By Jacqueline Daley-Aspinall – Partner and Ian Montgomery, Senior Associate, Corporate & Commercial Department, Harney Westwood & Riegels
Although there are less than 30,000 people living and working within the British Virgin Islands (the BVI), these islands are home to almost 500,000 active companies registered under the BVI Business Companies Act 2004 (the ‘BC Act’). The small size of the population, the raw natural beauty, and the peaceful tranquillity of the islands belie the fact that the BVI is one of the world’s most important offshore financial centres and the leading offshore jurisdiction for company formations. In some countries, the term used for an offshore company is ‘a BVI’.
One of the most significant benefits of a BVI company is the ease and speed with which one can be incorporated. Once an incorporator of companies (known as a ‘registered agent’ or ‘RA’) is provided with the necessary know-your-client (‘KYC’) information and the applicable fees, it can incorporate a company within 24 hours.
The companies offer maximum flexibility in that they may engage in any act or activity not contrary to BVI law. BVI companies feature in a myriad of transactions and they can be employed as easily as a single asset holding company as for use as a corporation whose shares are to be listed on a stock exchange.
Unless a BVI company owns real estate in the BVI or has employees in the jurisdiction, it is generally exempt from paying taxes here but it will be required to pay annual government fees and RA fees.
The RA usually provides a registered office address for any BVI company it incorporates but otherwise, there is no requirement for a company to have a physical presence in the Territory. There is also no general requirement for a company to have BVI based directors or shareholders or for the company to hold meetings in the BVI.
Another advantage of BVI companies is the confidentiality they provide. The Registry of Corporate Affairs in the BVI is the only public source of company information, and only limited company documents are available there. Safeguards are however built in to BVI law to prevent this confidentiality from being abused, for example by criminal activity or money laundering. Supervision of the offshore sector is provided by the Financial Services Commission which has a wide range of enforcement provisions to investigate and prevent wrongdoing.
The BC Act offers a wide variety of corporate options. Five different types of companies may be incorporated – being companies limited by shares, unlimited companies, with or without the power to issue shares or companies limited by guarantee, with or without the power to issue shares. Such companies may then be classified as restricted purposes companies or segregated portfolio companies or both. The most frequently used type of company is a company limited by shares as it provides limited liability to shareholders so that they will not responsible for any debts of the company beyond any amount owed for their shares.
Last, but not least, is the relative cost efficiency of a BVI company. A BVI company may be formed and maintained at a fraction of the cost of entities registered in certain other jurisdictions.
Every BVI company must have a registered agent. The registered agent provides the registered office address and will, amongst other things, be responsible for paying fees to the Registry of Corporate Affairs on behalf of the BVI company and holding at the registered office, either the original or an accurate copy of the company’s statutory registers (i.e. the register of members, register of directors and if any, the register of charges).
Harneys has an affiliated company which provides RA services but a comprehensive list of all currently licensed registered agents can be found on the BVI’s Financial Services Commission’s website.
Every registered agent has its own standard incorporations form. The forms vary but all will generally ask the person seeking to incorporate the company to propose names for the company, indicate the total maximum number of shares that are to be issued by the company and to indicate whether the company’s constitution, known as the memorandum and articles (the ‘M&A’), are to have any special provisions – this is based on the fact that each RA has a selection of standard M&As.
The incorporation form will also ask for names and details of intended directors and shareholders of the BVI company and the number of shares to be issued to each shareholder.
In keeping with internationally adopted compliance requirements, the incorporations form will demand KYC information on the intended ultimate owner of the company. Usually, it requests that certified copies of proof of address (such as a utility bill) and proof of identity (such as a passport or driver’s licence) must be sent to the registered agent in connection with the company’s intended shareholders. Some RAs also ask for this information in connection with intended directors of the company.
The incorporation form will solicit details of a contact person or ‘client-of record’ for the company. The RA will liaise with that contact person after the company is incorporated and will send any future notices or requests to the person by way of the communication method requested, i.e. e-mail, fax, airmail etc.
Most registered agents now ask that a service contract be executed between the RA and whoever is giving instructions on the company formation. The contract sets out the rights and obligations of both parties in connection with the BVI company.
The RA will only start the process of incorporating a company if it receives its fees. The quantum of the fees charged vary from registered agent to registered agent and will include a government incorporation fee and the fees to be paid to the RA for its services as agent and also for its providing the registered office.
Payment can usually be made by wire transfer or by credit card, if speed of incorporation is paramount. Payment by cheque is also acceptable but the RA is likely to wait until the cheque is negotiated before initiating the process.
Hard copies of the KYC information must be delivered to the registered agent to facilitate the incorporation. A person planning to incorporate should get the necessary documents copied, certified and sent to the registered agent by courier or by mail. Again, if speed is important or confirmation of receipt by the RA is preferred, then courier would be the best option.
Once the registered agent receives a copy of the completed incorporations form, applicable fees and any other documents it requests, it will:
The BVI Registry of Corporate Affairs will need to approve the proposed name of the company to ensure that it is not the same as another registered BVI company, a name that is offensive or which contains any restricted or prohibited words or a name that might confuse or mislead the public into believing that the company is affiliated to a globally recognised brand.
The name of the company must have a specified ending which reflects the type of company formed, so the name of a company limited by shares must end in – “Limited”, “Corporation”, “Incorporation”, “Societe Anonyme” or “Sociedad Anonima”, or their corresponding abbreviations, “Ltd”, “Corp”, “Inc”, or “S.A.”, while an unlimited company must end with either “Unlimited” or its abbreviation, “Unltd”.
Further, a company may have an additional foreign character name which can be particularly appealing to Chinese and Russian clients.
Following recent changes to BVI law, it is also possible to re-use a name previously associated with another company, in certain specific situations.
A company that will be authorised to issue 50,000 shares or less must pay a US$350 fee. A company that will be authorised to issue more than 50,000 shares is required to pay a fee of US$1,100. Where such company is to be a restricted purposes company or a private trust company then higher fees apply.
These same fees will actually be payable by the company yearly, once it is incorporated.
The M&A must contain certain matters stipulated by BVI law. It will act as the ‘Bible’ for the company and will dictate the actions of the shareholders, the directors and the company.
As indicated above, each RA has a selection of standard M&As, but these may be modified as necessary. Significant modifications must however be reviewed by a lawyer.
The registered agent must sign the M&A in the capacity as ‘Incorporator’ and submit it as part of the incorporation application.
The application for incorporation can only be filed by the proposed registered agent and the BVI Registrar of Corporate Affairs (the ‘Registrar’) will not accept an application from any other person. If the Registrar is satisfied that the provisions of the BC Act have been complied with, she will register the M&A as submitted, allot a unique number to the company and issue a certificate of incorporation. The BVI company is incorporated from the date specified in the certificate.
After the incorporation, the registered agent must within six months appoint the company’s first director(s). Those directors should then ensure that the company has one or more members. Otherwise, any person doing business in the name of or on behalf of the BVI company may be personally liable for payment of all debts of the company incurred while the company had no member.
The incorporation process for a BVI company is quick, easy and inexpensive compared to many other offshore jurisdictions.
The flexibility and versatility of BVI companies encourages persons seeking the ideal incorporation destination to look no further than the BVI. The simplicity of the process will undoubtedly ensure that the BVI retains its status as a leading offshore jurisdiction for decades to come.