Company Limited by Shares (International Business Company)

In order to be incorporated as a company limited by shares under the BVI Business Companies Act 2004 (BVIBCA), the memorandum of association (“memorandum”) must specifically state that it is such a company. The memorandum must also state the maximum number of shares that the company is authorized to issue or that the company is authorized to issue an unlimited number of shares, the classes of shares, and (if there is to be more than one class) the rights, privileges, restrictions, and conditions attaching to each such class. There must always be at least one shareholder at all times, but this requirement does not apply during the period from the incorporation of the company to the appointment of the first directors.

The BVIBCA provides that a member of a limited company has no liability as a member for the debts and obligations of the company and is a statutory affirmation of the principle that the company has a separate legal personality from its members. Thus, a creditor cannot sue a member of a limited company for the company’s debts. However, where there are no members, any person doing business on behalf of or in the name of the company is personally liable for its debts.

As regards a shareholder’s liability to the company to contribute to its assets, under the BVIBCA, this is limited to the amount unpaid on shares held by him, any liability expressly provided for in the memorandum or articles of association (“articles”) and a liability to repay Sec. 58 distributions made in contravention of the solvency requirements.

Thus, the BVIBCA allows the memorandum or articles expressly to provide for additional liability on the part of a shareholder to the company, e.g., a liability to contribute further equity, and they can provide for when such liability should accrue (including, for example, while it is still a going concern, although this is unlikely to be done in practice).

The name of a limited company must end with any of “limited”, “Corporation”, “Incorporation”, “Société Anonyme” or “Sociedad Anonima”, or their corresponding abbreviations; “Ltd”, “Corp.”, “Inc.” or “SA”.

Company Limited by Guarantee not Authorized to Issue Shares

In order to be incorporated as such a company, the memorandum must state that it is a company limited by guarantee that is not authorized to issue shares. The essence of such a company is that its guarantee members’ liabilities to contribute to the company’s assets only arise in the event that the company goes into voluntary liquidation under the BVIBCA or into insolvent liquidation under the Insolvency Act 2003, and is limited to an amount that must be stated in the memorandum. The memorandum or articles can also expressly provide for any additional liability to the company and, as mentioned above in relation to companies limited by shares, there is no reason why that liability cannot arise while the company is a going concern. This can be a useful mechanism for providing for annual payments or subscriptions by members. A guarantee member will also be liable to repay any Sec. 58 distribution made in contravention of the solvency requirements.

The general rule of limited liability applies, i.e., the guarantee members are not liable as members for the debts or obligations of the company. A company limited by guarantee must have at least one guarantee member at all times, but this requirement does not apply during the period from the incorporation of the company to the appointment of the first directors. One contrast with companies limited by shares is in the voting rights of members. For companies limited by shares, a shareholder has the total number of votes attached to the shares that he holds, whereas a guarantee member is entitled to one vote unless the memorandum or articles provide otherwise.

The name of a limited company must end with any of “limited”, “Corporation”, “Incorporation”, “Société Anonyme” or “Sociedad Anonima”, or their corresponding abbreviations; “Ltd”, “Corp.”, “Inc.” or “SA”.

Company Limited by Guarantee and Authorized to Issue Shares

In order to be incorporated as such a company, the memorandum must state that it is a company limited by guarantee that is authorized to issue shares. As it is a hybrid vehicle, the memorandum must contain the matters required for guarantee companies as well as for companies limited by shares, i.e., it must state the amount which each guarantee member is liable to contribute to the company’s assets upon liquidation, the maximum number of shares the company is authorized to issue or that the company is authorized to issue an unlimited number of shares and the classes of shares and the rights, privileges, etc. attaching to each class if there is to be more than one class of shares.

At least one of its members must be a guarantee member, but it can also have shareholders. The guarantee member’s liability to the company will be as discussed above in relation to a company limited by guarantee not authorized to issue shares, while a shareholder’s liability is as discussed above in relation to a company limited by shares. As regards voting rights, a shareholder member will have the votes attached to his shares, while a guarantee member will have one vote unless the memorandum or articles provide otherwise.

The name of a limited company must end with any of “limited”, “Corporation”, “Incorporation”, “Société Anonyme” or “Sociedad Anonima”, or their corresponding abbreviations; “Ltd”, “Corp.”, “Inc.” or “SA”.

Unlimited Companies not Authorized to Issue Shares

Its memorandum must state that it is such a company, and it must have at least one unlimited member at all times. Each member will have one vote unless the memorandum or articles provide otherwise.

The name of an unlimited company must end with either “Unlimited” or its abbreviation, “Unltd”.

Unlimited Companies Authorized to Issue Shares

The BVIBCA allows for the incorporation of an unlimited company that can issue shares. Its memorandum must state that it is such a company, and it must also state the maximum number of shares that it is authorized to issue or that the company is authorized to issue an unlimited number of shares, the classes of shares and, if more than one, the rights, restrictions, etc. attaching to each class. It must have at least one member who is an unlimited member, i.e., who has unlimited liability for the liabilities of the company as explained above, but this requirement does not apply during the period from the incorporation of the company to the appointment of the first directors.

The name of an unlimited company must end with either "Unlimited" or its abbreviation, "Unltd".

Restricted-Purposes Companies

In order to create a restricted-purposes company, three requirements must be met: (i) the company must be a company limited by shares; (ii) the memorandum as filed on incorporation must state that it is a restricted-purposes company; and (iii) the memorandum must state the actual purposes of the company. If those requirements are met, the company will be registered as a restricted-purposes company and will be required to have the acronym “SPV” in its name. A restricted-purposes company can also be a segregated portfolio company.

Note that in order to be a restricted-purposes company, the company must be incorporated as such; a company cannot subsequently register as one. Therefore, a company that is not a restricted-purposes company cannot amend its memorandum to state that it is such a company, and any resolution passed by its members or directors to that effect is void.

Once registered as a restricted-purposes company, a company cannot amend its memorandum to delete or modify the statement that it is a restricted-purposes company, and any resolution to that effect by its members or directors is void. However, the purposes in the memorandum may be modified unless the memorandum specifically states that they cannot be amended.

It is intended that these companies will be exempt from the administration provisions under Part III of the Insolvency Act 2003 when those provisions are brought into force. However, no amendment has yet been made to the Insolvency Act 2003 to effect that intention.

The name of a restricted purpose company must end with either “(SPV) Limited” or “(SPV) Ltd”.

Segregated Portfolio Company

The BVIBCA allows insurance companies and mutual funds to incorporate or register as segregated portfolio companies (SPCs), and there is a provision to enact regulations to allow other types of companies to incorporate or register as SPCs.

The name of a segregated portfolio company must include “Segregated Portfolio Company” or “SPC”. The name of a segregated portfolio company that is also a restricted-purposes company must include the designation “(SPV)” immediately before or after the designation “Segregated Portfolio Company” or “SPC”.

Foreign Company

While the BVIBCA is principally concerned with companies incorporated under it or which register under it, Part XI regulates foreign companies which do business on the British Virgin Islands. Such companies cannot carry on business on the British Virgin Islands unless they register, or have applied to the Registrar to register, as foreign companies under the Register of Foreign Companies.

The application must be in the approved form and accompanied by the following documents: (i) evidence of its incorporation; (ii) a certified copy of its constitution; (iii) a list of directors as at the date of the application with full names, nationality, address and date of appointment of each director; (iv) a notice specifying its registered agent on the British Virgin Islands; and (v) any other documents that may be prescribed. Failure by a foreign company to register does not affect the validity or enforceability of any transaction entered into by it but means that it commits an offense. It must also have a registered agent on the British Virgin Islands at all times and must file an annual return by 31 March of every year made up to 31 December of the previous year.

If the Registrar considers that the name of a foreign company that applies for registration is undesirable, he must not register the company unless it applies to be registered with an alternate name acceptable to the Registrar. Where the Registrar is satisfied that the name or alternate name of a foreign company that is registered under the BVIBCA is undesirable, he must serve notice on the company to cease carrying on business on the British Virgin Islands using that name. Within 30 days after the date of service of the notice, the company must apply to the Registrar to be registered under an alternate name acceptable to the Registrar.

A foreign company that carries on business in the British Virgin Islands must ensure that its full corporate name or its registered alternate name is used in every communication sent by it and in every document issued or signed on its behalf that creates a legal obligation of the company. Where registered under an alternate name, the foreign company must state in every communication and document that the alternate name is not the corporate name under which the company is registered in its place of incorporation.

Trusts

BVI trusts are governed by English common law as supplemented by the Trustee Ordinance Cap. 303 as amended in 1993 and 2003. Trust and trust management services are offered on the British Virgin Islands by trust companies licensed under the Banks and Trust Companies Act 1990 (BTCA).

BVI law recognizes all types of trusts, including discretionary trusts, accumulation and maintenance trusts, and life interest trusts. It also recognizes purpose trusts which are trusts other than those for the benefit of a particular person or group of persons. The purpose must be specific, reasonable, and possible and must not be immoral, unlawful, or contrary to public policy. At least one trustee must be a “designated person” as defined by the Act, and each such trust must appoint an “enforcer” to enforce the trust.

The perpetuity period may be fixed by the trust instrument for any number of years not to exceed 100. The rule against perpetuities does not apply to purpose trusts. For the purpose of establishing whether there has been any breach of the rule against perpetuities, “wait and see” provisions apply.

The courts of the British Virgin Islands are given jurisdiction over trusts in all cases where the proper law of the trust is expressed to be that of the British Virgin Islands or where the trustee is a resident of the British Virgin Islands or, being a corporation, is registered to do business on the British Virgin Islands or where the administration of the trust is carried on in the British Virgin Islands. Similarly, the courts will have jurisdiction if any trust property is situated on the British Virgin Islands, if the court is the natural forum for the litigation, if the parties submit to the jurisdiction of the court, or if the trust instrument contains a provision referring disputes to the jurisdiction of the court.

The law now contains comprehensive and carefully drafted provisions protecting BVI trusts from forced heirship claims.

The trustee of a trust may be an individual or a trust corporation, which if it is a BVI corporation, must have a trust license unless it is not “carrying on trust business” as determined by directions issued under the BTCA. Trustees’ powers and responsibilities are regulated by the Trustee Act, which permits, inter alia, trustees to make any investments authorized by the trust instrument or by law. Trustees are required to keep proper records of administration of the trust property, but there is no requirement for filing accounts with the Registrar.

Under BVI tax law, trust income is exempt from tax in the hands of the trustees. Beneficiaries are also exempt from tax in respect of all distributions from the trust unless the beneficiaries are residents of the British Virgin Islands, which for such purpose means persons who ordinarily reside on the British Virgin Islands or who carry on business from an office or other fixed place of business on the British Virgin Islands. However, these exemptions are now redundant because of the zero-rating of income tax.

Mutual funds

The MFA 2006 Act divides open-ended investment funds into a number of classes:

A “professional fund” is defined as a mutual fund that is designated as a professional fund by regulations, the shares of which are made available only to professional investors and for which the initial investment by the majority of such investors is not less than USD 100,000 or its equivalent in any other currency.

A “private fund” means a mutual fund with no more than 50 investors, where an invitation to subscribe for or purchase shares issued by the fund is made on a private basis and is designated as a private fund by regulations.

A “public fund” is a mutual fund that is neither a private nor a professional fund. A public fund may not carry on business or manage or administer its affairs from the British Virgin Islands unless it is registered under the MFA. Recognition under the MFA is also required for private or professional funds.

All open-ended funds have to be ‘recognized’ or registered by the Registrar of Mutual Funds, an official of the Financial Services Commission. The Act also sets up a licensing regime for managers and administrators of mutual funds. Umbrella funds and funds of funds are both permitted. Closed-end funds are not covered by the Act. Investment funds in the BVI normally take one of three corporate forms: the Business Company (BVIBC), the Unit Trust or the Limited Partnership. A BVI mutual fund can also be specifically registered as a Segregated Portfolio Company under the BVI Business Companies Act 2004.

The BVI Registrar of Mutual Funds recognizes 39 jurisdictions as having sufficiently prudent systems of regulation/supervision of mutual fund business in place so as to allow him to approve applications for recognition and registration by British Virgin Islands mutual funds which list a functionary (e.g. a manager) from the recognized jurisdiction. The 39 jurisdictions are: United Kingdom, United States of America, Argentina, Australia, Bahamas, Belgium, Bermuda, Brazil, Canada, Cayman Islands, Chile, China, Curacao, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Isle of Man, Ireland, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, The Netherlands, New Zealand, Norway, Panama, Portugal, Singapore, Spain, South Africa, Sweden and Switzerland.

Although there are now 400 entities providing management and/or administration services to Mutual Funds in the BVI, Mutual Funds do not have to be managed or administered from within the BVI. Regulated service providers in the above jurisdictions around the world are accepted by the BVI Registrar of Mutual Funds to provide management and administrative services to BVI Funds, allowing greater flexibility when appointing service providers. Similarly, a non-BVI Mutual Fund is not required to be regulated under the Mutual Funds Act only because it is managed or administered from within the BVI, provided that the management or administrative service provider is a BVI entity, licensed under the Mutual Funds Act.

The Financial Services Commission is working on a code of practice to regulate BVI incorporated managers and administrators, which will adopt the highest international standards. The Securities and Investment Business Act 2010, came into effect on 17 May 2011. It requires all mutual funds in the BVI to have an authorized representative in the BVI and to have at least two directors. The authorized representative will have certain responsibilities to ensure that its mutual fund client complies with the regulatory requirements in the BVI.

Resident Agent

A registered agent must apply to form a BVI company and provide written consent to act. The registered office of the company does not need to be the address of the registered agent, although it must be within the BVI.

Costs & Duration

International Business Company

Fees for incorporation of an IBC are based on the company’s authorized share capital. Statutory incorporation fees are USD 550 (increased from USD 350, effective 1 January 2023) for capital up to USD 50,000 and USD 1,350 thereafter (increased from USD 1,100, effective 1 January 2023).

The company is obliged to appoint a licensed registered agent.

The annual government license fee as of 1 January 2023 amounts to the following:

Effective 1 July 2023, bearer shares are abolished. Previously, IBCs that did not comply with the bearer share regulations paid higher fees.

If a company fails to pay the annual government license fee, its name may be struck off. Effective 1 January 2023, a company that is struck off is dissolved on the date of publication of a notice of striking off by the BVI Registrar of Corporate Affairs in the official gazette. Prior to striking off a company, a notice of 90 days is issued to the company to make payment of the outstanding fees and regularize its status. The previous provision of a grace period of 7 years for companies struck off before being dissolved is removed.

Normally, the incorporation process takes no more than one day; however, for banks, trust companies, and insurers, the process is lengthier.

Trusts

Trust instruments, the proper law of which is the law of the British Virgin Islands, are subject to a USD 100 trust duty to be denoted by a revenue stamp affixed to the trust instrument and canceled. Instruments creating a trust for exclusively charitable purposes are, however, exempt from the duty. Trust duty may be paid late with penalties. Trust instruments and all appointments thereunder and any transfer of an interest in a trust are exempt from stamp duty unless the trust carries on a business or trade on the British Virgin Islands or has as its underlying assets land on the British Virgin Islands. All trust instruments are exempt from the provisions of the Registration and Records Act.

Mutual Funds

The fee payable in the year in which recognition or license is granted is USD 350 in the case of a recognized private or professional fund, USD 500 in the case of a person licensed as a manager or administrator and USD 1,000 in the case of a person licensed as both manager and administrator. The same amounts are payable thereafter as an annual fee.

Management and Substance Requirements

International Business Company

Under the BVIBCA, from 31 December 2004, all international business companies (IBCs) located in BVI are required to establish and maintain a Register of Directors and must appoint their first director within 30 days of the IBC’s incorporation. As from 2007, all IBCs are known as BVI Business Companies. Other statutory requirements largely remain minimal and flexible as follows:

• Only one director and one shareholder are required;
• Shareholders, directors, and officers need not be resident in the BVI, and there is no stipulation as to their nationality;
• There is no minimum capital requirement;
• Shares must be registered and may be issued in any currency (effective 1 July 2023, bearer shares are abolished);
• Accounts need not be kept; however, if they are kept, there is no requirement for an audit;
• No returns are needed of shareholders, directors, or officers;
• Shareholders’ and directors’ meetings need not be held in the BVI and can be held by telephone;
• The Memorandum and Articles of Association are the only documents to be held on the public record; and
• Effective 1 January 2023, names of current directors are publicly accessible. Previously, information about directors was not available on the public record unless a company elected otherwise.

IBC status is granted subject to certain conditions:

• No business may be transacted with residents in the BVI;
• No ownership interest in real property in the BVI is permitted; property may be leased for office use only;
• Banking or trust business may be carried on only if an appropriate license is issued;
• Likewise, a license is required to carry on insurance or re-insurance business;
• Engaging in the business of company management or providing registered facilities for BVI incorporated companies is not permitted.

IBCs are permitted to own shares in other BVI companies, maintain bank accounts in the jurisdiction and employ the services of local professionals. IBCs are exempt from BVI taxes by statute.

Trusts

The Amendment Act provided for the appointment of a ‘protector of trust’, effectively a supervisor of the trustee(s), and also managing and custodian trustees. A company offering trust services must obtain a license under the Banks and Trust Companies Act 1990 and conform to various conditions.

With effect from 1 March 2004, three new pieces of Trust Legislation came into force in the BVI:

• The Virgin Islands Special Trusts Act (VISTA);
• The Trustee (Amendment) Act; and
• The Property (Miscellaneous Provisions) Act.

The Vista Act allows trustees of VISTA trusts which hold a shareholding in a BVI International Business Company to disengage the trustee from management responsibilities. The use of trusts to cater for the succession of shares in companies has historically been impeded by the ‘prudent man of business’ rule of English trust law which is designed to help preserve the value of trust investments. The new legislation leaves the responsibility for managing the company to the directors of the company.

The new Act applies only where there is an enabling provision in the trust instrument. Where the new Act applies, designated shares will be held on “trust to retain”, and the trustee’s duty to retain the shares as part of the trust fund will have precedence over any duty to preserve or enhance their value. It is also possible to amend existing trusts to allow the provisions of the VISTA Act to apply to them.

The Act is confined to shares in BVI International Business Companies and Companies Act companies; and the trustee of a VISTA trust must be a company that holds a license to undertake trust business under the Banks and Trust Companies Act, 1990.

Mutual Funds

A person may not carry on business as a manager or administrator of a mutual fund on or from the British Virgin Islands unless he is licensed for that purpose under the MFA. This does not, however, apply to a person who is not ordinarily resident or domiciled in the British Virgin Islands as a manager or administrator of mutual funds under the laws of a recognized country or jurisdiction and who has received written permission from the FSC to carry on business as manager or administrator of mutual funds on or from the British Virgin Islands.

The MFA provides that a code of practice is to be drawn up for fund managers and administrators. The code will deal with matters relating to the conduct of business, financial resources, notification of certain specified events, advertising clients’ money and custody of investments, and accounting records and audit requirements.

Bearer Shares

Effective 1 July 2023, bearer shares are abolished, i.e., a company cannot issue a bearer share, convert a registered share to a bearer share, or exchange a registered share for a bearer share. Any existing bearer share as on 1 July 2023 is automatically converted into registered shares.

Law Prior to 1 July 2023

Prior to 1 July 2023, bearer shares were prohibited unless authorized by the memorandum or articles of association, and bearer share certificates had to be deposited with a custodian approved by the BVI Financial Services Commission.

A company that had existing bearer shares (created before 1 January 2005) and which re-registered on 1 January 2007 was obliged to deposit its bearer shares with an appropriate custodian on or before 31 December 2009.

Those eligible to apply as an “authorized” custodian were service providers licensed under any BVI financial services legislation, as well as bodies corporate incorporated or formed outside the BVI that were not resident in and did not have a place of business in the BVI. Those eligible to apply as a “recognized” custodian were investment exchanges or clearing organizations that operated securities clearance or settlement systems in a jurisdiction that is a member of the Financial Action Task Force.

All applicants to be “authorized” custodians had to satisfy the Financial Services Commission that they met certain “fit and proper” criteria and had the necessary systems in place for safe custody of their bearer shares. For bodies corporate, the Commission would consider the prudential regulation and anti-money laundering regulations with which the bodies had to comply.

A company issuing bearer shares had to provide the Custodian with:

• The full name of the beneficial owner of the shares; and
• The full name of any other person having an interest in that share or a statement to the effect that no other person has any interest in the share.

Authorized Capital

In most offshore jurisdictions there is a minimum required authorized share capital, and the share capital selected usually affects the fixed government fees payable. In British Virgin Islands, there is a more flexible alternative: BVI Business Companies may choose to state only the number of shares for issue, but they do not have to determine the monetary value of their capital. Thus, the company may issue its shares at a “market value”, or at a value that depends on the capitalization requirements of the company.

The normal authorized share capital is USD 50,000 divided into shares with or without par value. The share capital may be expressed in any currency. The minimum issued capital may be one share of no par value or one share of par value. Actually, any share capital is permitted, but additional government fees apply for the use of No Par Value Shares ($50) and authorized capital over $50,000 or equivalent (see above).

In the BVI, a company with the same 50,000 shares may decide to issue its shares with a value of one US cent, or one hundred Euros, or five thousand pounds sterling each, thus raising substantially different amounts of capital from its potential shareholders.