On 1 January 2005, a new company law regime came into effect in the British Virgin Islands. The new Act, entitled the BVI Business Company Act, has been modelled on the territory’s well-known International Business Companies Act, as amended, and includes several new features to expand its appeal to international investors and business professionals, while also providing a suitable framework for domestic BVI companies.
Since its inception in 1984, the BVI International Business Companies Act has drawn some 600,000 companies to be registered there, providing a powerful driver of growth to the domestic economy. Over the years, the IBC has been at the core of the territory’s successful development into a premier offshore financial centre.
Twenty years later, the BVI Government, the Financial Services Commission, the Attorney General’s Chambers and private sector experts have combined to draw up the new legislation aimed at maintaining the BVI’s pre-eminence as an international corporate domicile.
"The new BVI Business Companies Act was designed to safeguard the attributes that have made the BVI the world’s premier offshore company domicile," said Dr. the Hon. D. Orlando Smith, Chief Minister of the BVI. "The collaborative effort to draft this new Act has resulted in legislation that not only retains all the virtues of the current IBC Act, but makes the BVI even more attractive to clients by including new features that have become desirable since the enactment of the current Act."
By incorporating all companies registered in the BVI, domestic and international, and maintaining the income tax exemption that IBCs have always enjoyed, the Act also eliminates the problem of "ring-fencing", in compliance with the EU Directive on Business Taxation.
To ensure a seamless transition to the new regime, the BVI Government has incorporated a two-year transition period in the new Act to allow existing companies (i.e. companies incorporated before 1 January 2005)to come into compliance with the requirements of the Act. The transition period will be guided by the following:
In 2005, new incorporations will be possible under all three Acts, i.e. the Companies Act (CAP 285), the International Business Companies Act (CAP 291) and the new BVI Business Companies Act.;
In 2006, new incorporations will only be possible under the BVI Business Companies Act. Companies already on the Register will be permitted to continue to operate under the International Business Companies Act or the Companies Act for one final year, during which they must prepare to re-register under the BVI Business Companies Act; and
By 2007, it is envisioned that all companies registered in the BVI will be operating under the new regime established by the BVI Business Companies Act.
Other key changes ushered in by the Act include:
The creation of different types of company: companies limited by shares, companies limited by guarantee, hybrid companies (i.e. limited by shares and by guarantee), and unlimited companies with or without share capital
The provision for an entirely new type of company called a "restricted purpose company" which, as far as we are aware, will be unique to the BVI. This company is designed to be used as a special purposes vehicle, especially within structured finance transactions and joint venture operations.
The incorporation of segregated portfolio companies (sometimes referred to as protected cell companies). This will be particularly attractive and important for the investment funds and captive insurance industries, both of which are rapidly growing in numbers in the BVI.
New provisions for the registration of mortgages, charges and other encumbrances.
A requirement for domestic companies to have a Registered Agent in the BVI.
A modest increase in the registration and annual renewal from $300 / $1,000 to $350 / $1,100
The BVI Government, in partnership with the financial service private sector and the BVI Chamber of Commerce and Hotel Association, will launch an education programme to ensure that all BVI companies, both domestic and international, are aware of the new legislation’s requirements.
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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