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The BVI Business Companies Act (No 16 of 2004) is the principal
statute of the
British Virgin Islands
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relating to
British Virgin Islands company law
British may refer to:
Peoples, culture, and language
* British people, nationals or natives of the United Kingdom, British Overseas Territories, and Crown Dependencies.
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, regulating both
offshore companies
The term "offshore company" or “offshore corporation” is used in at least two distinct and different ways. An offshore company may be a reference to:
* a company, group or sometimes a division thereof, which engages in offshoring business pr ...
and local companies. It replaced the extremely popular and highly successful
International Business Companies Act
The International Business Companies Act, 1984 was a statute of the British Virgin Islands which permitted the incorporation of International Business Companies (IBCs) within the Territory. The Act played in a huge role in the economic and fin ...
. It came into force on 1 January 2005.
The decision to replace the International Business Companies Act was driven by two things. Firstly, there was a general perception that the older legislation was becoming a bit dated, and needed modernising. Secondly, the
OECD
The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate e ...
and other multinational organisations had expressed concerns about ring-fenced tax regimes in
tax haven
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
s, such as that under the older legislation and were putting jurisdictions under pressure to repeal them. The
British Virgin Islands Financial Services Commission
The BVI Financial Services Commission is an autonomous regulatory authority responsible for the regulation, supervision and inspection of all the British Virgin Islands financial services including insurance, banking, trustee business, company ...
dealt with both issues in a single legislative swoop.
The BVI Business Companies Act is actually based upon a
New Zealand
New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and over 700 smaller islands. It is the sixth-largest island count ...
statute (as opposed to the International Business Companies Act, which was based on
Delaware
Delaware ( ) is a state in the Mid-Atlantic region of the United States, bordering Maryland to its south and west; Pennsylvania to its north; and New Jersey and the Atlantic Ocean to its east. The state takes its name from the adjacent Del ...
corporation law). Conscious of how widely the earlier legislation had been copied by other tax havens, the BVI Business Companies Act was drafted with a large number of forms and procedures which specifically tied it into the Territory's regulatory structure, thereby making it much harder to simply copy and enact.
Name
The name of the statute actually commences with "BVI". That statute is often mistakenly referred to as simply the "Business Companies Act" due to a common misinterpretation that the "BVI" is a description of the jurisdiction of enactment rather than actually part of the name.
The letters BVI were deliberately inserted as part of the branding exercise, and it was hoped that companies formed under the new legislations would be referred to as "BVIBCs". This would neatly merge the common acronym under the old legislation ("IBCs") and the common reference used in
Hong Kong
Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China (abbr. Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delta i ...
, the which has the largest geographical concentration of British Virgin Island companies (where they are often referred to simply as: "BVIs").
Ultimately the phrase "BVIBCs" proved to be too much of a mouthful, and in the offshore financial industry, it is more usual to refer to entities formed under the Act as "BCs", or simply "BVI companies".
Features
The Act contains a number of specific features which are designed to make the British Virgin Islands more attractive as an
offshore financial centre
An offshore financial centre (OFC) is defined as a "country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy."
"Offshore" does not refer ...
. These include:
* considerably restricting the requirement for
corporate benefit
* abolishing
financial assistance in relation to company shares
* abolishing the concept of a
share capital in relation to company shares (and thereby ''en passant'' removing requirements relating to maintenance of capital and distributable reserves requirements for
dividend
A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-i ...
s)
* removing restrictions in relation to the declaration of
dividend
A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-i ...
s
* increasing the types of company that can be formed
* modernising the regime for registration of
security interest
In finance, a security interest is a legal right granted by a debtor to a creditor over the debtor's property (usually referred to as the ''collateral'') which enables the creditor to have recourse to the property if the debtor defaults in makin ...
s
* the Act introduces statutory
minority shareholder protections
* companies are no longer required to have a stated corporate object, thereby obviating a number of difficulties relating to ''
ultra vires
('beyond the powers') is a Latin phrase used in law to describe an act which requires legal authority but is done without it. Its opposite, an act done under proper authority, is ('within the powers'). Acts that are may equivalently be termed ...
'' and
director's duties.
Transitional arrangements
The intention of the legislation was to eventually consolidate all British Virgin Islands company law into a single statute.
Prior to the BVI Business Companies Act coming into force, it was possible to incorporate a
company under two different statutes: the International Business Companies Act (Cap 291) and the Companies Act (Cap 285).
After the BVI Business Companies Act came into force on 1 January 2005, it was possible to incorporate a company under any of the three statutes. It was also possible for a company which had been originally incorporated under the International Business Companies Act or the Companies Act to adopt new
constitutional documents
In relation to juristic persons, the constitutional documents (sometimes referred to as the charter documents) are the documents which define the existence of an entity and regulate the structure and control of that entity and its members. The pr ...
and voluntarily re-register under the BVI Business Companies Act.
After 1 January 2006, it was no longer possible to incorporate a company under the International Business Companies Act or the Companies Act, but companies which had been originally incorporated under those Acts continued to be regulated by them.
After 1 January 2007, all companies which had been originally incorporated under the International Business Companies Act were compulsorily re-registered under the BVI Business Companies Act. Detailed transitional provisions were enacted in Schedule 2 of the new Act to deal with discrepancies between the two sets of legislation.
After 1 January 2009, all companies which had been originally incorporated under the Companies Act were compulsorily re-registered under the BVI Business Companies Act. Initially it was proposed that this transition date would occur on 1 January 2008, but on 31 December 2007 emergency legislation was passed, pushing it back by a year so that the transitional provisions set out in Schedule 2 of the Act could be further amended and modified.
Amendments
The Act has already been amended multiple times in its relatively brief life. Although some of the amendments relate to fine tuning legislation, and others relate to introducing new features (such as minority shareholder rights), a great many other amendments have been necessary to fix issues brought about by the transitional arrangements. Registration procedures for
security interest
In finance, a security interest is a legal right granted by a debtor to a creditor over the debtor's property (usually referred to as the ''collateral'') which enables the creditor to have recourse to the property if the debtor defaults in makin ...
s have proved particularly difficult to resolve.
[Up until late 2007, it was not possible to de-register security which had been registered under the old International Business Companies Act, but was released subsequent to the repeal of that legislation. Similarly, amendments to security registered under the old Act could not be filed either. These difficulties were corrected by the BVI Business Companies (Amendment of Schedules) (No. 2) Order 2007 (SI No 80 of 2007).]
Replications
Although the predecessor International Business Companies Act was widely copied by other offshore jurisdictions, it was assumed that the BVI Business Companies Act would not be similarly replicated, as the architecture of the legislation integrated it very closely with the systems and procedures of the British Virgin Islands corporate registry. However, in 2006 the
Isle of Man
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passed new company act, the
Isle of Man Companies Act, which was nearly a word-for-word copy of the BVI Business Companies Act.
External links
BVI FSC legislation libraryArticle comparing BVI Business Companies Act to International Business Companies ActArticle - key features of the BVI Business Companies ActVideo: The Story of the IBC ActBVI Business Companies Act, 2004BVI Business Companies (Amendment) Act 2006BVI Business Companies (Amendment) Act, 2015Formation requirements and taxation(in German)
Footnotes
{{DEFAULTSORT:BVI Business Copmanies Act
British Virgin Islands company law
British Virgin Islands law
Offshore finance
2004 in law
2004 in the British Virgin Islands