BVI Appears on EU “White List” of Jurisdictions

The British Virgin Islands became one of 16 countries placed on EU white list, which was revealed in the last weeks of February. The jurisdiction was whitelisted partially due to economic substance legislation enacted at the end of 2018, which allowed the BVI to be placed on the EU’s “Annex II” of jurisdictions with “pending commitments.” The deadline extensions were granted to give time to the British Virgin Islands to pass the needed reforms to fully comply with co-operation standards. Thus, the country avoided being placed on “Annex I” (the blacklist).

BVI Premier Andrew Fahie welcomed the decision of the European Union, having said in his statement: “This is as a result of close cooperation and positive dialogue with the EU and demonstrates the BVI’s commitment to meeting and surpassing international standards.” He also added that he and his government “remain completely focused on ensuring the continued success of our international business and finance centre and its role in the global economy. We believe there will be significant opportunity for our territory and our people as we enhance our economic substance yet further.”

The 16 new whitelisted jurisdictions, along with the Virgin Islands, are Antigua and Barbuda, Armenia, the Bahamas, Barbados, Belize, Bermuda, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, St. Kitts and Nevis and Vietnam.

2019 Budget Passed by the House of Assembly

On April 26, following two days of debates, the House of Assembly of the British Virgin Islands has passed the budget 2019 with amendments; legally titled the Appropriation Act 2019, it has retroactively come into force on January 1, 2019.

The largest share of the budget is reportedly given to the Ministry of Health & Social Development. The Ministry of Education, Culture, Youth Affairs, Fisheries & Agriculture is the one to receive the second largest share, followed by the Ministry of Transportation, Works & Utilities.

The fourth most significant share of the budget was received by the Ministry of Finance and Ministry of Natural Resources, and the fifth one was received by the Ministry of Labour & Immigration.

UK Government Extending Deadline for Public Registers in BVI

The UK government has given its Overseas Territories including the British Virgin Islands an allowance to continue without implementing the public registers of company beneficial ownership until the year 2023. In fact this is a 3 year extension to the initial deadline set by the United Kingdom in its Sanctions and Anti-Money Laundering Act, which was forcing to implement public registers by the year 2020.

UK Minister responsible for OTs, Lord Tariq Ahmad, gave his comments about the deadline extension: “It is our intention that if by 2020 there is no public register, for whatever territory, we will then issue an Order in Council, which will then have a requirement for an operational public register by 2023.” By his words, the 2023 deadline will give the UK time to advance its mission of making public registers become a global standard. 

The public registers mean that the BVI along with other Overseas Territories will be required to disclose the names of beneficial owners of offshore companies registered in the jurisdictions. The BVI is objecting the implementation of public registers before they become a global standard, as it would place the territory in a disadvantageous position to other countries providing financial services.

BVI Passes The Economic Substance (Companies and Limited Partnerships) Act

According to the announcement of BVI Premier and minister of finance, Dr Orlando Smith, the territory has passed The Economic Substance (Companies and Limited Partnerships) Act, 2018, which came into force on January 1, 2019. This is an important legislation addressing the EU’s concerns over “economic substance”, ahead of the December 31 deadline set by the European union for the British Virgin Islands and other financial centres.

In his comments BVI Premier said: “The government has engaged closely with EU officials over the last 18 months to understand and address the concerns that have been raised and has consulted on a regular basis with representatives of the financial services industry. Dialogue with the industry will continue to ensure smooth implementation of the new requirements and the International Tax Authority is issuing a guidance note to accompany the new Act.” 

Also, the BVI government admitted that the legislation will create challenges for some companies and limited partnerships, mostly due to the compressed timeline. It is expected that the formal response of the European Union will be given after some months.

BVI Government Approved Bill on the Issue of Economic Substance

BVI Premier and Minister of Finance Dr Orlando Smith announced that the BVI Government has taken measures to respond to the EU’s listing of non-cooperative jurisdictions, and will take reasonable steps to address EU economic concerns. The government approved the Bill , which is planned to be considered in the House of Assembly on December 13, and to come into effect by December 31, 2018, which is the EU deadline.

The new legislation will provide further assurance which was required from the BVI on the issue of ‘economic substance’. It is to introduce economic substance requirements for all business companies and LPs which are registered and tax resident in the British Virgin Islands.

Every corporate service provider will have to know where the company or limited partnership is tax resident and must be ready to provide that information to the BVI’s competent authorities. If tax resident in the BVI, they must show ‘economic substance’. Companies or LPs must, in relation to any relevant activity, carry out core income generating activities in BVI. Among them are: banking business, insurance business, fund management business, finance and leasing business, headquarters business, shipping business, holding business, intellectual property business, and distribution and service centre business.

For the last months, the BVI government had regular consultations with representatives of financial services industry, to address the concerns, and will continue dialogue for smooth implementation of the new requirements.

BVI FSC Published New Amendment Order to BVI Business Companies Act

The BVI Financial Services Commission has published BVI Business Companies Act Amendment Order, which came into force on 1 September 2018, and which reduced maximum penalty for late filing of Registers of Directors from US$8,000 to US$5,000. Also, the Order provided for the issue of refund in cases where penalty over US$5,000 was previously applied, and the refund process was already started.

BVI Business Companies that were incorporated before 1 April 2016 were given time until 31 March 2017 to file Registers of Directors at the Registry of Corporate Affairs, and prior to the amendment BVI BCs that failed to file them were subjected to escalating penalty fees.

The registrar is authorized by this Amendment Order to strike existing companies from the Register if they fail to file RODs by the deadline of 31 December 2018, and the companies will need to pay all penalties and fees in order to be restored.

BVI FSC Publishes AML Code and MBC Act Amendments

The British Virgin Islands Financial Services Commission issued two new additions to the regulatory and registration regime in the jurisdiction: An amendment to the Anti-Money Laundering and Terrorist Financing Code of Practice, 2008 (the “AML Code”) and the Micro Business Companies Act, 2017 (the “MBC Act”).

The first one focuses on supporting the use of digital services for customer identification and verification, which provides for global financial technology solutions. The amendment to the AML Code takes effect on 1 August 2018. 

For the Micro Business Companies Act, 2017, there is a new technology that focuses on easy and quick registration of MBCs. BVI FSC expanded its registration system VIRRGIN to provide a new MBC portal. It will be available to registered agents who can develop mobile applications and more efficiently manage and administer MBCs. The MBC Act has come into effect on 5 June 2018, and the registration regime is currently implemented.

BVI Government Appoints Legal Council to Advise on Public Register

In the press briefing held on May 30, BVI Premier and Minister of Finance, Dr Orlando Smith, announced that the government has appointed legal counsel to advise on potential legal issues related to the public register of beneficial ownership imposed by Britain. This appointment followed the UK Sanctions and Anti-Money Laundering Bill which requires Overseas Territories, including the BVI, to make public beneficial ownership of all registered companies. With this Bill, the UK receives the right to implement sanctions on individuals, companies and states, and address money-laundering after the Brexit.

BVI Premier said that the legal team “is confident that the imposition of a public register would raise serious constitutional and human rights issues and would be subject to constitutional challenge.” 

A week earlier, BVI diplomat Benito Wheatley has informed the British government that the UK decision to force public registers of beneficial ownership will negatively impact the jurisdiction’s financial services sector that makes more than 60 percent of government revenue.

British House of Lords Voting Against Public Beneficial Owners Register

The amendment proposal for the Cayman Islands, British Virgin Islands and four other British Overseas Territories to implement public register of beneficial owners behind offshore companies registered in these jurisdiction was rejected in British House of Lords, by 211 to 201. The peers voted during the debate on the proposed Sanctions and Anti-Money Laundering Bill; the public register requirement was for the purposes of “preventing money-laundering”.

The amendment, if accepted, would allow the UK government to demand the offshore countries to provide details of companies’ owners. It was already the fourth time when the idea of public registers was discussed in the House of Lords.

In the opinion of the Conservative member of the Lords who argued against the proposal the law enforcement agencies do not support public registers as they actually don’t help law enforcement. He also noted that the UK overseas countries already shown themselves“extremely efficient in responding to the requests of policing and other agencies”.

Other concerns expressed included the potential identity theft that can be facilitated by the public register of beneficial ownership, as well as possible loss of business in favour of competitors. There were also warnings against legislating for self-governing overseas territories.

BVI Implementing Beneficial Ownership Search Platform

The BVI government completed legislative requirements to implement the Beneficial Ownership Secure Search system - an innovative technology-enabled searchable portal changing the way how beneficial ownership information on BVI companies is held and accessed, and also shared with competent authorities in the BVI and the United Kingdom. The new platform was developed following the exchange of notes with the UK in April 2016.

Corporate service providers are required to upload the beneficial ownership of their clients to the new system, where the BVI competent authorities may find information available within 24 hours. By words of BVI Premier and minister of finance, Dr Orlando Smith, “Through its use of technology BOSSs perfectly blends the principles of privacy and security and is entirely fit for purpose. Working with BDO, we have developed a world class platform that will benefit all stakeholders, including corporate service providers, company owners and law enforcement agencies.

Other jurisdictions are acting similarly to further improve standards for holding and making beneficial ownership information accessible to competent authorities.

BVI Governor Speaks on BVI Government Legislative Agenda

BVI Governor John Duncan has delivered his speech at the first sitting of the second session of the third House of Assembly of the BVI themed "Securing Our Future" where he outlined specific focus areas for the BVI government. These included improving social services, strengthening educational sector, border protection, enhancing law, order and public safety, stimulating the economy, infrastructural development, and public sector reforms.

The Governor's speech from the throne, covering legislative agenda of the BVI government, is traditional in Commonwealth countries and British Overseas territories. It is used by the government to set its legislative programme for the upcoming year, and is prepared by the government on behalf of the Queen. 

John Duncan became the 16th governor of the British Virgin Islands on August 15, 2014, and his first speech from the throne address was delivered on November 10, 2014.

BVI Government Enacted Virgin Islands Deposit Insurance Act

The BVI government has enacted the Virgin Islands Deposit Insurance Act 2016 (VIDIC Act), providing some level of protection to depositors of financial institutions in the jurisdiction. The legal act was passed on April 25 and gazetted on May 19. By words of the BVI Premier and Minister of Finance, Dr Orlando Smith, the VIDIC Act will strengthen economic stability of the BVI financial system, and will contribute to increased consumer confidence.

The deposit insurance system has the purpose to protect depositors who are not in a position to assess the risks of the institution in which they choose to put their deposits. It will also automatically protect depositors' insured funds against major financial losses, in case the financial institution fails. The VIDIC Act provides for the establishment of the Virgin Islands Deposit Insurance Corporation, which will provide insurance against loss of deposits.

Revised Guidance Notes on FATCA Published by BVI

BVI jurisdiction has updated guidance notes concerning the international tax compliance requirements under its intergovernmental agreements with the US and the UK, drawing attention to the revised deadline of June 30, 2015, for financial institutions to report with respect to the 2014, for financial institutions to report under the US Foreign Account Tax Compliance Act (FATCA). The original version was issued in July 2015.

Also, it became known that the BVI Financial Account Reporting System (BVIFARS) will be available for use from April 15, 2015, when authorities will start to accept applications for enrolment from reporting financial institutions.

New Cybercrime Legislation Act Introduced in BVI

Last week, a bill was introduced in the British Virgin Islands House of Assembly named The Computer Misuse and Cybercrime Act. This legislation document provides for fines of up to US$1 million or prison sentences of up to 20 years for individuals that illegally leak confidential information, and sentences of up to 15 years and/or fines of US$500,000 for anyone publishing such data, and applies to any person of any nationality. Actually, the law followed the global leak of information in the last year, published by the International Consortium of Investigative Journalists (ICIJ), and revealing private information on BVI companies contained in the secret files.

According to the survey of the industry, conducted by Offshore Incorporations Limited, the ICIJ’s reports had caused a “crisis of confidence” in the offshore industry and decline in offshore company incorporations, and particularly in the British Virgin Islands jurisdiction. Most offshore professionals stated that the disclosures have reduced demand for offshore financial vehicles or, in other cases, prompted clients to move their business from one financial centre to another. 

Press freedom manager of the International Press Institute (IPI) Barbara Trionfi said that "It is vital that the House of Assembly amend the Computer Misuse and Cybercrime Bill to include a clear exception for information in the public interest, as journalists must be free to report on issues that affect democratic accountability." She added: "We are also concerned that the disproportionately harsh punishments foreseen by this bill, as well as a lack of specificity as to which information is protected, will contribute to a dangerous chilling effect on the media."

New Arbitration Act Approved by the House of Assembly

The British Virgin Islands House of Assembly had the final reading of the new Arbitration Act 2013, which was part of the work produced by the Arbitration Focus Group – a committee comprised of public and private sector representatives. In modernising BVI arbitration framework, the Arbitration Focus Group focused on updating the Territory’s arbitration legislation, as well as procuring the extension of the New York Convention to the BVI, and creating an administrative body to facilitate arbitration in the jurisdiction. 

The new Act incorporates the UNCITRAL model law on arbitration, as amended in July 2006, into the British Virgin Islands domestic law. Also, the new legislation modernizes the provisions for the enforcement of foreign arbitration awards in the BVI, and provides for the creation of a new statutory body: the BVI International Arbitration Centre. It includes changes providing arbitration awards to be exempt from local stamp duty and from any charges under the Income Tax Act or the Payroll Taxes Act. 

The new Arbitration Act also grants various additional powers to the British Virgin Islands courts to support and assist the conduct of arbitration proceedings.

The previous arbitration legislation in the jurisdiction was the Arbitration Act - a synthesis of the English Arbitration Acts of 1950 and 1975, regarded as unsuitable for modern cross-border arbitration.

BVI FSC Issued Guidelines for Authorised Representatives under SIBA Act

Last week, BVI FSC published a document named ‘Guidelines for Authorised Representatives Under the Securities and Investment Business Act (September 2013)’, where provided information and guidelines about functions of Authorised Representatives, their qualifying procedure, reporting requirements, and other issues. The document, published on the home page of the Commission, was approved by the Board of Commissioners on 27 August, and issued by the FSC on 10 September, 2013.

In accordance with the Securities and Investment Business Act, 2010 (“SIBA”), every licensee and public, private, professional or recognized foreign fund is required to appoint an Authorised Representative, who will act as the main intermediary between the licensee or fund and the BVI FSC. The issued Guidelines define the procedures and the proper criteria for qualifying to act as an Authorised Representative, how an application to act as an Authorised Representative must be made, and submitted to the Commission. They also inform about the beneficial ownership structure of an Authorised Representative to be certified and properly supervised by the Commission. 

It is provided by the Guidelines that a person certified as an Authorised Representative must be independent, meaning, for example, that it may not carry out any other services except for those associated with the provision of services as an Authorised Representative. Also, an Authorised Representative must be based in the British Virgin Islands, and everyday functions of the Authorised Representative must be carried out by individuals resident in the Territory.

The Guidelines state the functions and responsibilities of an Authorised Representative, as outlined in SIBA, human resource requirements, and those concerning general reporting and financial statements.

Harneys Issued Second Edition of “British Virgin Islands Commercial Law”

In the last weeks of 2012, the international offshore law firm Harney Westwood & Riegels announced the publication of the 2nd edition of practitioner’s textbook ‘British Virgin Islands Commercial Law’. Since it was first published in February 2012, it remained the first and only textbook focusing solely on British Virgin Islands law and practice, comprising Harney’s expertise as the oldest and largest law firm in this offshore jurisdiction.

The publication is an authoritative source of information and advice for lawyers and other professionals who work with corporate structures and transactions, providing a deep analytical view of BVI legal background, related to business companies, partnerships, credit and security, investment funds, insolvency, dispute resolution, taxation and trust legislation. 

There are some changes in the law of the British Virgin Islands that occurred since the 1st textbook was edited, including the passing of the BVI Business Companies (Amendment) Act 2012 was passed and the accompanying BVI Business Companies Regulations 2012.

BVI Adopt New Laws on Aicraft Registration

New laws to support the expansion of the aircraft registry of the British Virgin Islands entered into force, enabling locally-registered operators to secure aircraft financing. New pieces of the BVI legislation, named the Mortgaging of Aircraft and Aircraft Engines Act, 2011, and the Mortgaging of Aircraft and Aircraft Engines Regulations, 2012, allow aircraft operators to register their ownership in the jurisdictions under three separate registries – for aircraft, their engines, and their mortgages. This will give to aircraft operators the opportunity to receive financing from lending institutions, which require that legal ownership should be demonstrated before providing financing.

The British Virgin Islands has been known as tax-efficient jurisdiction for aircraft holding companies, and in the last year the government launched the development of the local Aircraft Register. The BVI government expects that, with the new legislation, the jurisdiction will be able to use its position as a holding company domicile to encourage international operators to register their aircraft and engines in the BVI. 

According to Harney’s law firm, the new legislation, and especially its development providing for the filing of priority notices for credit institutions “paves the way for new business opportunities which complement and support the British Virgin Islands’ position as the premier offshore corporate domicile with over 850,000 companies incorporated to date.”

BVI Corporate Law Updated by Amendments and Regulations

The British Virgin Islands Financial Services Commission announced that the BVI Business Companies (Amendment) Act, 2012 and associated BVI Business Companies Regulations 2012 came into force on 15 October 2012, amending the original BVI Business Companies Act, 2004. Both the Act and the Regulations actually are the first significant update to the corporate law regime of the British Virgin Islands since 2006, and introduce a number of measures aimed at streamlining, clarifying and improving the administration of BVI Business Companies.

The BVI Business Companies (Amendment) Act, 2012 includes 85 new and amended provisions which clarify certain issues within the Act, and codify some existing practices. Some of the key changes that have been made affect such important issues as company names, share class conversion and bearer shares, Notice of Amendment, the Registrar of Companies, registered agents and registration procedure, voluntary liquidation and dissolution, fees, and security interests of the companies. All the changes are beneficial to the BVI regime and aimed to increase its attractiveness as one of the leading offshore jurisdictions worldwide. 

BVI Business Companies Regulations, 2012 have been developed to complement the implementation of some of the provisions of the Act. The Regulations have a total of 29 new provisions and three new Schedules.

The BVI Business Companies (Amendment) Act, 2012 and BVI Business Companies Regulations 2012 can be found on Commission’s website at www.bvifsc.vg.

Harneys Launches Textbook on BVI Law

On February 15, Harneys law firm launched the publication of 'British Virgin Islands Commercial Law', which is the first textbook that focuses exclusively on BVI law and practice. This event was attended by the representatives of business and legal community.

Governor McCleary and Premier and Minister for Finance Dr. D. Orlando Smith congratulated Harneys on the book's publication and talked on the significance of such a publication about the British Virgin Islands which depends on financial services industry. By words of Premier Smith, Harneys for several decades has been a committed company in the British Virgin Islands.

The textbook is written by Harneys lawyers and published by leading legal publisher, Sweet and Maxwell. It includes chapters on Company Law, Credit and Security, Law of Property, Financial Services Law, Investment Funds, Insolvency Law, Dispute Resolution and Trusts.

In January, the firm celebrated the publication of the new textbook in Hong Kong where it held legal seminar and interactive session on recent legal developments in the BVI jurisdiction.