BRITISH VIRGIN ISLANDS: An Introduction to Corporate & Finance including Investment Funds

The BVI as an International Financial Centre

The British Virgin Islands is a popular and exceptionally efficient jurisdiction in which to incorporate (and operate) a variety of business entities, including public companies, investment funds, multi-shareholder companies, joint venture companies and holding companies.

Unlike other offshore jurisdictions, the BVI has borrowed from Delaware corporate law (in addition to English law), with the BVI Business Companies Act blending the best features of US and English corporate law. This approach has been particularly successful, with the BVI (i) leading all other offshore financial centres in the number of company incorporations, and (ii) becoming a major transactional jurisdiction.

In addition to the beneficial amalgam of US and English law (as well as the various advantages common to a number of offshore jurisdictions), the following factors also ensure that the BVI maintains its position as an attractive jurisdiction for incorporations and corporate transactions.

Speed/cost of incorporation

Subject to satisfying relevant know-your-customer (KYC) requirements companies can be incorporated in the BVI very quickly by licensed registered agents. The cost of incorporation is also relatively inexpensive compared with other jurisdictions.

Corporate flexibility/capitalisation requirements

Company law in the BVI is designed to provide maximum flexibility; companies are permitted to undertake any lawful act or activity, there are no corporate benefit restrictions and there is a wide range of mechanisms to implement transactions (ranging from Delaware-style mergers to UK-style schemes of arrangement). Furthermore, the BVI does not impose capitalisation rules or any general maintenance of capital requirements. In addition, BVI companies are able to provide financial assistance to a third party for the acquisition of its own shares, and to implement poison pills.

Regulation-light jurisdiction

Outside of certain very specific industries (eg, investment funds, banking and insurance), BVI companies do not need regulatory approval to conduct their affairs. The BVI provides light but effective regulation to minimise unnecessary regulatory burdens.

Tax neutrality

The BVI has no income tax, corporation tax, capital gains tax, wealth tax or similar fiscal laws. Using a BVI company can therefore create tax-neutral layers in a corporate structure.

Debt financing

The BVI has a simple and relatively quick system relating to secured creditor registration, which facilitates leveraging assets in order to raise capital. The BVI also has the most developed insolvency system of the offshore jurisdictions, which is often a key consideration for lenders.

International recognition and precedent

Many BVI companies are listed on all major US and UK stock exchanges and are often counterparties in the largest global M&A and financing transactions. As such, there is a high degree of institutional recognition and comfort in doing business with a BVI company.

Legal framework and rule of law

The BVI is a British Overseas Territory with a stable political system and a respected commercial court dedicated to corporate and commercial matters. The ultimate court of appeal is to the Privy Council in London.

Recent Activity/Developments in the BVI

Generally, the fortunes of the BVI (and of all offshore financial centres) are tied to the global economy, in particular, to the economies of the USA, the UK and China. While global M&A activity is uncertain, the BVI is well positioned for any rebound as financial market conditions improve.

Recent BVI Legislation Impacting Companies

There have been a number of changes to the BVI Business Companies Act, 2004 (the “BC Act”) which directly affect BVI companies. The key changes can be summarised as follows.

• With effect from 1 January 2023, there is a requirement for a BVI company to prepare and file with its registered agent an annual return containing certain prescribed financial information. The annual return must be filed within nine months of the end of the company’s financial/fiscal year to which it relates. Several corporate service providers in the BVI offer a range of services to assist clients comply with these obligations.
• There is a requirement for the register of directors of each BVI company to be filed with the BVI Registry of Corporate Affairs. Such register was previously not accessible to the public in any way. With effect from 1 January 2023, the names of the current directors of BVI companies have been made publicly accessible.
• With effect from 1 January 2023, companies that are struck off the register will automatically be dissolved. Previously, a struck-off company could remain struck off for seven years. Under the new regime, a company is immediately dissolved and can only be restored within five years of dissolution.
• A voluntary liquidator of a BVI company (or, in the case of a joint liquidation, at least one of the liquidators) must now be an individual resident in the BVI and must have certain experience and qualifications. Liquidators also have new obligations to collect copies of financial records, including the annual return of the company.
• There is also now an obligation to note on the relevant register where a director or shareholder acts as a “nominee” director or shareholder.
• As of 1 January 2025, most BVI companies have an obligation to file their register of members with the Registrar of Corporate Affairs and to collect and file certain know your client “KYC” information on their shareholders and beneficial owners (at a 10% level rather than at a 25% level). The filing is done through the company’s registered agent. As of the date of writing this summary, this information is confidential and only accessible by authorised law enforcement, taxation and regulatory authorities.
• It is unclear as at the time of writing this summary where the BVI will end up regarding publicly accessible registers of beneficial owners (PARBOs). It is almost certainly the case that BVI will be adopting PARBOs in 2025, but the extent of the protections that will be in place to ensure that only those persons with a legitimate interest have access to the information is unclear.

Law firms and other service providers in the BVI continue to assist clients with questions about the changes to the BC Act and, in particular, to help clients prepare for the new filing requirements.

Incorporating a BVI Company

In order to incorporate a BVI company, it will be necessary to satisfy certain due diligence requirements. At a high level, the information required to satisfy these requirements will generally include the following.

• Where intermediary holding companies are present in the ownership chain, subject to certain exemptions, further information will be required on these entities (eg, in the case of a company, the name, address, date and place of incorporation of the company, and the names and addresses of all shareholders and their percentages of ownership will be required).
• Otherwise, beneficial owners, being the individuals who beneficially own or are entitled on a look-through basis to a 10% or greater interest in a BVI entity, will need to provide:
  • a copy of the beneficial owner’s passport or other government-issued photographic identification document;
  • verification of address; and
  • a personal declaration.

Outside of these requirements, there are very few obstacles to incorporating a company in the BVI, which is one of the main reasons it remains the leading offshore jurisdiction for company incorporations and corporate transactions.