Although we are still in a recessionary state, there is no doubt that the global markets have picked up somewhat over the last year or so. Companies are again looking to raise capital via initial public offerings and BVI companies as usual are in the mix. BVI companies are listed on major stock exchanges around the world including the New York Stock Exchange, Nasdaq, the Frankfurt Stock Exchange, the Main Board of the London Stock Exchange, the AIM market of the London Stock Exchange, the Toronto Stock Exchange and the Singapore Stock Exchange. BVI companies were also recently accepted for listing on the Hong Kong Stock Exchange and in the last few months at least two BVI companies have been listed. On AIM, BVI companies are a major player and although there was a drop off in the last two years recently there has been a steady increase in BVI listings. These stock exchanges play a significant role in the global markets and the fact that BVI companies are recognized and used on these stock exchanges says a lot about the BVI and BVI companies in terms of their flexibility and global recognition. There are several factors which make BVI companies attractive vehicles for listing purposes and a few of them are highlighted below.
Incorporation
The cost associated with the incorporation and ongoing administration of a BVI company are comparatively low when compared to most onshore jurisdictions and other offshore jurisdictions. In addition, incorporations can be carried out very quickly once the requisite due diligence requirements are satisfied.
Constitution
The constitution of a BVI company can be tailored to incorporate various aspects of foreign law including regulatory requirements once they are not contrary to BVI law. This flexibility allows the BVI company to use appropriate aspects of onshore laws and regulations to its advantage to satisfy the listing requirements of an onshore stock exchange.
For example, BVI companies can include in their constitution specific provisions relating to the disclosure of interests in shares and takeover provisions in a manner consistent with the laws of a specific onshore jurisdiction. Inclusion of certain key concepts provide shareholders and regulatory authorities with comfort that there are familiar protective provisions within the constitution of the foreign listing vehicle. In addition, BVI law prescribes certain statutory duties for directors and several statutory protections for shareholders.
Shares and distributions
The BVI Business Companies Act, 2004 ("BC Act") has abolished the concept of share capital and so most BVI companies limited by shares will have shares with no par value. With the share capital concept no longer applicable, a BVI company seeking to make a distribution to its shareholders may ignore any retention of capital in determining the amount of funds available for distribution once it satisfies the prescribed solvency test. For a company with a large issued share figure, this is a potentially a huge advantage.
Financial assistance
The BC Act specifically provides that a BVI company can financially assist any person in connection with the acquisition of its own shares. This flexibility can be helpful in certain types of transactions where such assistance is needed for the benefit of a person or entity of significant importance to a company's overall business.
Taxation
BVI companies carrying on business outside the BVI are not liable for income tax or corporation tax in the BVI. In addition, holders of BVI shares are not subject to tax in the BVI on any distributions or dividends paid to them and there are no transfer taxes on shares. BVI companies are often used to hold group funds and these funds can be used to either finance other group companies through injections of share capital or can be used to fund acquisitions by group members without any taxation issues in the BVI.
Conclusion
The BVI is a well respected and recognized offshore jurisdiction whose regulation and flexibility allow for the use of BVI companies in sophisticated international markets. The flexibility of BVI companies in terms of their constitution, distributions and neutral tax position all help to make BVI companies a good choice of vehicle for listings. The jurisdiction also has many professionals with global experience and regulators who strike a balance in a manner which continue to spur on the continued success of BVI companies in the world's largest and most sophisticated capital markets.
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.
