Abstract
The British Virgin Islands has recently introduced a substantial number of reforms in relation to trusts and estates. These have been made in addition to those innovations relating to variation, reservation of powers and the jurisdiction's firewall offering, which are considered in earlier articles in this periodical.1 These further reforms include those enabling foreign grants of representation to be resealed in the jurisdiction, the reintroduction of ‘the old rule in Hastings–Bass' and refinements to the territory's highly popular private trust company offering.
Issue Section: Article
In addition to its ground-breaking new provisions enabling the dispositive provisions of a trust to be varied,2 its new reserved power provisions3 and the enhancements to the British Virgin Islands' (BVI) firewall offering,4 which were covered in earlier editions of this periodical,5 the BVI has introduced a significant number of further reforms6 relating to trusts and estates. These reforms all came into effect on 9 July 2021.
The BVI now has a new Probate (Resealing) Act,7 which enables grants of probate and administration that have been issued by the courts of multiple other jurisdictions to be resealed in the territory pursuant to a simplified application procedure. The new Act applies to all the jurisdictions to which the UK's Colonial Probates Act 1982 applies, without requiring reciprocity. The Act now goes further in that the jurisdictions from which grants can now be resealed also include Hong Kong,8 Singapore, South Africa, India, each state of the USA and the Crown Dependencies. An application to reseal such a grant in the BVI must be made in accordance with the BVI's comprehensive new probate rules, which came into effect in November 2017.9 This particular reform has indirectly served as an encouragement for the many shareholders of BVI companies to prepare wills so that their wishes in relation to the appointment of their personal representatives and the devolution of their BVI estates on their deaths can be given effect.
Further amendments to the BVI's Trustee Act, which was enacted in 1961, but previously reformed in 1993, 2003 and 2013, have been made to introduce additional changes to the BVI trust law to reflect the requirements of the jurisdiction's international client base.
Although the most noteworthy reforms which were made to the BVI's Trustee Act in 2021 are generally considered to be those introducing the BVI's new variation and reserved power provisions into the original Act and those which make the jurisdiction's firewall offering more robust, one further amendment of significance which was made by the Trustee (Amendment) Act, 2021 was that which re-introduces what is colloquially known as ‘the old rule in Hastings-Bass' into BVI law. As a result of this reform, the court now has jurisdiction to set aside the flawed exercise of a fiduciary power. Accordingly, beneficiaries and professional advisers now have the comfort of knowing that if a power is exercised which turns out to have adverse consequences, such as (but not only) adverse tax consequences, an application can be made to the court to set aside the exercise of the power, so that beneficiaries do not need to rely on time-consuming and expensive claims for breach of fiduciary duty or negligence against trustees or professional advisers.
Other changes that were made by the 2021 Amendment Act include amendments to section 95 of the Trustee Act, which is contained in Part X of that Act10 that in turn includes the BVI's sophisticated provisions facilitating transactions by third parties (such as banks and other lenders) with the trustees of BVI trusts. The relevant refinements make it clear that the section, which gives specified protection to such third parties, is inapplicable if the third party has been dishonest. Section 104 of the Act has also been amended so that trustees of trusts created prior to 1 March 2004, when Part X came into force, now have the statutory power to elect that the Part applies to the trust, thereby creating additional flexibility.
The new Trustee (Amendment) Act also inserts a comprehensive new section (92A) into the Trustee Act, in place of section 2A which has now been repealed, dealing with trustees' record-keeping requirements; the new section applies to the trustees of all express trusts, which are administered in or from within the BVI.
The BVI's highly utilised private trust company regulations (the PTC Regulations)11 have also been reformed to address two issues of uncertainty. The PTC Regulations enable private trust companies to be established in the jurisdiction without the need to apply for a trust licence provided specified conditions are met.
The PTC Regulations have now been amended so that BVI private trust companies' directors need not be ‘professional' (as previously required by the Regulations12) in order for their remuneration not to disqualify the private trust company from the ‘unremunerated trust business' head of the exemption. They have also been amended so that an exempt private trust company can carry on other unregulated activities without jeopardising its eligibility for the exemption.
Finally, two new statutes, the Property (Miscellaneous Provisions) (Amendment) Act, 2021 and the Administration of Small Estates (Amendment) Act, 2021 have come into effect. These two statutes also modernise BVI law insofar as it relates to trusts and estates. The former, consistently with the spirit of the BVI's Status of Children Act, 2013,13 abolishes14 (to the extent that it still exists) the archaic rule of English public policy to the effect that any disposition is void if it is in favour of issue born out of wedlock who are not alive when the disposition takes effect.
All these reforms were introduced following proposals made by the Trust & Succession Law Review Committee of the British Virgin Islands Branch of STEP, the function of which is to keep the BVI's laws relating to trusts and estates under constant review and to introduce measures that meet the legitimate expectations of the BVI's international clientele.
Footnotes
1 See footnotes 2, 3 and 4 below.
2 For fuller information on the new statutory provisions, see the author's article Groundbreaking new provisions in variation of BVI trusts – Trusts & Trustees (OUP), Vol. 28, issue 5 pp 381–5.
3 For more detailed information about the BVI's new reserved power new legislation, please see the author's article BVI introduces new reserved power trust legislation in Trusts & Trustees (OUP) Vol. 28, No. 7, 2022.
4 For a more detailed analysis of the BVI's new firewall legislation, please refer to the author's article BVI strengthens firewall provisions in Trustee Act in Trusts & Trustees (OUP), Vol. 28, No. 7, 2022.
5 See footnotes 2, 3 and 4 above.
6 A more detailed analysis of these reforms is to be found in the author's article in the STEP TQR, Vol. 21, No. 4 2022, pp 31–40.
7 The Probate (Resealing Act), 2021.
8 Whether the grant was issued prior to or after 1 July 1997.
9 Eastern Caribbean Supreme Court (Non-Contentious Probate and Administration of Estates) Rules 2017.
10 For further information about Part X of the Trustee Act, please see O'Neal Webster's Overview of Trusts and Trustee Services in the BVI which is to be found in the ‘perspectives' section of the firm's website at www.onealwebster.com. This article contains a basic summary of BVI trust law.
11 The Financial Services (Exemptions) Regulations, 2007 (as amended).
12 See the author's article, New British Virgin Islands Trusts and Estates Legislation Part 2, Trust & Trustees (OUP), 2013 for a summary of the other provisions of the PTC Regulations and details of the conditions which must be met in order for the private trust company to qualify for the licensing exemption.
13 And consistently with reforms to English law in 1969.
14 With retroactive effect.
Originally Published by Oxford University Press
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
