Anguilla: Information on Jurisdiction

INTRODUCTION - HISTORY AND BACKGROUND

Anguilla is a British Overseas Territory, having a constitutional relationship with Britain similar to the Cayman Islands, the British Virgin Islands and Bermuda. It lies in the Eastern Caribbean, very near the French/Dutch island of St. Martin/St. Maarten (7 miles), and to the East of Puerto Rico (200 miles) and the British Virgin Islands (94 miles) with St. Kitts and Nevis and Antigua to the South East.

Anguilla was first colonized by the British in 1650. It unilaterally left the British-administered Associated State of St Kitts-Nevis-Anguilla in 1967, instead opting to return to direct British rule, and formally attained its present status as a British Overseas Territory in 1980.

Anguilla’s ministerial form of government provides for a legislature called the House of Assembly and an Executive Council. The British-appointed Governor retains responsibility for internal security, police, civil service, defence, external affairs and international financial services.

Anguilla’s financial sector, though relatively small, is well developed, efficient and expanding. The current trust and corporate laws launched in 1994 and subsequently amended as necessary are modern in their approach. There are several commercial banks, law firms and accounting firms, together with a number of trust companies, company managers and insurance companies regulated by the Financial Services Commission.

While the Eastern Caribbean dollar is the official currency (XCD), the US dollar circulates freely and there are no exchange controls.

LEGAL SYSTEM AND COURT STRUCTURE

Anguilla’s legal system is based on that of England. English common law and equity have been specifically extended to Anguilla by statute, insofar as the quite comprehensive local legislation enacted by the House of Assembly does not cover any particular area of law. Anguilla comes under the umbrella of the Eastern Caribbean Supreme Court, to whose Court of Appeal appeals lie from the High Court, with final right of appeal to the Privy Council in England.

SOURCES OF LAW

Anguillian trust law is derived from the general principles of English trust law and from the Trusts Act. The Trusts Act applies to trusts created both before and after its enactment on January 1, 1995, except where its application to a trust created before that date would be likely to result in an injustice. In such a case the court may instead apply the repealed trust acts formerly in force. Anguilla is not a party to the Hague Convention on the Law Applicable to Trusts and on their Recognition, July 1, 1985.

The Trust Companies and Offshore Banking Act regulates the carrying on of "trust business" by trust companies in or from within Anguilla. A licence may be granted to a general trust company to carry on general trust business, or to a private trust company to carry on restricted trust business on behalf of specified persons.

PROPERTY, ESTATE AND PROBATE

The Wills Act is based on the un-amended English Wills Act of 1837 and governs the formal and essential validity of a will disposing of immovable property in Anguilla, or movable property of a testator domiciled at death in Anguilla. A testator has unrestricted freedom to dispose of property by will. The Intestates Estates Act governs administration and distribution of estates of persons dying intestate.

The English Non-Contentious Probate Rules 1987 apply in Anguilla and provide for applications for grants of probate or letters of administration with respect to assets located in Anguilla. Under the Probates (Resealing) Act, grants issued in the United Kingdom, by Commonwealth courts or by British courts in foreign countries may be re-sealed by the Anguillian court.

The International Business Companies Act includes a provision to the effect that the situs of the ownership of shares, debt obligations or other securities of companies incorporated under that Act is in Anguilla.

TAXATION

Anguilla has no income, capital gains, wealth, withholding, gift or inheritance taxes. Nonetheless, "exempt trusts" are legislatively excluded from such taxes and from distributions tax and estate duty. An exempt trust is one where neither the settlor nor any of the beneficiaries are resident in Anguilla and where trust property does not include any land in Anguilla or the shares of any company beneficially owning such land. Anguilla is not a party to any tax treaties.

TRUSTS

An Anguillian trust is not a separate legal entity. The Trusts Act provides that a trust exists where a trustee holds property for the benefit of a beneficiary, whether or not yet ascertained or in existence, and/or for any valid charitable or non-charitable purpose which is not for the benefit only of the trustee. The settlor may also be a trustee, beneficiary or protector of the trust.

OTHER LEGAL ENTITIES COMMONLY USED

An IBC is incorporated by filing Articles of Incorporation. The by-laws are not required to be publicly filed. An IBC generally has the power to undertake any lawful business or activity in or outside Anguilla, but is prohibited from carrying on business with persons resident in Anguilla, owning real property in Anguilla or carrying on banking, insurance, company management or trust business.

An IBC may have a single director and a single shareholder, both of whom may be corporate and non-resident. Nominee shareholders may be used. It is not mandatory to file director and shareholder details publicly. Copies of the share register, the articles, the by-laws and any amendments must be kept at the IBC's registered office. Annual returns or financial statements need not be filed.

Foreign companies may be re-domiciled to Anguilla as IBCs even if the foreign law does not recognize such continuation. An IBC may re-domicile to a foreign jurisdiction if the laws of the foreign jurisdiction permit.

An IBC may issue registered and/or bearer shares, which may be issued with or without par value and in one or more foreign currencies. An IBC may purchase and own its own shares and may reduce its authorized and paid-in capital. Charges over property may be created and registered with the Registrar of Companies. An IBC may be voluntarily wound up by a resolution of the directors and shareholders. An IBC is exempt from taxation.

Anguilla’s zero tax regime enables ABCs to be used either as domestic companies for business within Anguilla or as offshore vehicles. ABCs used as offshore vehicles are exempt from most record-keeping and accounting requirements. An ABC may have a single director and shareholder. ABCs may be limited by shares (which must be without nominal or par value and cannot be bearer shares), by guarantee or by both, thus making hybrid companies possible. The doctrine of ultra vires has been abolished. Generally, an ABC has all of the rights, powers and privileges of an individual. Unless licensed to do so, it may not carry on banking, trust, insurance or company management business.

ABCs are formed by filing articles of incorporation. By-laws need not be publicly filed. ABCs must file an annual return containing shareholder and director details. A private ABC is exempt under the Companies Act from, amongst other requirements, being audited, but it must maintain at its registered office a copy of its consolidated financial statements and prepare and maintain at its registered office minutes of meetings of directors and resolutions of directors and committees. An annual shareholders’ meeting is required for all ABCs.

ABCs are exempt from taxation, except that ABCs owning land in Anguilla are subject to stamp duty on the transfer of shares.

The Limited Liability Company Act ("LLC Act") is quite similar to the corresponding Delaware statute. The term of an Anguilla LLC may be perpetual or specific. LLCs may be structured to provide their members with both limited liability and rights and liabilities to income and for losses. The LLC Act also clearly creates an economic interest which can be transferred separately from the membership interest.

In return for their contributions, members own an assignable LLC Interest. On dissolution, members receive distributions of assets from the LLC, if solvent, although interim distributions can be made before dissolution.

An LLC is formed by filing articles of formation. The LLC must also have an "LLC Agreement" which need not be publicly filed. An LLC may have a single member and is managed by the members or by one or more managers. It can carry on any business not prohibited by law in Anguilla, but cannot carry on banking, insurance, trust or company management business unless licensed to do so. LLCs are exempt from taxation.

A foreign LLC may re-domicile to Anguilla and an Anguillian LLC may, subject to its LLC agreement and the LLC Act, re-domicile outside Anguilla.

The Mutual Funds Act 2004 ("MFA") provides for mutual funds formed as unit trusts, in addition to those formed as companies or partnerships. The MFA was passed in August 2004 with the purpose of regulating mutual funds and the managers and administrators who provide administrative support services to mutual funds and attracting mutual funds business to Anguilla by providing a reasonable regulated environment. Public funds, private funds and professional funds are regulated under this Act.

A Public Fund is defined as one making an invitation to the public or any section thereof to purchase shares and which is not a private or a professional fund.

A Private Fund is defined as one with a limited number of investors and whose constituent documents specify that the invitation to purchase shares is to be made on a private basis.

A Professional Fund is one whose shares are available for purchase only to professional investors, defined by the MFA as a person whose ordinary business involves dealing in investments.

The MFA sets out requirements for publishing the prospectus of a public fund as well as specifying requirements for an annual audit and other annual filings with the Registrar of Mutual Funds.

The procedures for securing fund approval under the MFA are streamlined. The application procedures for private and professional funds are considerably less onerous than for public funds, and it will normally be possible for suitable applicants to obtain approval for a private or professional fund within a very short time from making the application.

INCORPORATION OF IBCS, LLCS, ABCS AND LIMITED PARTNERSHIPS AND FUNDS

All incorporations, formations and on-going maintenance of IBCs, LLCs, ABCs and limited partnerships can be carried out using Anguilla’s Commercial On-Line Registration Network system ("ACORN"), a modern on-line registration system which is accessible to registered users 24 hours a day, 365 days a year. Users include regulated Anguillian entities and their approved overseas agents.

OTHER RELEVANT MATTERS - ANTI-MONEY LAUNDERING RULES

The Proceeds of Criminal Conduct Act establishes four money-laundering offences:

- assisting another to retain the benefit of criminal conduct;

- acquisition, possession or use of proceeds of criminal conduct;

- concealing or transferring proceeds of criminal conduct; and

- tipping off.

The Regulations and Guidance Notes to this Act cover procedures for identification of clients of regulated persons, record keeping, internal reporting and training of staff. Failure to comply with the Regulations may constitute an offence.

NEW DEVELOPMENTS

During 2004, new financial services legislation was enacted in Anguilla, including a new insurance law, new mutual funds law and new protected cell companies law.

Mutual Funds: The Mutual Funds Act 2004 provides for mutual funds formed as unit trusts, in addition to those formed as companies or partnerships. Public funds, private funds and professional funds are regulated under the Act which provides for streamlined fund approval.

Insurance Companies: The Insurance Act 2004 provides for the licensing and regulation of both insurers doing domestic insurance business in Anguilla and insurers from Anguilla engaged in "foreign insurance business", defined as risks and premiums originating outside Anguilla. In addition it provides for the licensing of insurance agents (persons acting for a single insurer), insurance brokers (persons acting for more than one insurer) and insurance managers. The procedures for securing a licence for an insurance company are straight forward and quick.

Protected Cell Companies: The Protected Cell Companies Act 2004 makes provision for a corporate entity that holds assets in one or more segregated cells, separating the assets in each cell from those in other cells. Cellular assets are only available to satisfy the creditors of that cell and creditors of other cells have no claim upon them. The protected cell company was originally devised for the insurance and mutual fund industries to facilitate "rent-a-captive" operations and "umbrella funds". Increasingly diverse uses are now emerging.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.