International investors are attracted to the BVI by its regulatory framework, low tax and established legal system, which ensures that the territory is a neutral and safe place to pool capital, set up a holding company or to invest into markets where there may be political risk or legal barriers that deter direct investment.
The BVI Business Company Act 2004 replaced the hugely successful International Business Companies Act of 1984. The BC Act lowered the income tax rate to 0% for both resident and non-resident business companies to ensure the BVI was fully compliant with the EU Code of Conduct on Business Taxation, as required by the UK of all its Overseas Territories.
Several different types of companies can be incorporated under the BC new regime:
- Companies limited by shares
- Companies limited by guarantee
- Hybrid Companies limited by guarantee and authorised to issue shares
- Unlimited companies authorised to issue shares
- Unlimited companies not authorised to issue shares
The Act also allows companies to be registered as Restricted Purposes, which are generally used in structured finance transactions, or Segregated Portfolio Companies, which are limited to mutual funds and insurance companies.
All BCs located in BVI are required to establish and maintain a Register of Directors and must appoint their first director within 30 days of incorporation. Other statutory requirements remain minimal and flexible:
- 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 may be either registered or bearer (only under restricted conditions) and may be issued in any currency.
- Annual accounts need not be prepared but it is essential to keep books of accounts; if accounts are prepared, there is no requirement for an audit.
- No returns are required of shareholders, directors or officers.
- Shareholders’ and directors’ meetings need not be held in the BVI and can be held by telephone or other electronic means.
- The Memorandum and Articles of Association are the only documents to be held on the public record.
The BC Act permits more flexibility on names. It allows the re-use of the name of a company that has been previously struck off the register, changed its name or been dissolved. The Act also permits company names to contain foreign characters.
The BC Act abolished the concept of authorised share capital and replaced it with a maximum number of shares that the company is entitled to issue. It also removed the requirement that a dividend can only be declared and paid out of ‘surplus’, leaving in place the pre-existing solvency test requirement, and has boosted the rights of minority shareholders.
A registered agent must apply to form the company and provide a written consent to act. The registered office of the company need not be the address of the registered agent, but it must be within the BVI.
The Act further formalised and tightened the record keeping obligations of companies and abolished bearer shares unless specifically authorised by the memorandum or articles of association. Bearer share certificates must be deposited with a custodian who has been approved by the BVI Financial Services Commission.
Companies limited by guarantee must have a minimum of two members; the Memorandum of Association contains a statement of the amount up to which the members guarantee the company’s debts. The Articles can provide for the members to have differing portions of the assets and liabilities.