act") is in force effective January 2, 1998.The Act covers both mutual funds and their managers and administrators.
The Act defines a mutual fund as a legal vehicle:
• organised under the laws of the BVI or of any other country or jurisdiction that collects and pools funds for the purpose of collective investment, and
• that issues shares, or similar interests, that entitle the holder to receive an amount computed by reference to the value of a proportionate interest in the whole or part of the net assets of the legal vehicle.
Business of mutual funds includes, but is not limited to one or more of the following activities: the management of investments, receiving subscriptions and arranging the issue or redemption of shares, maintenance of the register of shareholders, maintenance of accounting records, the publication of a prospectus or other similar invitation to purchase shares, the solicitation of investors to purchase shares.
Mutual funds must be either registered, in case of a public fund, or recognized in case of a private or professional fund.
The majority of BVI investment funds are set up as companies limited by shares under the BVI Business Companies Act, 2004.
Types of Funds
The Act distinguishes between three types of mutual funds:
A fund that offers its shares to the public.
A fund that sells its shares on a private basis or that has less than fifty investors.
A fund that is made available only to professional investors (either a financial institution or an individual who has signed a declaration that he/she has net worth in excess of US$1,000,000.00 and consents to be treated as a professional investor) with a minimum initial investment of US$100,000.00 for the majority of investors.
All BVI Mutual Funds shall submit a return to the FSC by 30 June of each year, for the calendar year ending 31 December of the previous year.
There is no statutory audit requirement for Mutual Funds, save for registered Public Funds.
Registration and recognition
A public fund must apply for and obtain registration with the Financial Services Commission ("FSC"), Investment Business Division, to carry on its business or administer its affairs in or from within the BVI. Promoters of public funds are able to seek advance consent to be registered, prior to proceeding with the fund's lawful constitution.
The majority of BVI funds are Private or Professional Mutual Funds. A Private or Professional Mutual Fund must be recognized with the FSC in order to carry on its business or manage or administer its affairs in or from within the BVI. A Professional Mutual Fund can benefit from a fast track procedure whereby it may commence operation up to 14 days before being recognised.
Mutual fund participants
The Manager of mutual funds determines the investment strategy of the fund and makes the investment decisions. The manager earns fees in the range of 1 to 2% of the NAV per annum, calculated and paid on a regular basis.
The Administrator acts as registrar and transfer agent, keeps the books and records of the fund, and calculates the NAV. Depending on the complexity of the fund, the administrator's fees could be as little as a few thousand dollars a year or as much as 0.5 to 0.65 % of the NAV per annum.
All managers or administrators of mutual funds in the BVI must be licensed by the Registrar of Mutual Funds. In order to obtain a license, the applicant must show, among other things that it has the financial, human and administrative resources and facilities necessary for the competent and efficient conduct of its business. The procedure of establishing a management or/and administrator company is similar to the procedure of establishing of a mutual fund to the extent that first a BC is incorporated and then it applies for a license to act as a manager or/and administrator of mutual funds.
The BVI Registrar of Mutual Funds recognizes 25 jurisdictions as having sufficiently prudent systems of regulation/supervision of mutual fund business in place so as to allow him to approve applications for recognition and registration by British Virgin Islands mutual funds which list a functionary (e.g. a manager) from the recognized jurisdiction. The 25 jurisdictions are: United Kingdom; United States of America; Australia; Bahamas, Bermuda; Canada; Cayman Islands; Germany; Italy; Japan; Luxembourg; Switzerland; Ireland; Jersey; Guernsey; Isle of Man; Hong Kong; France; Belgium; The Netherlands; The British Virgin Islands; Singapore; Spain; Malta; and Gibraltar.
So, Mutual Funds do not have to be managed or administered from within the BVI. Similarly, a non-BVI Mutual Fund is not required to be regulated under the Mutual Funds Act on the grounds that it is managed or administered from within the BVI, provided that the management or administrative service provider is a BVI entity, licensed under the Mutual Funds Act.
The Custodian is a financial institution that holds the property of the mutual fund in safe keeping. In coordination with the fund manager it performs acts as the fund's payer and payee i.e. it pays and receives payments for purchase and sale of stocks, bonds and other financial instruments. Banks normally assume the role of Custodians. The Custodian acts independently of the funds’ manager of administrator and must maintain accounting records and prepare audited financial statements for each year. Such accounts and statements shall be kept available for examination by Commission, any authorized person and all investors. Custodial Fees can also be a fixed fee or a percentage of NAV.
The Investment Advisor could be a natural or legal person. The most important thing however is that the person must be licensed to perform as an investment advisor in a recognized jurisdiction. In addition the person must show that there is enough manpower and office support services to execute the task of an investment advisor. As to the functions of the advisor, it includes buying and selling of shares, bonds in the stock and bond market respectively. In essence the success and growth of mutual funds depend very much on the investment decisions made by the advisor.
It is not recommended to appoint the same person as an investment advisor and a custodian. This is likely to present a problem to the authorities as there is an apparent conflict of interests.
Directors of a mutual fund
Natural persons are normally appointed to be directors of mutual funds, there must be at least two directors. Directors can appoint President and Secretary of the company, and whatever additional Officers they deem appropriate, and can determine what duties shall be performed by such Officers.
There are a number of legal and marketing reasons why funds typically have more than one class of capital: a) To distinguish management from investors. Management shares, which control the appointment of the directors and thereforе the overall policy of the fund, the selection of professional advisors and so on, will have voting rights but generally no participation in the equity or any dividends, distributions or redemptions of the fund. Investors shares will carry all of the economic benefits but only limited rights to vote, where, for example, there is a proposal to change their share rights or to change control of the fund; b) To distinguish between different asset classes in which the fund invests, e.g. different currencies, bonds as opposed to equities and so on. This enables investors to have a certain choice as to their portfolio mix and usually, to change the mix under certain conditions; c) To distinguish between different investors. Where investors are given full discretion as to their portfolio mix, so that each investor will have a different performance, it is necessary to separately identify the portfolio and results of each investor. The BVI Mutual Fund Act and policy guidelines prohibit the use of bearer shares in mutual funds and fund management companies.
Annual requirements and payments
All registered public mutual funds, recognized private or professional mutual funds and any investor in such funds who is not an ordinary resident of the BVI are exempted from BVI income taxes and stamp duties.
A registered public mutual fund is required to prepare financial statements in respect of each financial year of its operations. Financial statements must be prepared in accordance with generally accepted accounting principles and be audited by an auditor approved by the Registrar.
Private and professional funds are not required to be audited, but the Act requires that a private fund must maintain adequate accounting records. They may be kept in any place as the fund’s officers may choose, provided such accounting information is available for the examination of the Registrar of Mutual Funds in the BVI.
The annual fees payable by registered public funds, recognized private or professional funds and mutual fund managers and administrators are as follows:
The fund or manager/administrator is also required to pay annual BC licence fee, the amount of which is based on the amount of the share capital. The other principal running costs (management, administration and custody) will generally be based on a percentage of NAV (subject to certain agreed minimum fees). The Governor has the right to sue for unpaid annual fees by action and to require a penalty for late payment.
A BVI mutual fund can also be specifically registered as a Segregated Portfolio Company under the BVI Business Companies Act 2004.
Segregated Portfolio Company
Under the BVI Business Companies Act 2004 ("BVI BC Act"), a company limited by shares may be incorporated or, if it has already been incorporated, be registered by the Registrar as a segregated portfolio company ("SPC"), sometimes referred to as a protected cell company, provided that the Financial Services Commission has given its written approval and provided that the company:
1. is, or on its incorporation will be, licensed as an insurer under the Insurance Act 1994;
2. is, or on its incorporation will be, recognised as a professional or private fund or registered as a public fund under the Mutual Funds Act 1996; or
3. is, or on its incorporation will be, of such class or description as may be prescribed by regulations made under section 159 of the BVI BC Act.
At present only licensed insurers and recognized or registered mutual funds can incorporate or register as an SPC under the BVI BC Act.
An SPC benefits from the statutory segregation of assets and liabilities between segregated portfolios established within the same company.
A segregated portfolio is a portfolio containing assets and liabilities that are legally separated from the assets and liabilities of the company’s ordinary account, usually referred to as the “general account” and from other segregated portfolios within the company. Each segregated portfolio needs to be separately identified or designated and is required to include in such identification or designation the words “Segregated Portfolio”.
SPCs can establish segregated portfolios to segregate the assets relating to classes of shares with different investment criteria, thus protecting shareholders from the potential of cross liability arising from the adverse investment performance of other classes of shares.
Notwithstanding that each segregated portfolio in an SPC must be separately identified, it will not be a separate legal entity.
To achieve the segregation of the assets and liabilities of each segregated portfolio, the SPC must identify the relevant segregated portfolio(s) and make clear that business is being transacted in the name of, or by or for the account of the particular named segregated portfolio(s). The capacity in which the SPC contracts and the name(s) of the relevant segregated portfolio(s) must be set out in writing in the relevant transaction documentation.
It is the directors’ duty to establish and maintain the segregation of each segregated portfolio's assets from those of other segregated portfolios and also the general assets of the SPC.
Creditors of a segregated portfolio have recourse to the assets of the segregated portfolio and to any general assets of the company (not comprised within any segregated portfolio) in case that the segregated portfolio assets attributable to such portfolio are insufficient.
When dealing with a SPC a third party should clearly establish which segregated portfolio of the SPC it is dealing with (and therefore which of the relevant segregated assets it has recourse against).
To get the approval to register a mutual fund as an SPC, it is necessary to file an application to the Commission. The application must include the following information (Segregated Portfolio Companies Regulations 2005):
1. The name, or proposed name of the company (which must include the letters "SPC");
2. Details of the person who is, or who will be appointed as the administrator of the company;
3. A list of the initial segregated portfolios that it is intended will be created, including the name, identification or designation of each segregated portfolio;
4. In respect of each of the initial segregated portfolios, details of the functionary who will be appointed by the company in respect of the portfolio;
5. Its memorandum and articles and the changes proposed to be made to the memorandum and articles should its application be approved;
6. A statement in the form approved by the Commission, signed by at least one director of the company on behalf of the board, setting out the following:
(a) the assets and liabilities of the company as at a date no more than six months prior to the date of the application;
(b) details of any transactions, events or other matters not reflected in the statement of assets and liabilities that the directors consider have materially affected or, prior to its registration as an SPC are likely to materially affect, the assets and liabilities of the company;
(c) the assets of the company that it is intended will be segregated portfolio assets, specifying in respect of which portfolio, and the assets that it is intended will be general assets;
(d) and how the liabilities of the company will be satisfied;
7. A declaration signed by at least one director of the company on behalf of the board that:
(a) resolutions of the directors have been passed approving the registration of the company as an SPC;
(b) the company is solvent and that the company and each proposed segregated portfolio will, after the assets of the company have been allocated to segregated portfolios, be solvent;
(c) the company has given notice to members of its intention to apply for registration as a SPC;
8. a copy of its offering document for each of the initial segregated portfolios that it is intended will be created.
Due to the fact that the share class rights vary as a result of the transfer of assets and liabilities of the company into segregated portfolios, shareholder consent will be required.
Any SPC must always have one or more administrator, manager and custodian and may appoint one or more investment advisor. The instrument of appointment must specify the segregated portfolio or portfolios in respect of which the officer is appointed, as well as his responsibilities and duties in respect of each such segregated portfolio.
An SPC must also have an auditor who will be responsible for auditing its financial statements, which must be filed with the Commission within six months of the end of its financial year.
The Insurance Act was adopted in November 1994 and provides for the licensing of all persons carrying on insurance business and prohibits to any person to act as an insurer unless licensed under the Act.
A captive insurance company is a wholly owned subsidiary of an industrial, commercial or government organisation which exists to insure all or some particular risks of that organisation and its affiliates. Captives may be owned by one organisation (a single parent captive) or by a number of different bodies (group or association captives). There are no restrictions on the types of risk that a captive can be used to insure.
Captive reinsurance companies are also popular in modern risk management and are often used together with traditional insurers or as part of a programme. Many larger organisations have several different captives, each specializing in a particular area.
Before issuing a license to an Applicant, the Governor shall satisfy himself that: the Applicant has the knowledge and expertise necessary to carry on insurance business in a competent manner; it has an adequate business plan (including the description of the type of insurance business, the structure of the company and the reasons for setting it up); the value of its assets exceeds the amount of its liabilities by the amount prescribed by the Regulations. The application form also requires details of the owners, directors and officers and the relevant professional advisers, including the auditor and resident insurance manager.
The granting of a licence is within the absolute discretion of the Governor. The application fee is USD 500. All licences expire on 31 December each year and may be renewed provided that audited accounts have been submitted and the prescribed fee of USD 2000 is paid (per annum).
Minimum fully paid up capital is USD 100,000 for general business, USD 200,000 for long-term business, and USD 300,000 for insurers writing both general and long-term.
BVI Insurance Act 1994 requires that all insurance companies must appoint an authorised manager resident in the BVI. The functions of that manager include keeping basic information regarding the accounts, any formal meetings and all insurance and reinsurance transactions.
The advantages of the BVI (British Virgin Islands) Ship Registry include the following:
1. The BVI Registry is a member of the Red Ensign Group, which ensure that ships flying the BVI flag are entitled to British Diplomatic/Consular support and the protection of the Royal Navy. The BVI has access to the technical expertise of the British Maritime and Coast Guard Agency.
2. There are low Initial Registration and Annual Maintenance Fees.
3. Secure registration of yachts, mortgages, and discharge of mortgages. The change or transfer of ownership or title to the vessel is easily verified with the Registry. The BVI Registry has a fully computerized Fleet Management System and Database.
4. Full corporate, legal, and courier services are readily available in the BVI.
5. The BVI has the British Judicial System, with political and social stability.
6. The British Virgin Islands is recognized worldwide as a reputable offshore financial centre, leading the world in company formation and related corporate services.
In order to register a yacht in the BVI it is necessary to provide the Registrar of Shipping with the following documents/information:
1. Name of Ship
2. Name of owner
3. Address of owner
4. Marine survey of vessel by marine surveyor (the surveyor MUST be qualified to provide the survey). The approved Classification Societies, for the purposes of thе Survey/Inspection/Certification for Registration details, Tonnage and requirements of SOLAS, MARPOL and Codes of Practice are:
LR - Lloyds Register of Shipping;
BV - Bureau Veritas;
DNV - Det Norske Veritas;
GL - Germanisher Lloyd;
ABS - American Bureau of Shipping; and
RINA - Registro Italiano Naval.
5. Builder’s certificate OR Foreign Bill of Sale
6. In the case of a new vessel, name and address of builder and yard number allocated to the vessel
7. Deletion certificate where vessel was previously registered
8. Declaration of Ownership
9. In the case of ownership by a company, Certificate of Incorporation and Memorandum and Articles of Association and Certificate of Good Standing.
10. Appointment of authorized officer
The client will need to get: a) Builder's Certificate - if a new yacht; or b) Bill of Sale & Deletion Certificate from the Existing Registry. The client will also be responsible for obtaining the yacht survey.
Only a vessel owned by a British subject or a BVI corporation is entitled to be registered as a British Ship.
The General Rule is there is no preliminary registration period.
However, it is possible to obtain a Preliminary Certificate to enable conditional short-term permission to operate vessel after Carving and Marking is issued and before issue of Permanent Certificate of Registry.
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.
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.
Banks are supervised by the Inspector of Banks, Trusts and Companies, an official of the Financial Services Commission.
Price1 990 USD
including incorporation tax, state registry fee, including Compliance fee
Stamp Duty and Registry of Corporate Affairs incorporation fee
Price1 530 USD
including registered address and registered agent, NOT including Compliance fee
DHL or TNT, at cost of a Courier Service
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Pricefrom 990 USD
Paid-up “nominee director” set includes the following documents
Pricefrom 375 USD
Paid-up “nominee shareholder” set includes the following documents
Compliance fee is payable in the cases of: renewal of a company, liquidation of a company, transfer out of a company, issue of a power of attorney to a new attorney, change of director / shareholder / BO (except the change to a nominee director / shareholder)
simple company structure with only 1 physical person
additional compliance fee for legal entity in structure under GSL administration (per 1 entity)
additional compliance fee for legal entity in structure NOT under GSL administration (per 1 entity)