The British Virgin Islands is a group of about 50 islands situated in the Caribbean Sea, adjacent to the US Virgin Islands, about 95 kilometres east of Puerto Rico. The total land area is 153 sq. km. The 21,272 inhabitants (2002 est.) are spread across 16 of the 50 islands. Road Town on the main island of Tortola is the capital and financial centre of the British Virgin Islands and is the seat of government.
English is the official language. The BVI are mostly Protestant (86%) and have a literacy factor of 97.8%.
The British Virgin Islands were discovered by Christopher Columbus who is said to have been so impressed by their large number that he named them "Las Virgenes" in honour of St. Ursula and her 11,000 attendant maidens who sacrificed their lives for God in the 4th Century. The Crest of St. Ursula is the national symbol of the BVI. During the 16th and 17th centuries the Islands harboured Dutch and English Buccaneers. Perhaps the most famous, many would say infamous, of those pirates was the British renegade Sir Henry Morgan, well known for hating not only the Spanish but the sight of both taxes and tax collectors. Not only did those pirates give the islands such a colourful past, they were also responsible for some of today's tourists, hopefully seeking out those long-lost treasures.
The BVI were first settled by the Dutch in 1648, but soon after this British planters took control of the island group and the islands attained status of a British colony, and remained part of the Leeward Islands from 1872 until 1956, when they became a separately administered entity. In 1967 a new constitution provided for a ministerial government system. Nowadays the BVI enjoy the British Overseas Territory status.
The political system of the BVI is based on the British Westminster Model with Queen Elizabeth II as titular Head of State, represented in the BVI by a Governor General (appointed by the monarch). The Governor presides over the Executive Council, which consists of the Chief Minister (elected by the Legislative Council), his attorney general and a trio of ministers. The legal power is vested in the unicameral Legislative Council (13 seats; members are elected by direct popular vote, one member from each of 9 electoral districts, and four at-large members; members serve five-year terms). The judicial power is represented by the Eastern Caribbean Supreme Court, Magistrate's Court, Juvenile Court, Court of Summary Jurisdiction. The UK remains responsible for the territory's external affairs, defence, internal security and the administration of the courts.
The economy of the BVI is one of the most stable and prosperous in the Caribbean area, it is highly dependent on the tourist industry, which generates about 45% of the national income.
In the mid-1980s, the government began offering offshore registration to companies wishing to incorporate in the islands, and offshore investment now generates substantial revenues. The USD is the official currency of the BVI since 1959.
BVI Law is based on the English Common Law. The constitution of the BVI was adopted in 1967). Principal corporate legislation is The Companies Act (Cap. 285) and The International Business Companies Act, 1984 (Cap. 291). Other significant laws are the Banks and Trust Companies Act, 1990, the Company Management Act, 1990, the Mutual Funds Act, 1996, the Trustee Ordinance (Cap.303) including the Trustee Amendment Act, 1993, the Insurance Act, 1994, the Limited Partnership Act, 1996. The BVI has Double Taxation Agreements with Japan and Switzerland, although they have limited benefit and are not applicable to offshore business.
The type of company for the international trade and investment is International Business Company. International Business Company (known as an "IBC") is regulated by the International Business Companies Act, 1984 ("the Act").
There are very few restrictions on the activities of a BVI IBC. At present, an IBC may not:
- carry on business with any person resident in the Territory;
- own any interest in real property in the BVI, other than the lease of an office;
- carry on banking or trust business, insurance or reinsurance business, insurance brokerage or agency, company management business or mutual funds business, unless appropriately licensed under BVI legislation, it cannot provide the registered office or registered agent for BVI companies.
However, an IBC may engage in all of the following activities without breaching these restrictions: a) make deposits or maintain accounts with BVI banks; b) make or maintain professional contact with solicitors, barristers, accountants, bookkeepers, trust companies, administration companies, investment advisors or other similar persons carrying on business within the BVI; c) prepare or maintain books and records within the BVI; d) hold meetings of its directors or members in the BVI; e) hold a lease of property for use as an office from which to communicate with members; f) hold shares, debt obligations or other securities in another IBC or local BVI company.
Furthermore, licenses are required in order for a BVI IBC to undertake the following: a) banking or trust business; b) insurance or re-insurance business agency or brokerage; c) registered agent or company management; d) mutual fund activities or e) mutual fund management or administration.
Income by IBC's is exempted from income tax in the BVI. This includes all dividends, interest, rents, royalties, compensations, capital gains realised with respect to any shares, debt obligations or other securities, and any other amounts paid to the company. In addition to this, no estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable with respect to any shares, debt obligations or other securities of a company incorporated under the Act. In general, all transactions of an IBC are exempted from the payment of stamp duty.
To incorporate an IBC, a Memorandum and Articles of Association of a proposed company must be signed by one or more natural or juridical persons, acting as Subscribers, and submitted to the Registry of Companies in the BVI. The IBC Act requires that the subscriber to the Memorandum and Articles of Association be the Registered Agent named in such Memorandum. The IBC Act requires that every IBC has a Registered Office and a Registered office in the BVI.
The Memorandum establishes the basic structure of the IBC including the name, the purposes for which the company is formed, authorized capital, details on the shares which may be issued including their par value, denomination, classes and the rights attached, and any other matters which affect the basic existence of the company.
The Articles of Association are essentially the by-laws of the company which govern relations between the various members of the company. They deal with the procedures for calling meetings of shareholders, passing resolutions and transferring shares including any restrictions which may apply.
Once the original M&AA are filed and the proper fees paid, the Registrar of Companies will issue a Certificate of Incorporation, which specifies the name of the IBC, the date on which it was incorporated, and its Company Number. The Certificate of Incorporation constitutes evidence of the company's legal existence. The M&AA can be changed after incorporation by passing director(s') or shareholder(s') resolutions.
The name of the company may be in any language and must end in the word "Limited," "Corporation," "Incorporated," "Societe Anonyme" or "Sociedad Anonima," or their abbreviations "Ltd.," "Corp.," "Inc.," or "S.A.". The words arbitrage, assurance, banc, bancorp, bank, banque, bourse, broker, building society, bureau, casino, change, chartered, cooperative, credit, currency, exchange? Fiduciary, fund, imperial, insurance, life, loan, lottery, municipal, mutual, mutual fund, provident, reinsurance, risk, royal, saving(s), trust, trustee company or any word conveying a similar meaning, cannot be used except with the approval in writing of the Registrar of BVI. Moreover, any name identical to that of a company already existing or suggesting the patronage of Her Majesty or that of a member of the Royal Family, or a connection with Her Majesty's Government or a department thereof, or with a municipality or other local authority, cannot be used.
The fee to incorporate a company with capital up to $50,000 is $300; for an IBC using no par value shares or having no share capital - $ 350; for an IBC with capital of more than $50,000, the fee is $1,000.
Standard authorised capital of an IBC consists of US$50,000.00 divided into 50,000 shares with a par value of US$1.00 each, which ensures the payment of the minimum registration and annual fee (US$300.00). The shares can be divided into such number of classes and series as the directors can determine by their resolution. The directors are duly empowered to issue shares as registered shares or to the bearer, shares of no par value, preference shares, redeemable shares and shares with or without voting rights. Shares issued as registered shares may be exchanged for shares issued to bearer, and shares issued to bearer may be exchanged for registered shares.
According to the Act, an IBC may not conduct business without having issued at least one share. Any acts done by an IBC prior to the issuance of shares may give rise to personal liability on the part of its directors or its agents. The minimum issued capital is one share of no par value or one share of par value. No share in an IBC may be issued until the consideration in respect of the share is fully paid (this can be for cash, services rendered, personal property, a promissory note or other binding obligation to contribute money or property). Issue or Subscription Price is the amount actually paid for each share, and can be any amount in excess of the par value. The difference between par value and issue price is called the share premium or surplus, which would be shown as such on the balance sheet. An IBC may also purchase, redeem and reissue its own shares from shareholders and hold them or cancel them, making an IBC an ideal vehicle for mutual funds.
An IBC may have one or more shareholders, individuals or corporations of any nationality or residence. Shareholders need not disclose their identity to the Registrar of Companies. However a copy of the register of shareholders must be kept at the registered office address in the BVI.
The day to day management of an IBC is undertaken by the directors. Unless otherwise specified in the Articles of Association, each director has full power to represent the IBC, and one director's signature is enough to sign a contract or other legal document enforceable against the IBC. The initial Directors are elected by the subscribers to the Memorandum of Association, and thereafter these are elected by the Shareholders. However, where permitted by the Memorandum or Articles of Association of an IBC, the Directors may also elect Directors for such term as the Directors may determine. There is no requirement to register initial or ongoing changes in directors and/or officers.
The minimum number of directors is one. They may be natural persons or bodies corporate of any nationality and need not reside in the British Virgin Islands. The company secretary may also be a natural person or a body corporate, of any nationality and need not reside in the British Virgin Islands.
Directors also have the power to amend or modify by their resolution any of the conditions contained in the Memorandum and Articles of Association and to increase or reduce the authorised capital of the Company.
An IBC is not required to file any financial reports or tax returns in the British Virgin Islands. However a company is required to keep financial records, which reflect the financial position of a company. There is no need to register or file documents or accounts with the British Virgin Islands aside from the original Memorandum or Articles of Incorporation, amendments thereto, or agreements concerning arrangements, mergers or consolidations concerning an IBC, and winding-up or dissolution thereof. The books of account can be kept in any manner in any part of the world.
Shareholders and/or directors may hold their meetings in any country and they may attend such meetings by proxy. There does not need to be any Annual General Meeting. Resolutions and minutes may be effected by faxed signature without the need for actual meetings.
The BVI IBCs are required to pay annual license fees, which are based on the IBC’s share capital and are as follows: US$300.00 if its authorised capital does not exceed US$50,000.00 and its shares have a par value; US$1,000.00 if its authorised capital exceeds US$50,000.00; US$350.00 if its capital does not exceed US$50,000.00 and some or all of its shares have no par value or the company has no share capital.
There are two license fee dates for the payment of such license fee:
1) If an IBC was incorporated from January to June, the license fee should be paid on or before 31st May of any given year. If the company fails to pay the License Fee by such date, then same increases by 10%. If the License Fee is not paid by 31st July, then a filing penalty amounting to 50% of the License Fee is due and payable. If the IBC fails to pay the increased License Fee by 31st October, the Registrar will strike the name of the company off the Register as of 1 st November.
2) If an IBC was incorporated from July to December, the license fee should be paid on or before 30th November of any given year. If the company fails to pay the License Fee by such date, then same increases by 10%. If the License Fee is not paid by 31st January of the next year, then a filing penalty amounting to 50% of the License Fee is due and payable. If the IBC fails to pay the increased License Fee by 30th April of the next year, the Registrar will strike the name of the company off the Register as of 1st May of the next year.
The Company may be formally dissolved from the Register of Companies by the Resolution of Directors. To this end they can appoint a liquidator who arranges for all of the creditors to be satisfied and the assets sold and proceeds transferred to the shareholders. In order to do this, the company would need to pay its back fees (if any), plus a fee to file the Articles of Dissolution. The fees for the services of the liquidator are not included in the above. The dissolution process effectively “kills” the company for all time. When the process is finished, a Certificate of Dissolution will be issued by the Registrar.
There is another way to “end” the active life of an IBC; the company can be struck from the Register of Companies for non-payment of its annual license fees five months after they were due. The obvious advantage of this option is the cost (or lack thereof.) The disadvantage is that the company may be restored by any person who wishes to pay the back fees in order that it may be brought back to life in order to receive legal notice (and/or be attacked in a court of law.) However, where a company does not have any outstanding creditors or other potential liabilities, the method of simply not paying fees and allowing the company to “lapse” is frequently utilised. A company that has been struck off remains liable for all debts, claims, liabilities and actions of the company and the striking-off does not affect the liability of its members, directors, officers or agents. While a company is struck off its directors may not legally commence or defend legal proceedings or act in any other way with respect to the affairs of the company. The company may however, continue to incur liabilities, creditors may make claims against it and the court may appoint an official liquidator for the company (with costs to be paid by the company).
If an IBC has been struck off, it can be restored to the Register within 10 years by paying the following applicable fee:
(i) $300.00 if application for restoration is made within 6 months immediately following the company being struck off the Register;
(ii) $600.00 if application for restoration is made after 6 months immediately following the company being struck off the Register.
Upon request the Registrar can issue a certificate of good standing for any existing IBC and such certificate will confirm that the company does legally exist.
N o public record is maintained as to the identity of shareholders or directors. Public records of International Business Companies consist only of the Certificate of Incorporation, Memorandum and Articles of Association, name and address of the registered agent, the record of payments of the annual fees, amendments to the Memorandum and Articles of Association or agreements concerning arrangements, mergers or consolidations, winding-up or dissolution of an IBC. Optionally, the public record may contain other document as the company may wish to place there, such as a Register of Mortgages Charges and other Encumbrances, Registers of Directors, Registers or Members, and Registers of Officers--but these are not required. They are filed at the sole option of the Company. It should be noted that Registers of Members are required to be maintained at the Registered Office of the Company in the BVI. Those records are confidential and not a matter of public record.