The following guide highlights the key benefits of using a BVI corporate structure.
Companies incorporated in the BVI are, by most measures, the most popular offshore holding structure in the world. While offshore vehicles are used for a wide variety of different purposes globally, there are a number of common factors which feed into the success of the BVI product. Although the most popular BVI vehicles are companies, BVI trusts and partnerships are also increasing in popularity.
Many of the BVI's advantages are common to numerous other jurisdictions (English language, absence of currency exchange controls, US dollar as a currency, stable democracy, common law legal system with final appeal to the Privy Council in London), a number of other advantages are not.
1. Corporate flexibility. Modern, flexible and commercially minded BVI corporate legislation (with certain provisions cherry-picked from Delaware, Ontario, Australia, and English corporate legislation) ensures that corporate transactions proceed with maximised efficiency, consistent with common law legal systems.
2. Corporate efficiency. BVI Companies ordinarily enjoy broad corporate capacity; they can undertake any lawful act or activity, and there are no restrictions relating to corporate benefit nor are they limited by financial assistance restrictions. Efficient procedures apply for authorisation of corporate activity - the vast majority of corporate activity can be approved by the directors without the need for a shareholders' resolution.
3. Minimal capitalisation requirements. BVI Companies are not subject to "thin capitalisation" rules or any capital maintenance requirements. Provided a company maintains cash-flow and balance sheet solvency, the distribution of assets to shareholders or redemption of shares is a straightforward process. A BVI company is expressly empowered to provide financial assistance to a third party for the acquisition of its own shares.
4. Tax neutrality. The BVI has no income tax, corporation tax, capital gains tax, wealth tax or similar fiscal laws. While trading companies will normally pay taxes in the usual way in countries where they engage in business, using a BVI company as an intermediary holding company can create tax neutral layers in the corporate holding structure.
5. Low cost. BVI companies are still inexpensive compared to other premium jurisdictions such as Cayman and Bermuda. A vanilla BVI company can normally be incorporated for around US$1,400 inclusive of disbursements and annual government fees are around US$450.
6. Fast company formation. A BVI company can be formed on a same day basis at a competitive price that is still relatively inexpensive compared to other premium offshore jurisdictions. The BVI's anti-money laundering (AML) laws do mandate that customer due diligence (in line with the FATF Recommendations) be obtained on directors, shareholders and ultimate beneficial owners of a BVI company; the practical speed of forming a BVI company will mostly be linked to the client's ability to satisfy customer due diligence requirements.
7. Efficient company maintenance. The continuing obligations for BVI companies and their officers and owners are commercially progressive and non-onerous. For example:
- a single director and single shareholder are sufficient
- no requirement for a company secretary
- no residency requirements for directors
- no requirements as to frequency or location of meetings of directors or shareholders (telephone meetings and written resolutions executed in counterpart are permissible)
- no requirement for audited financial statements
- no required annual filings
- cost efficient registered office and agency services
- straightforward corporate recordkeeping requirements and flexibility as to where the original corporate records can be maintained
8. Confidentiality not secrecy. Neither the register of directors nor the register of shareholders of a BVI company are publicly available (the register of directors is filed with the BVI Registry). Although safeguards exist to prevent abuse of corporate confidentiality in relation to money-laundering and international crime, law abiding companies can exist with the confidence of privacy. The BVI was among the first of the offshore jurisdictions to adopt progressive AML legislation compliant with the FATF Recommendations. The BVI has also executed a number of tax information exchange agreements (TIEAs) with various jurisdictions and as such, at a regulatory level, information can be shared in accordance with the FATF compliant AML legislation or the TIEAs for the purposes that they are designed for.
9. Joint ventures and IPO ready. BVI companies may adopt specific provisions in their corporate constitutions to abrogate the common law duties on directors to act in the best interests of all of the shareholders in a joint venture, and instead free them to act for the benefit of the party appointing them. This flexibility has led to a number of high profile international joint ventures being structured through BVI holding companies. BVI companies can be listed easily on the world's leading stock exchanges and there are no additional listing regulations under BVI law.
10. "Light touch" regulation. Outside of certain very specific industries (mainly investment funds, banking and insurance) BVI companies do not need regulatory approval to conduct their affairs. The BVI aims to provide "light but effective" regulation to minimise unnecessary regulatory burdens. The most common type of regulated business is investment funds, for which specific carve-outs exist to minimise the regulatory burden for low risk investment funds.
11. Transaction fluency. As the largest offshore corporate domicile (and second largest global corporate domicile), the BVI enjoys the presence of all of the top tier offshore law firms staffed with experienced corporate lawyers, the majority of whom trained with and practised at top tier UK law firms. Transactions are professionally handled and transaction fluency is optimised.
12. Innovative trust structures. Trust law has been heavily modified in the BVI to remove un-commercial common law provisions. New and innovative products, such as VISTA trusts and private trust companies
have driven the popularity of trusts, combined with rules refining restrictions to applicable non-charitable purpose trusts and rules against remoteness of vesting.
13. Debt financing. The BVI has a quick and simple system relating to secured creditor registration which facilitates leveraging assets where a BVI company needs to do so in order to raise capital. BVI law recognises "foreign" law transaction and security documents (over assets and shares of a BVI company). The BVI also has the most developed insolvency system in the offshore world, which is very friendly to secured creditors and, while not usually a key consideration for companies, is attractive for lenders.
14. Commercial Court. Commercial ventures can, and sometimes will, go wrong and result in disputes. The BVI Commercial Court enjoys a sterling reputation in the offshore world both for delivering judgments which are consistent with commercial good sense, but also maintaining swift access to justice, and thereby avoiding the lengthy delays and sometimes arbitrary decisions which have characterised the judicial process in other jurisdictions. The BVI Commercial Court is very experienced in relation to USA documents and USA legal issues, and the USA played a key role in the BVI becoming an international financial centre. The BVI Commercial Court has strong case precedent and appeal rights to the UK Privy Council and many leading cases related to shareholder and other corporate disputes have been heard by the BVI Commercial Court.
15. Success. Offshore structuring will always be driven by relevant considerations of the underlying transaction or structure. No one offshore structure can be all things to all people, but the dominance of the BVI product in the market suggests that BVI structures can seemingly be most things to most people. Owing to its corporate advantages, the BVI company has evolved as a highly proficient facilitator for the global flow of finance.
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.