Most Read Contributor in British Virgin Islands, February 2017
2016 was the year of Donald Trump, Brexit and extensive
overtime for celebrity obituary writers. The 2016 Atlantic
hurricane season was equally active: the most expensive since 2012
and the deadliest since 2005. The BVI missed out on most of the
tropical storm activity, but (along with most of the offshore
world) had its own storm with the Panama Papers – the leak of
the client database of Panamanian-based corporate service provider
Mossack Fonseca. 2016 was a hard year for BVI registered agents and
a good year for people looking for employment as compliance
Starting with the elephant in the room. The BVI, as the largest
International Financial Centre (IFC) by
number of companies, was home for many of the thousands of
companies mentioned in the Panama Papers. This resulted in a lot of
international media attention. Eventually, the real nature of the
Panama Papers began to be heard (but not quite as loudly as the
original story), namely that this was about the internal failings
of one service provider and should not detract from the real value
that IFCs contribute to the global economy. And the world
media's attention reluctantly moved on. Mossack Fonseca was
fined and censured by various regulators across the world. The
BVI's Financial Services Commission levied the heaviest fine in
its history. Many people thought that Mossack Fonseca would fold
and while it has pulled out of some territories, it does appear to
have survived. We shall see if it does survive 2017 as an
independent entity or if it is taken over by a rival.
Developments in BVI law
The latest amendments to the BVI Business Companies Act went
live in 2016 and these included the mandatory (but not publicly
accessible) registration of directors. Measures to introduce a
register of beneficial ownership (accessible to approved
international law enforcement bodies, but not the public) are
scheduled to be introduced in June 2017.
Enforcing share security without a court order
One of the amendments was the introduction of section 91B
requiring registered agents to act on the instructions of
directors, which complicated share security letters of instruction
(to registered agents). In one of our "firsts" for 2016,
Harneys used this section to successfully enforce share security
without a court order. Previously, registered agents would
sometimes require a court order (BVI or foreign) before updating
the original register of members in the face of understandable
resistance from their "client of record" and so remedies
such as possession and appropriation did not work well in practice
in the BVI. This may now change and is a development to watch with
BVI Court rulings
There were two rulings of the BVI courts in 2016 of particular
interest to secured creditors of BVI companies: UVW v
XYZI, which broadened Norwich Pharmacal orders in the BVI to
include BVI based registered agents where the judgement debtor has
shown evasive conduct; and Tipp Investments PCC v Chagala Group
Ltd. et al, which held that a beneficial owner holding its
interest via a nominee was not a member of a BVI company and did
not have standing for bringing an unfair prejudice claim.
Iran and Italy
In 2016 the BVI repealed its sanctions on Iran and was added to
Italy's "whitelist" of countries deemed to allow for
adequate exchange of information with Italy. These steps will
facilitate dealings with BVI companies and Iran and Italy
Expectations for 2017
BVI Limited Partnership regime
The much-anticipated revised BVI Limited Partnership regime is
expected to be introduced in the first half of 2017 and should
boost the private equity industry's use of the BVI.
In Q2 2016, the rate of growth by new incorporations in the BVI
was understandably slower in light of the Panama Papers, but the Q3
figures which were recently published showed an impressive increase
from the previous quarter of 14.8 per cent.
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When Walkers was launched as an offshore law firm in 1964 in the Cayman Islands it is fair to assume that the founders would never have dreamt their creation would, fifty years later, be working in a cross-border restructuring market driven by China.
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