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BRITISH VIRGIN ISLANDS
- POLITICAL CONDITIONS
- INTERNATIONAL BUSINESS COMPANY (IBC)
- ADVANTAGES OF BVI
- PRE-INCORPORATION MATTERS
- COMPANY NAME
- REQUIREMENTS OF BVI LAW
- TRANSACTIONS INVOLVING SHARES OF AN IBC
- TAXATION
- GOVERNMENT FEES
- REGISTRATION REQUIREMENTS
- REGISTRATION SET OF DOCUMENTS
BRITISH VIRGIN ISLANDS
British Virgin Islands (BVI) are located in the Eastern Caribbean Sea, about 80 kilometers East of Puerto Rico. There are 36 British Virgin Islands; only 16 are inhabited. Although they constitute one of the few remaining British colonies, the islands are economically integrated with the nearby US Virgin Islands and the official currency is the US dollar and official language - English. The population is about 14,500, of whom 12,000 live on the island of Tortola, in and around road Town, the capital and main business center Island. There are very well developed international telecommunication and courier services.
POLITICAL CONDITIONS
British Virgin Islands are a British possession and a member of the British Commonwealth. BVI became self-governing in 1967. The Foreign and Commonwealth Office of the United Kingdom appoints the Governor. The Governor is responsible for defense, security, the civil service and administration of the courts. He is advised by an Executive Council consisting of two elected members and the attorney general. The Legislative Council has nine elected members, one of whom is the chief minister. The attorney general is an ex-officio member of the Legislative Council. The speaker is elected from outside the Council. The islands are politically stable and there is no real desire for independence. It is territory with superb commercial and professional infrastructure. Offshore activity is being highly encouraged and motivated.
INTERNATIONAL BUSINESS COMPANY (IBC)
Local legal system is based upon the Common Law of the United Kingdom. The principal statute governing the formation and operation of an International Business Company ("IBC"), the most preferred offshore company in the British Virgin Islands ("BVI") is the International Business Companies Ordinance, 1984 (thereafter - the "IBC Ordinance") as amended by the IBC Ordinance Amendments of 1988, 1990 and 1991.
The IBC Ordinance does not replace the existing Companies Act of 1885 (as amended) applicable in the British Virgin Islands, but provides a flexible and informal legal framework for the establishment of an IBC. Only IBC's can be incorporated under the IBC Ordinance Subsection 4 (thereafter S.4), which it describes as companies, which do not carry on business with BVI residents, except as expressly permitted by law. Where incorporation of an IBC under the IBC Ordinance is inappropriate it may be possible to incorporate the company under the existing companies legislation.
BVI has become one of the most popular offshore jurisdictions primarily thanks to extensive marketing and legislative efforts. An International Business Companies Ordinance of 1984 allows for minimum reporting requirements and for maximum privacy conditions. Pursuant to the provisions of the Ordinance of subsection (S.5.1) to qualify for registration as an IBC, the Company may not:
Carry on business in the BVI (but it may maintain BVI bank accounts and receive interest and may own shares in other BVI companies);
Own an interest in real estate in the BVI (other than a lease of an office);
Carry on banking or trust business unless it is licensed to do so under the Banks and Trust Companies Act, 1990;
Carry on business as an insurance or a reinsurance company, insurance agent or insurance broker, unless it is licensed under an enactment authorizing it to carry on that business;
Carry on the business of company management, unless it is licensed under the Company Management Act, 1990; or
Carry on the business of providing the registered office or the registered agent.
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ADVANTAGES OF BVI |
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An IBC is exempt from the provisions of the BVI Income tax Ordinance (S.111(1)). However every company must pay annual license fee (S.105).
Confidentiality and Disclosure - no public record is maintained as to the identity of shareholders or directors.
IBC's have no annual tax filing requirements or annual return of shareholders filings.
The IBC must have at least one shareholder and one director, of any nationality, resident anywhere, whose identities need not be disclosed, even to the local authorities. Directors can be individuals as well as business entities of any citizenship (S.42).
No restrictions on frequency or location of the Board meetings (as long as all directors participating in the meeting can hear each other). The books, records and minutes of meetings may be kept wherever the directors determine (S.48(1).
IBC may change its domicile from the British Virgin Islands to another jurisdiction, i.e. it may flee the British Virgin Islands but in order to continue as a corporate entity it will need to register in whatever jurisdiction it flees to.
No audited accounts or other financial statements are required.
PRE-INCORPORATION MATTERS
Incorporation
An IBC is incorporated by the filing in duplicate of the Company's memorandum and articles with the Registrar of Companies (the "Registrar") signed by its registered agent as subscriber in the presence of and attested by a witness (S.3;12.3). Included with the incorporating documents must be a certification by the company's registered agent that all the requirements of the IBC Ordinance in respect to incorporation have been complied with (S.14.1b). There is no requirement to publicize an intention to incorporate, nor is there any pre-approval by any BVI regulatory body. The registered agent is required to perform a due diligence review on the promoters of the company.
Having been satisfied that all of the IBC Ordinance's incorporation requirements have been met, the Registrar will register the memorandum and articles and issue a certificate of incorporation certifying that the company is incorporated on that date (S.14.3).
If all appropriate information is provided to the registered agent, the filing of the memorandum and articles with the Registrar for the purpose of effecting incorporation can usually be accomplished within a business day. The issuance of a certificate of incorporation will usually follow within a couple of days thereafter.
COMPANY NAME
You can give a name to your company. Subsection 11.1. determines that IBC's name must indicate the limited liability status by adding the following words or abbreviations thereof:
"Limited" or "Ltd";
"Corporation" or "Corp";
"Incorporated" or "Inc";
"Societe Anonyme" or "S.A."; or
"Sociedad Anonima" or "S.A".
No company shall be incorporated under a name that is identical with that under which a company in existence is already incorporated or registered under the Companies Act or so nearly resembles the name as to be calculated to deceive, except where the company in existence gives its consent (S.11.2a); or
The name of IBC must not contain the following words: Assurance, Bank, Building Society, Chamber of Commerce, Chartered, Co-operative, Imperial, Insurance, Reinsurance, Indemnity, Guarantee, Municipal, Royal, Trust, Trust Company, Trust Corporation, Trustee Company, Trustee, Savings, Savings and Loans, Underwriting, Security and Casualty (S.11.2b). Unless special written permission is granted by one or more of the following, namely the Register of Companies, the Commissioner of Insurance and the Governor in Council.
The name of IBC must not suggest or imply the patronage of Her Majesty or any member of the Royal Family or any connection with Her Majesty's Government or any department thereof or any connection with a municipality or other local authority or with a society or body incorporated by Royal Charter (S.11.2b).
The name of IBC must not be indecent, offensive or, in the opinion of the Registrar, objectionable (S.11.2c).
A name intended for future adoption may be reserved for 90 days(S.11.7)s.
Contracts before incorporation
Where a person purports to enter into a written contract in the name of an IBC or on behalf of an IBC which has not yet been incorporated, the contract will take effect as a contract entered into by that person and he will be personally liable under the contract unless the agreement specifically provides otherwise (S.69.1). Within a reasonable time after incorporation, the IBC may by any action or conduct, unilaterally adopt such a written contract and will become a party thereto to the same extent as if it had been in existence at the date of the contract (S.69.2). Such adoption by the IBC will discharge the person who purported to act on its behalf unless the contract provides otherwise.
Registered Agent
Every IBC must have at all times a registered agent in the BVI (S.39.1). Registered agents, which can be either an individual, firm or company, must be licensed under either the Company Management Act 1990 or the Banks and Trust Companies Act 1990 (S.39.2). The Registrar must maintain a register of licensed registered agents (S.40A1)
Capital Structure
An IBC can issue shares either with or without par value, and in registered or bearer form, partly voting or non-voting; of various classes, and have designations, powers, preferences and rights with qualifications, limitations or restrictions. This information must be included in the Memorandum of Association (S.17A;12.1). No shares may be issued unless fully paid or in return for a written obligation for payment (S.18). Consideration for shares can take any form not expressly excluded by the memorandum or articles. Shares in an IBC are personal property(S.26).
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REQUIREMENTS OF BVI LAW
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The memorandum and the articles of an IBC together form its constitution. Both documents are a matter of public record and available for inspection by the public at the offices of the Registrar (S.13.1.).
Memorandum
Pursuant to the S.12.1 the memorandum must include:
1. The IBC's name;
2. The address within the BVI of the IBC's registered office;
3. The name and address within the BVI of the IBC's registered agent;
4. The IBC's objects or purposes for which the company is to be incorporated;
5. Details of the IBC's capital structure; and
6. A verbatim statement that the company may not carry on any of those activities listed in subsection 5.1. of the Ordinance unless specifically licensed.
If the memorandum contains a statement to the effect that the object of the IBC is to engage in any act or activity that is not prohibited by any BVI law, such a statement makes all legal acts or activities objects of the IBC, subject to any express limitations in the memorandum (S.12.2). The memorandum must be subscribed by the registered agent (in the presence of a witness), but there need not be any other subscriber to the memorandum (S.12.3).
Articles
The articles must be included when the memorandum is submitted for registration with the Registrar and therefore are available for inspection by the public (S.13.1). The articles prescribe the regulations of the company. The articles also must be subscribed by the registered agent in the presence of and witnessed by another person (S.13.2). The articles must state whether or not share certificates will be issued.
Registered Office
An IBC must have at all times a registered office within the BVI maintained by its own staff or its registered agent (S.38). The address of the registered office must be included in the memorandum and therefore is available for public inspection (S.12.1). A post office box cannot be used as a registered office. In general, the books and records will be kept at the registered office; however, the directors have the discretion to keep them at some other location. Duplicate records may be kept at any other office outside the BVI. A copy of the share register must be kept at the registered office.
Directors
An IBC is managed by a board of directors, which consists of one or more persons who can be either individuals or companies (S.42). The articles determine the number of directors (S.44). None of the directors need be residents of the BVI. The first directors are elected by the subscriber (s) to the memorandum; and thereafter are elected and removed either by the members or, if the memorandum or articles permit, by the other directors (S.43). A company may maintain a register setting forth the names and addresses of the directors and if so, a copy must be kept at the registered office (S.43.A1). The register need not be available for inspection by the public. However, the IBC may elect to register its register of directors with the Registrar, which then makes it available for public inspection (S.111.A1.b).
Directors meetings may be held within or outside the BVI and a director participating in the meeting by electronic means will be deemed to be present at the meeting if all the directors participating are able to hear each other (S.48).
A director must be given at least 3 days notice of a directors' meeting (S.49.1). However, a directors meeting which contravenes this requirement can still be valid if all of the directors or such majority as specified in the memorandum or articles have waived notice. The presence of a director at the meeting constitutes waiver on his part (S.49.2).
A quorum for a meeting of directors, unless the memorandum or articles state otherwise, is half the total number of directors present in person or by alternate, at the commencement of the meeting (S.50).
An action that may be taken by the directors at a meeting may also be taken by a unanimous resolution of the directors in writing or written electronic communication, without the need of any notice (S.51).
A director may by written instrument appoint an alternate who need not be a director. The alternate can attend meetings in the absence of the appointing director and vote or consent in his place (S.52).
Neither directors nor alternate directors need hold any shares in the company in order to act as such.
Officers
There is no express requirement in the IBC Ordinance to appoint any particular officer, including a secretary. Any officers or agents may be appointed by a resolution of directors and will have such powers and authority of the directors as are set forth in the articles or in the appointing resolution, except that no officer or agent has any power or authority with respect to a matter requiring a resolution of directors (S.53).
Bankers
An IBC may open and maintain bank accounts in or out of the BVI.
Books of Account
An IBC must keep such accounts and records, as the directors consider necessary or desirable to reflect its financial position. The IBC must also keep minutes of all meetings and copies of all resolutions consented to by the directors, members and officers. The books, records and minutes must be kept at the registered office or at such other place as the directors determine (S.66).
A member, in pursuance of a specified purpose reasonably related to his interest as a member, may request in writing to inspect the company's share register and all books, records, minutes and consents kept by the IBC (S.64). If the IBC refuses the request, the member may apply to the court for an order to allow the inspection.
Seal
An IBC must have a common seal and an imprint of it must be kept at its registered office (S.66.3A). The IBC Ordinance makes no specific provision for the use of the seal, and therefore the general law in respect to company seals will apply. The Company seal will normally have the name of the Company in the outer circle and in the center "International Business Company British Virgin Islands".
Financial Year End
There are no provisions in the IBC Ordinance requiring an IBC to set a date as its financial year-end.
Auditors
There are no provisions in the IBC Ordinance either for an annual audit or for the appointment of auditors.
Members
An IBC must maintain a share register containing the names and addresses of the holders of registered shares, the number of each class and series of registered shares, the date on which the member was entered in the register and the date on which the member ceased to be a member. In respect to shares issued to bearer, the share register must contain the total number of each class and series of shares so issued(S.28.1).
A copy of the share register must be kept at the registered office, but need not be available for public inspection. If the IBC elects to register a copy of the share register with the Registrar that copy then becomes available for public inspection (S.11A).
If at any time an IBC does not have any members, any person doing business in the name of or on behalf of the IBC is personally liable for all debts contracted by the IBC while it was without members (S.74).
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TRANSACTIONS INVOLVING SHARES OF AN IBC
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The IBC Ordinance provides for only one type of IBC that limited by shares. The shares may be in registered or bearer form. There is no minimum authorized capital.
Issue of Shares
The power to issue shares of an IBC rests with the directors. Subject to limitations in the memorandum or articles, shares may be issued for such amounts as the directors determine from time to time, provided that in the case of par value shares, the amount must not be less than the par value. In the absence of fraud, the decision of the directors as to the consideration received in respect of the issue is conclusive, unless a question of law is involved (S.20.1).
In the case of shares issued with par value, the consideration received in excess of the par value is treated as surplus. In the case of shares issued without par value, the directors designate what portion of the consideration is capital and what portion is surplus, provided that they designate as capital at least that amount which would represent the preference in the assets of the company that such shares would be entitled to upon liquidation (S.20.2).
Consideration for the disposition of treasury shares is added to surplus. An IBC may issue fractional shares (S.20.3).
Transfer of Shares
Subject to any limitations in the memorandum or articles, registered shares of a BVI company may be transferred by a standard instrument of transfer signed by the transferor and containing the name and address of the transferee. In the absence of a written instrument of transfer the directors may accept such evidence of a transfer of shares, as they consider appropriate (S.33.1,2.).
A share issued to bearer is transferable by delivery of the share certificate (S.31).
Redemption and Re-Purchase of Shares
Subject to its memorandum or articles, an IBC may purchase, redeem or otherwise acquire its own shares, but only out of surplus or in exchange for newly issued shares of equal value (S.33.1). The acquired shares may be cancelled or held as treasury shares. However, no such acquisition will be permitted unless the directors determine that immediately after the acquisition that the IBC will be able to satisfy its liabilities as they become due in the ordinary course of business and the realizable value of the IBC's assets are equal to or greater than the sum of its liabilities and capital (S.33.2). The IBC Ordinance provides for certain situations where this liquidity test is not mandatory prior to re-purchase being permitted.
Dividends & Distributions
An IBC may declare and pay a dividend, or make a distribution out of surplus, provided that the directors are satisfied that immediately after the payment of the dividend, the company will be able to satisfy its liabilities as they become due in the ordinary course of business and the realizable value of the IBC's assets will be equal to or greater than the sum of its liabilities and capital (S.36).
Public Offers
The Ordinance does not require a prospectus or other form of offer document where shares are subject to an offer of shares to the public.
Mortgages and Charges of Shares
A mortgage or charge on shares must be in writing signed by, or with the authority of, the holder of the shares to which the mortgage or charge relates. In respect of a bearer share, a mortgage or charge is not valid and enforceable unless the applicable share certificate is deposited with the mortgage or charge (S.37.A1).
TAXATION
All amounts paid by an IBC to non-residents of the BVI and all capital gains realized by non-residents on the securities of an IBC are exempt from all provisions of the BVI Income Tax Ordinance (S.111.1). Further, non-residents are not subject to estate or gift taxes with respect to securities of an IBC (S.111.2). The Ordinance also exempts an IBC from the provisions of the Stamp Act and the Registration and Records Act in respect to all instruments or deeds relating to the business of the IBC, including the transfer of all property to or by the IBC and transactions in respect of its securities (S.111.3, 4.).
GOVERNMENT FEES
The fees are based upon the IBC's authorized capital and the type of its shares, as follows (Part X, Fees and Penalties):
Fees on Incorporations
Authorized Capital Fee
$0 - $50,000 (all "par value" shares) $300
$0 - $50,000 (some "no par value" shares) $350
More than $50,000 ("par value" or "no par value" shares) $1,000
Annual License Fees
Authorized Capital Fee
$0 - $50,000 (all "par value" shares) $300
$0 - $50,000 (some "no par value" shares) $350
More than $50,000 ("par value" or "no par value" shares) $1,000
A company that is incorporated in the first six months of a year shall on or before 31st May in the following year and in each succeeding year pay to the Registrar a license fee. A company that is incorporated in the second six months of a year shall on or before 30th November in the following year and in each succeeding year pay to the Registrar a license fee (S.105).
The Registrar is authorized to issue guidelines with respect to the calculation of fees payable when the authorized capital is stated in a currency other than United States dollars. The annual license fee is due only in the second year of operation, not in the year of incorporation.
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