British Virgin Islands: Leading Innovation In International Business And Finance

According to many analysts, global economic challenges continue to drive the world economy towards a recession, spurred on by the Russian invasion of Ukraine on the heels of the Covid-19 pandemic. High interest rates, high energy costs, climate change concerns, increased regulation and the growing difficulty of doing business generally, have placed multinational enterprises (MNEs) and corporates in an unenviable position, challenging their bottom line and in some cases their very existence.

Continued Growth Of Crucial Sectors

Notwithstanding the global economic issues, the BVI has seen a tremendous resurgence in its tourism sector, with a significant increase in day trippers, cruise ship arrivals and yachting activities. The territory welcomed its first non-stop commercial flight from the US mainland on 1 June, 2023, as American Airlines commenced direct flights from Miami to the Terrence B. Lettsome International Airport, and this has already garnered significant attention from travelers to the territory.

The BVI’s financial services industry is also performing at healthy levels, holding its own in the areas of company incorporations, limited partnership formations, investment funds, investment fund managers, investment business licensing, and Fintech related activity. Active companies at the end of the first quarter of 2023 stood at 372,439, limited partnerships at 2,280, and registered investment funds at 2,083. The growth in ‘light touch’ regulatory products such as the incubator fund, approved fund, and the approved manager (able to manage investment funds globally), has been remarkable. BVI trusts remain attractive vehicles for succession planning, including the globally recognised VISTA trust and private trust company products. Domestic real estate and banking activities are also up, rising significantly since the end of the pandemic. The growth in tourism and financial services are welcomed as they form the two critical pillars of the BVI economy.

Global Player In International Capital Markets

BVI companies continue to feature in significant capital market and M&A transactions across the globe, with BVI service providers acting on high-value, complex, sophisticated transactions ranging from multi-million to multi-billion dollar deals including initial public offerings, acquisitions, complex restructurings, and new fund launches. Noteworthy transactions in recent times include:

• The US$ 11.6 billion acquisition of Biohaven by Pfizer through a BVI statutory merger, representing the largest ever takeover of a publicly-listed BVI company by transaction value;
• The US$ 1.3 billion financial restructuring of Noble Group through a lender-led BVI share pledge enforcement arrangement;
• The acquisition by Masplay of Nike de Chile with the involvement of a BVI subsidiary;
• The US$ 201 million acquisition of Six Waves Inc., a BVI company, by Nasdaq Stockholm-listed and leading gaming studios Stillfront Group; and
• The take-private of Ocean Outdoor Limited, which operated the famous Piccadilly Lights screen in London, by Atairos Group, also by way of a BVI statutory merger.

These transactions demonstrate the confidence in the BVI as jurisdiction of choice for businesses of all sizes, including highly valued listed companies.

Resolving High Value Cutting Edge Legal Disputes

Over the years, the BVI has seen a number of high-profile commercial disputes resolved before its courts, where BVI law firms, insolvency and other practitioners feature on behalf of their international clientele. In the evolving Fintech space, BVI practitioners assisted with the first freezing order granted by the BVI Commercial Court against persons unknown. In Re: ChainSwap v Persons Unknown, ChainSwap, a BVI company that provides a service to transfer tokens among different blockchains, was hacked and tokens were stolen. The Commercial Court found that ChainSwap had established an arguable case that the stolen tokens were its property and that it could grant an injunction against unknown persons as a form of relief to the company.

Also, in the first major crypto firm bankruptcy case, Three Arrows Capital (which was brought down by the collapse of cryptocurrencies Luna and TerraUSD) led to BVI Commercial Court appointed liquidators winding up the company in June 2022. The BVI is also involved in a number of spinoff cases resulting from the meltdown of mega crypto exchange, FTX. The BVI’s court system with a dedicated commercial court and high calibre judges and practitioners, coupled with the Privy Council in London being the final appellate court, are drivers of efficiency and confidence in resolving disputes through the BVI court system.

Additionally, the BVI International Arbitration Centre which was established in 2016 has in recent months added a number of experienced international arbitrators to its panel, which now include arbitrators from the UK, USA, Switzerland, Nigeria, Hong Kong, France, China and Canada, to name a few. The Centre forms a critical aspect of the dispute resolution regime in the BVI for international commercial matters.

Moving Ahead With Innovative Legislation And Global Compliance

The British Virgin Islands continues to demonstrate its legislative prowess and ingenuity with the BVI government passing several important pieces of legislation over the last few months. Of particular importance were the changes to the BVI Business Companies Act, 2004, which took effect on 1 January, 2023, by virtue of the BVI Business Companies (Amendment) Act, 2022. Key amendments included the availability of a list of the names of directors of BVI companies at the BVI Registry of Corporate Affairs, the abolition of bearer shares, a new requirement for filing an annual financial return, and changes to the eligibility of voluntary liquidators. The government also brought into force the Business Licensing Act, 2022, replacing the Business, Professions and Trade Licences Act. This new Act improves the regime for individuals and businesses inside and outside the BVI investing and operating within the territory.

Another significant piece of legislation was the Virtual Assets Service Providers Act, 2022, which came into force on 1 February, 2023, commonly called the ‘VASP Act’, which provides a regulatory framework for the supervision of virtual assets service providers and builds on the BVI’s legacy as a leading digital assets hub. The VASP Act describes the activities that require registration through the definition of key terms such as virtual assets, virtual assets service and VASPs. Additionally, activities that do not qualify as virtual assets services have also been outlined in the VASP Act for clarity. The VASP Act complements the BVI’s Fintech Regulatory Sandbox, developed to support Fintech innovators and the needs of financial services clients testing new Fintech products. The Sandbox enables the BVI Financial Services Commission to assess new Fintech products for essential compliance with legal and regulatory requirements.

Earlier in 2022, the BVI Financial Services Commission granted Brtuomi Worldwide Limited an investment business licence to operate a virtual asset exchange for a range of crypto trading services, including spot trading of cryptocurrencies and derivatives trading. Also, the Fusang Exchange, a fully regulated end-to-end digital securities exchange in Asia, was included on the BVI’s recognised list of exchanges.

In terms of global compliance, the BVI’s Beneficial Ownership Secure Search system (BOSSs), launched in 2017 to make company registration more efficient and robust for clients, is still a leader in regulatory innovation, and is consistently lauded by law enforcement authorities, such as the UK’s National Crime Agency (NCA), for its ability to retrieve and share information in a very short period of time. The territory also completed a successful Caribbean Financial Action Task Force (CFATF) mutual evaluation earlier this year, demonstrating its compliance with international standards and the effectiveness of its anti-money laundering and counter-terrorist financing (AML/CFT) regime in line with the recommendations of the Financial Action Task Force (FATF).

Research Continues To Confirm BVI’s Significance

The Pragmatix Report that was commissioned by BVI Finance was published in 2022, building on the previous Capital Economics and McKinsey Reports, made several significant findings about the BVI and its contribution to the global economy. Importantly, the Pragmatix Report highlighted the BVI’s strength as a tax-neutral jurisdiction that promotes global capital flows and facilitates important transactions that would otherwise be very difficult, if not impossible. The report also found that the BVI continues to be relevant in the global economic sector, explicitly confirming that the territory’s domestic economy is “sound, balanced and stable” and that the jurisdiction offers a “net benefit” to countries worldwide “due to its scale of contribution to investments and jobs.” Specifically, the report confirmed that investment mediated by the BVI as an international business and finance centre supports around 2.3 million jobs worldwide, with China (including Hong Kong) accounting for approximately one million, and around 400,000 in Europe and North America combined. In general, the BVI, through its ability to enable such global trade and investment, is a substantial net benefit to business and government across the globe.

Earlier in 2023, the territory welcomed a new government and its first Minister of Financial Services. How the new government handles ongoing governance reforms and the evolving economic landscape will determine the territory’s trajectory, but with a minister dedicated to financial services, the industry is expected to continue to move from strength to strength.

Overall, the outlook for the BVI is very positive, with service providers, including, lawyers, accountants, insolvency practitioners, and corporate services professionals feeling confident that the territory will weather the global economic challenges while contributing in a measurable way to the global economy.

In a world of globalised trade and capital investment, there will continue to be demand for corporate vehicles that facilitate efficient and secure cross-border transactions while adhering to the highest regulatory standards. The BVI ticks all the boxes in these areas, truly cementing its status as a premier international business and finance centre.

Christopher Simpson
Christopher is a Corporate and Commercial Partner with O'Neal Webster and a member of BVI Finance.