One of the many sensible and creative concepts underpinning the BVI Business Company (and its predecessor – the international business company) is a simple statutory requirement for financial record keeping.

The requirement for a BVI Business Company is for it to keep records that:

  • are sufficient to show and explain the company's transactions; and 
  • will, at any time, enable the financial position of the company to be determined with reasonable accuracy. 

Simple! This allowed for a great deal of flexibility by allowing the directors of the company to map the actual activities of the company to the appropriate level of financial record keeping. To directors of a BVI company, therefore, the provision was 'fit for purpose'.

In 2012, the record keeping requirements were qualified (under an amendment under the BVI's Mutual Legal Assistance (Tax) Matters Act, 2003) to mandate a BVI company to:

  1. keep at its registered agent's office (or such other place within or outside the BVI as notified in writing to the registered agent), the "records and underlying documentation of the company; and
  2. retain such records for at least 5 years of completion of the transaction to which they relate or of the company terminating the business relationship relating to the relevant records. (It took  two further statutory amendments but there is statutory guidance that "records and underlying documentation" includes accounts and records (such as invoices, contracts and similar documentation) in relation to (i) sums of money received and expended by the company, (ii) all sales and purchases of goods by the company and (iii) the assets and liabilities of the company.

There was never any secret made about what and whose purpose these amendments were made for. The 2012 amendment made it clear that enhanced record keeping requirements  were for furtherance of achieving the objectives of the mutual legal assistance law in facilitating requests for information. Immediately after the amendments in 2012 in relation to companies, a similar amendment was made to the Partnership Act, 1996 in respect of record keeping by limited partnerships.

In 2015, amendments were also made to the Trustee Act Chapter 303 and, again to the Partnership Act, 1996 introducing similar record keeping requirements for trusts records and placing a similar obligation on all partnership (not just limited partnerships).

The wider casting of the net is intentional. The various amendments stem from the OECD's peer review process of several jurisdictions, including the BVI, conducted under the auspices of the OECD Global Forum on Transparency and Exchange of Information armed with the Forum's Terms of Reference. The Terms of Reference against which the assessment take place describe the standards on transparency and exchange of information for tax purposes as developed by the Global Forum (of which, incidentally, BVI is a member).

The legislative amendments between 2012 and now mirror the language of the record keeping and retention standard set out in paragraph A.2.2 of the Terms. This standard require jurisdictions to "ensure that reliable account records are kept for all relevant entities and arrangements", in other words, not just legal entities.

The general consensus among pundits in the BVI financial services sector is that, on close examination, the recent amendments do not impose any new obligations as such.  Even so, however, the concern with the recent developments, as with most international initiatives, is that the "standard" will invariably shift and the author believes that the term "entities and arrangements" will continue to be given the widest possible interpretation thereby invariably signalling future legislative amendments or new laws.

For the time being, however, the recent efforts of the BVI on legislative, regulatory and administrative levels have, in August 2015, earned BVI the much improved and positive OECD rating of "largely compliant".

In a recent news release on the positive rating, the Premier and Minister of Finance, Dr. the Honourable D. Orlando Smith, OBE said that:

"the BVI has a long track-record of meeting and exceeding the highest international regulatory and transparency standards and we continue to do so today.  We are very pleased that this has been recognised by the OECD.

Standards of financial regulation are fast evolving in today's world and there is therefore little doubt that more legislative developments will continue to follow, not only for BVI but for the over 120 jurisdictions that have committed to international standards of tax transparency and regulation.

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.