The British Virgin Islands (BVI) is a leading offshore financial centre, providing robust yet flexible corporate structures within a politically safe and low cost jurisdiction. The most popular BVI corporate vehicles are companies and this guide gives a general overview of the advantages of using BVI companies*, the types of BVI companies available as well as the key characteristics and ongoing maintenance of BVI companies.
Advantages of using a BVI company
BVI companies are used for a variety of purposes, such as group holding companies, asset-holding SPVs (often real-estate or luxury goods) and investment funds and other regulated businesses. The key advantages of using BVI companies are as follows:
- political stability of the BVI;
- tax neutrality, meaning the BVI does not add any extra layer of taxes, ie no income tax, corporation tax or capital gains tax;
- the reputation of the BVI as a mature offshore financial centre;
- the BVI's developed common law legal system and well respected commercial court, with ultimate appeal to the Privy Council;
- straight forward administrative processes and low ongoing costs of maintaining a company within the BVI;
- modern and flexible companies legislation; and
- save for certain specific industries, the fact regulatory approval is not required for a company to conduct its affairs.
Types of BVI companies
The BVI Business Companies Act 2004 (Act) makes provision for several types of companies (as follows):
Company limited by shares
- the most common type of company incorporated in the BVI;
- has the ability to issue shares, the holders of which are its shareholders (owners);
- its directors manage the day to day affairs; and
- its shareholders enjoy separate legal personality, meaning that shareholder liability is (generally) limited to the amount (if any) unpaid on such shares.
Restricted purpose company
- a company limited by shares;
- a special purpose vehicle with limited corporate capacity to undertake certain specific purposes;
- typically used in securitisation and structured finance transactions to hold certain assets; and
- must be registered as a restricted purpose company at the time of incorporation.
Segregated portfolio company
- a company limited by shares; and
- legal segregation (or ring fencing) of the assets and liabilities of each individual portfolio from the other portfolios, and from those of the company itself.
Company limited by guarantee
- both the guarantee members and shareholders enjoy separate legal personality;
- a company limited by guarantee is available as both authorised to issue shares or not authorised to issue shares; and
- typically (but not always) used for non-profit organisations.
- the company may issue an unlimited amount of shares;
- these companies are available as both authorised to issue shares or not authorised to issue shares; and
- at least one of the members must be an unlimited member, who has unlimited liability for the liabilities of the company.
A company is a legal entity, separate from its shareholders, which can sue and be sued in its own right, and which has the full capacity of a natural person. In practice, the most commonly used BVI entity is the company limited by shares. For this reason, the rest of this guide focuses on BVI companies limited by shares, the key characteristics of which are set out below.
- the word 'Limited', 'Corporation', 'Incorporated', 'Societe Anonyme' or 'Sociedad Anonima' or the abbreviation 'Ltd', 'Corp', 'Inc' or 'S.A.' must be a part of the name of every company, and an unlimited company's name must end with 'Unlimited' or 'Unltd';
- if the company is a restricted purpose company, the name of the company must end with the words '(SPV) Limited' or '(SPV) Ltd';
- a company may be registered with an additional foreign character name approved by the BVI Registrar of Corporate Affairs (Registrar);
- indecent or objectionable names are not permitted, such as names that suggest royal patronage or that the entity is regulated (eg 'Trust Company' or 'Bank'); and
- the Registrar has a name reservation system for a set period of time.
- every company must have a registered agent that is located in the BVI, regardless of its company type and business operations;
- registered agents must be licensed in the BVI;
- registered agents act as an intermediary between the Registry of Corporate Affairs (and, for the purpose of the BVI economic substance regime (see 'BVI economic substance regime' below), the BVI International Tax Authority (ITA)) and the company;
- registered agents will provide services such as incorporation, nominee directors and/or shareholders and company secretaries, company administration (such as filing certain documents and making annual fee submissions) and management (such as maintaining corporate registers); and
- usually, the registered office of a company will be that of its registered agent.
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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.