British Virgin Islands: Frequently Asked Questions About The BVIís Non-Profit Organisations Act, 2012

Last Updated: 2 May 2013
Article by Leonard Birmingham, Sheila George and Colin Riegels

The Non-Profit Organisations Act was passed in the British Virgin Islands in 2012 and came into force on 1 January 2013. The law introduces a number of new requirements for non-profit organisations operating in the BVI. The following guide has been prepared by Harneys to assist the non-profit sector in the BVI understand its obligations under the law.

Q1 What is the Non-Profit Organisations Act, 2012?

A1 The Act is legislation passed by the British Virgin Islands to provide a framework for regulating charities and other non-profit organisations which operate predominantly in the Territory. The Act was passed as part of the global fight against terrorist financing; some international organisations believe that charities are used as a front by terrorists.

Q2 Does the legislation apply to non-profit organisations incorporated in the BVI but primarily carrying on its operations outside the BVI?

A2 No it does not. Nor does it apply to entities licensed under the Banks and Trust Companies Act, 1990 ("BTCA") or purpose trusts where the trustee is licensed under the BTCA.

Q3 I run a local non-profit organisation. What does this mean for me?

A3 First you need to consider if the Act applies to you. Firstly, are your activities conducted primarily within the Territory? Secondly, are you engaged in "the promotion of charitable, religious, cultural, educational, social or fraternal purposes, or other activities or programmes for the benefit of the public, or a section of the public"? Thirdly, do you raise or disburse funds in pursuance of these objectives? Finally, you need to consider if your organisation is established "solely or primarily" to do this.

If the answer to all four questions is "yes", then the Act probably applies to you and you will need to complete an application form and pay the relevant fee (either US$100 or, if your organisation is not a new organisation and your annual income is below US$250,000 then it is US$50).

Q4 What does "charitable, religious, cultural, educational, social or fraternal purpose" mean?

A4 It covers a pretty wide spectrum of organisations. Any religious organisation, including established churches will need to register as will all schools and colleges. A number of organisations such as the Lion's Club, Rotary and sporting associations would be included under the heading "social or fraternal". But any organisation which works for the public good is likely to be affected. This would include, for example, VISAR and the Historical Society. Arguably it also includes a number of Government bodies (like the Law Reform Commission).

Q5 OK, but what does "solely or primarily" mean?

A5 It really means that the public good should be the organisation's main purpose and any other functions are secondary. For example, the BVI Red Cross runs a second hand shop, but clearly it is a charity first and shop second, so it would need to register. Conversely many medical clinics in the Territory provide services at little or no charge for the needy. However, they are businesses first and only provide these services as an adjunct to their business, and so would not need to register.

Q6 With whom do I register?

A6 The organisation is required to submit its application, for registration, in a required statutory form, to the Non-Profit Organisations Registration Board through the Registrar of Non-Profit Organisations.

Q7 Is there a specific time limit within which I am required to register?

A7 For organisations in existence at the commencement of the Act, there is a ninety day window within which application should be made for certificate of registration. For new organisations coming into existence after the commencement of the Act there is a requirement that a person shall not operate a non-profit organisation unless registered under the Act. It is therefore necessary that registration take place before commencing operations.

Q8 What happens if I don't register?

A8 Theoretically it means you are committing a crime, punishable by either a fine or imprisonment. Whilst we expect that the authorities will take a sympathetic approach to the new legislation, the safest course is to comply.

Q9 Do those criminal penalties apply to me personally?

A9 Unfortunately, yes. If your organisation is what lawyers refer to as an "unincorporated association" (that is, a group of persons habitually carrying out an activity together but without the benefit of formal incorporation into a company with separate legal personality) then each member is potentially personally liable. If your organisation is incorporated as a limited company, then the members of the board of directors are potentially personally liable, but not other members.

Q10 But my organisation is small and/or informal - does it still apply to me?

A10 Probably. Being small does not unfortunately make any difference; the Act applies to all organisations, no matter how small. However they do have to be "organisations". That implies a certain degree of permanence. A purely temporary endeavour, such as a charity sale or a sponsored cycling event, is probably not sufficiently permanent and would not need to be registered.

Q11 My organisation is a church, but we also run a church school. Do the church and the school need to register separately?

A11 That is a difficult question. If the "main organisation" (In your case, the church) is registered, it usually follows that any smaller groups within the organisation should not need to register separately. However, if there is a separate and distinct group within the organisation which is financially independent of the organisation, then it seems likely that this independent group should separately register. So, if the school is financially separate from the church, then it seems likely it would need to register separately under the Act.

Q12 Alright I give in - I will register. Then what happens?

A12 Provided your registration is accepted, it is valid for one year from the date of issue and you then carry on much as before. Theoretically there are powers to inspect premises suspected of terrorist financing, but that is extremely unlikely. If your registration is rejected it means the Board does not consider you to be covered by the Act, and unless your organisation's status changes you can forget all about it.

However, once you are registered your organisation is going to have to provide financial records every year to the Board for review. Moreover, if your revenues are greater than US$250,000 a year you will need your financial statements to be "certified" by an accountant.

Q13 But what if we don't maintain formal financial records?

A13 Unfortunately you are going to have to start to do so.

Q14 Is it true we need to appoint a "money laundering reporting officer" now? What is that anyway?

A14 Well, strictly speaking all charities are supposed to have money laundering reporting officers already under BVI law under the Anti Money Laundering Code of Conduct, but the law is not strictly enforced against charities. The Act simply reiterates this requirement. The Act also provides that organisations with fewer than 5 employees are exempt, but no amendment has been made to the Code so we would suggest caution.

Q15 Does this "money laundering reporting officer" need to be a lawyer or accountant?

A15 No. Although it sounds very scary, being a money laundering reporting officer is really just about being the sensible person in the organisation whom people can approach when they have concerns about these issues. In an organisation like a bank or a trust company this needs to be a qualified professional, but in less formal non-profit organisation like a charity you really just need a bit of guidance and a lot of common sense. However, if you do have a lawyer or an accountant within your organisation to fill the role they may be more comfortable dealing with the relevant regulations.

Q16 Do we need a "compliance manual"? What is that?

A16 Unfortunately, you do. Under the Anti Money Laundering Code all charities are required to have a compliance manual to assist the members of the organisation and the money laundering reporting officer in setting out internal procedures to deal with these matters.

Q17 Is this all really necessary?

A17 We appreciate your frustration. From your point of view this all looks highly unnecessary and a big waste of time. However, it is important to remember that the British Virgin Islands needs to do this as part of the wider fight against terrorist financing and to maintain the support of the international bodies which are crucial to the Territory's offshore finance industry. Charities are formed for the greater good, and so unfortunately you just need to trust us when we say that, even if it is not apparent to all the people working hard for their local charities, there is a "greater good" for the BVI behind this legislation.

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.

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