BRITISH VIRGIN ISLANDS: An Introduction
Worldwide, the British Virgin Islands (BVI) continues to be recognised as a premier offshore international business and finance centre, highly regarded for its progressive, yet stable and business-friendly, legal and regulatory, environment.
The past year (2022) was an interesting one for the jurisdiction as significant economic challenges impacted the global economy, primarily caused by the Russian invasion of Ukraine as the world sought to transition out of the COVID-19 pandemic. High interest rates, rising costs across every industry, and the threat of a global recession all featured conspicuously throughout the year.
Notwithstanding the global economic issues, the BVI has seen a tremendous resurgence in its tourism sector, with a significant increase in cruise ship arrivals, day trippers, and yachting activities. The offshore territory’s financial services sector has also seen a healthy rebound, holding its own regarding company incorporations, limited partnerships, investment funds, investment fund managers, and investment business licensees. Active companies at the end of the third quarter of 2022 stood at 374,890, limited partnerships at 2,239, and registered investment funds just under 2,000. BVI trusts remain attractive vehicles for succession planning, including the BVI’s sought-after VISTA trusts, and its private trust companies. Domestic real estate and banking activities have also surged since the lifting of COVID-19 restrictions.
As with previous years, BVI companies are featured in significant capital markets and M&A transactions across the globe, with service firms acting in high-value, complex, sophisticated transactions worth tens of billions of dollars, including initial public offerings, acquisitions, complex restructurings, and new fund launches. Some noteworthy transactions include the USD11.6 billion acquisition of Biohaven by Pfizer through a BVI statutory merger, representing the largest ever takeover of a publicly-listed BVI company by transaction value; the USD1.3 billion financial restructuring of Noble Group through a lender-led BVI share pledge enforcement arrangement; the acquisition by Masplay of Nike de Chile with the involvement of a BVI subsidiary; the USD201 million acquisition of Six Waves Inc., a BVI company, by Nasdaq Stockholm-listed and leading gaming studios Stillfront Group; and the take-private of Ocean Outdoor Limited, which operated the famous Piccadilly Lights screen in London, by Atairos Group, also by way of a BVI statutory merger.
In the dispute resolution and insolvency arena, 2022 saw a number of high-profile matters involving BVI law firms and insolvency practitioners, including the first freezing order granted by the BVI Commercial Court against persons unknown. In re ChainSwap v Persons Unknown, ChainSwap, a BVI company that provides a service to transfer tokens among different blockchains, was hacked and tokens were stolen. The Court found that ChainSwap had established an arguable case that the stolen tokens were its property and that it could grant an injunction against unknown persons as a form of relief to the company. In the first major crypto firm bankruptcy case, Three Arrows Capital was brought down by the collapse of cryptocurrencies Luna and TerraUSD. The BVI Commercial Court appointed liquidators to wind down the company in June 2022. The BVI is also seeing a number of spin off cases resulting from the meltdown of crypto exchange, FTX. Meanwhile, the BVI International Arbitration Centre remains active, adding a number of experienced international arbitrators to its panel in 2022.
On the legislative front, the BVI government passed several important pieces of legislation during the past year. Of particular importance were the changes to the BVI Business Companies Act, 2004, which took effect on 1 January 2023, by virtue of the BVI Business Companies (Amendment) Act, 2022. Key amendments include the availability of a list of names of BVI companies’ directors at the BVI Registry of Corporate Affairs, a new requirement for filing an annual return, and changes to the eligibility of voluntary liquidators. The government also brought the Business Licensing Act, 2022 into force, replacing the Business, Professions and Trade Licences Act. This new Act improves the regime for individuals and businesses inside and outside the BVI that invest and operate within the territory. Another significant piece of legislation was the Virtual Assets Service Providers Act, 2022, which came into force on February 1, 2023, commonly called the “VASP Act.” The Act provides a regulatory framework for the supervision of virtual assets service providers and builds on the BVI’s legacy as a leading digital assets hub. Earlier in 2022, the BVI Financial Services Commission granted Brtuomi Worldwide Limited an investment business licence to operate a virtual asset exchange for a range of crypto trading services, including spot trading of cryptocurrencies as well as derivatives trading. The Fusang Exchange, a fully regulated end-to-end digital securities exchange in Asia was also included on the BVI’s recognised list of exchanges.
The Pragmatix Report commissioned by BVI Finance was published in 2022, with several notable findings. The report highlighted the BVI’s strengths as a tax-neutral jurisdiction that promotes global capital flows and facilitates important transactions that would otherwise be impossible. The report also finds that the BVI continues to be relevant in the global economic sector, explicitly confirming that the territory’s domestic economy is “sound, balanced and stable” and that the jurisdiction offers a “net benefit” to countries worldwide “due to its scale of contribution to investments and jobs.”
This year (2023) is the BVI’s election year, and the election results will determine the next government. How the new government handles ongoing governance reforms and the evolving economic landscape will determine the territory’s trajectory. For example, to address offshore anti-money laundering concerns, the BVI committed to the United Kingdom to implement a public register of beneficial ownership by the end of 2023. However, given a November 2022 judgment of the European Court of Justice declaring such registers invalid in the EU, it is unknown whether the UK will hold the BVI to that commitment. As with previous years, BVI financial services providers – lawyers, accountants, insolvency practitioners, and corporate services professionals – continue to employ their significant depth and expertise in addressing substantive, high-value transactions for the global market. Overall, the outlook for the BVI is very positive on all fronts as it moves from strength to strength as an offshore powerhouse in international business.