The BVI’s popularity with professional advisers is in no small measure due to the private sector having the ear of government and the latter’s willingness to ensure that the jurisdiction’s company law reflects trends in corporate jurisprudence.
This private sector-government partnership was very much in evidence in the run-up to the first major overhaul of the BVI corporate regime, which occurred in 2004 when the BVI Business Companies Act — the successor to the International Business Companies Act 1984 — was enacted. The new law, with its subsequent minor amendments in 2005, 2006 and 2007, builds on the solid foundation established by the 1984 legislation.
New company structures
The Act allows companies to be established as protected cell companies, so that assets held by the company in one cell are protected from the creditors of assets held in another cell — a corporate structure now increasingly used by the insurance and investment communities. The Act’s introduction of a restricted purposes company gives statutory recognition to special purpose vehicles, which are frequently used in cross-border securitisation transactions.
The Act introduces the concept of a ‘reserve’ director, which can be a useful planning tool in that many BVI companies have a board of directors consisting of a single individual director who also is the sole shareholder of the company.
Where such a shareholder/director structure exists, the Act permits the individual to nominate a person to be a reserve director to act in the place of a sole director on his/her death. This nomination ceases if the reserve director resigns or the sole shareholder/director revokes the appointment in writing.
The Act has expanded the shareholder rights that existed under the 1984 statute. Under the Act members can bring derivative, personal and representatives actions under certain circumstances.
The Act also provides that, subject to a company’s Memorandum and Articles of Association, members holding 90% of the votes of the outstanding shares entitled to vote and members of the company holding 90% of the votes of the outstanding shares of each class of shares entitled to vote as a class may direct the company to redeem shares held by the remaining members.
Registration of charges
Under the 1984 legislation the priority of charges was determined by the register of charges kept at the registered office and only the directors of the company had the authority to create a register.
The Act introduces a system of registration of charges with the registrar of corporate affairs and makes it mandatory that a company keeps a register of charges at its registered office. The application for registration may be submitted by the company through its registered agent or by the chargee directly to the registrar.
A July 2007 amendment to the Act has favourably changed the future treatment of companies formed before January 2005 with the power to issue bearer shares. Prior to the passing of the amendment, such companies would have had to pay increased government licence fees in 2008 and 2009 whether or not they had issued bearer shares; they would have had to pay a significant increase from 2010 onwards. As a result of the July amendment the 2008 and 2009 fee increases were annulled.
Instead, effective from 31 December, 2009, these companies will be deemed to have amended their Memorandum and Articles of Association to state that the company is prohibited from issuing bearer shares.
If a company wishes to retain the power to issue bearer shares, it can elect to disapply the deeming provision by filing a declaration with the registrar confirming that all bearer shares in issue have been delivered to an authorised or recognised custodian or no bearer shares have been issued.
BVI law enables private trust companies
Regulatory provisions in the BVI have recently been amended to enable the setting up of private trust companies that would be exempt from the requirement to obtain a trust license under the BVI Banks & Trust Companies Act.
This is undoubtedly a welcome development for trust practitioners in the
The new regulations, which came into effect on 1 August, 2007, provide that companies incorporated in the BVI that are intended either to be appointed as unremunerated trustees, or for the purpose of carrying on ‘related trust business’ (or a combination of unremunerated and related trust business), must satisfy certain statutory perquisite conditions before the exemption will apply.
It is fundamental to qualification for the exemption that the company must be either unremunerated or that the business of the company is confined to a single qualifying trust or a group of related trusts.
While it enjoys the exemption, the company is prohibited from engaging in any business other than trust business and from soliciting trust business from the general public.
One of these criteria is that the company must be a limited liability company, whether limited by shares or by guarantee and, if it is the latter, it must be a BVI-guarantee company authorised to issue shares. The company must also incorporate the letters PTC (private trust company) into its name and must declare in its memorandum of association that it is a PTC.
If the company ceases to meet any of the several criteria set out in the new regulations, it will lose the benefit of the exemption and must amend its memorandum of association to remove the declaration that it is a PTC. It will also face the likelihood of an enforcement action by the regulatory authority — the Financial Services Commission (FSC).
The qualifying criteria also includes the requirement that the company appoints, as its BVI-registered agent in the BVI, a company that holds a Class I trust licence. The BVI-registered agent will be required to keep certain on file in the BVI certain records, including copies of original trust deeds of the trusts for which the PTC is providing trust business.
The ongoing monitoring of the PTC is the responsibility of the BVI-registered agent and the registered agent will be liable to enforcement action by the FSC — including the loss of its own licence — if it fails to monitor or report on the status of the PTC.
BVI trust practitioners welcome the new regulations, which have brought clarity to the question of the exemption and which, they believe, will enhance the attractiveness of the BVI as a jurisdiction for setting up private trust companies.
The regulatory regime that normally applies to trust companies established in the BVI requires extensive statutory compliance and, while the private due diligence involved in establishing BVI companies is not less rigorous than that required by the FSC, eligibility for the exemption will certainly facilitate certain structures that would not otherwise easily be set up.
Barry Goodman is managing director of Trident Trust (BVI) and Helene Anne Lewis is the founding partner of SimonetteLewis.
