Elise Donovan discusses one of the world’s leading finance centres, the British Virgin Islands, which has ensured its stability through close relations with both the BVI Government and private sector.
For three decades, the British Virgin Islands (BVI) has developed its reputation as one of the world’s leading finance centres meeting the changing needs of international businesses and high net worth individuals. Working in close partnership, the Government and private sector in the BVI have ensured the Island’s place as a stable, well regulated and neutral jurisdiction making a significant contribution to the liquidity of the global economy.
Today the BVI is recognised by international organisations like the International Monetary Fund (IMF) and Organisation for Economic Cooperation and Development (OECD) as one of the safest, most trustworthy, robustly regulated and reliable financial centres in the world.
It is for these reasons that The BVI has become the corporate domicile of choice for close to 500,000 active companies globally with a range of business using BVI structures for international transactions across the world.
In addition to being the premier corporate domicile, the BVI provides a sophisticated array of diverse wealth management solutions in trust and estate planning, funds and investment business, captive insurance, ship and aircraft registration services. And offering these financial services in the BVI is a pool of highly qualified expert professionals from the world’s leading trust companies, law firms and accounting firms.
One of the key advantages to conducting business in the BVI is this collaborative approach to ensure the right balance between legislation, regulation and a business friendly environment that meets the highest standards for international businesses.
The BVI Advantage
The BVI is committed to offering the very best service proposition, and constantly looks to differentiate itself in the market. The Premier and Minister for Finance of the British Virgin Islands, Dr Orlando Smith, has made it clear the Government will aim to set the territory apart from its competitors through the development of innovative new offerings and by adhering to international standards of regulation. There have been three recent changes to the legislative regime in the BVI detailed below.
BVI Business Companies (Amendment) Act
Perhaps the most significant new piece of legislation in 2012 was the BVI Business Companies (Amendment) Act 2012, developed alongside the BVI Business Companies Regulations 2012. Both the Act and the new regulations are aimed at streamlining, clarifying and improving the administration of the affairs of BVI Business Companies.
The Amendment Act has a total of 85 new and amended provisions on the original 2004 Act, including new definitions designed to make the act easier to understand and interpret. The reaction from international business community has been positive, with a rise in the use of BVI structures for international transactions.
Approved Manager Regime
With the enactment of the Investment Business (Approved Managers) Regulations 2012, the BVI introduced a lighter regulatory regime for BVI-domiciled investment managers and investment advisers, which will complement the more regulated investment business licensing regime already available under the Securities and Investment Business Act 2010 (SIBA). The new regime came into force in December 2012.
The Approved Manager regime provides for eligible fund managers and advisers to submit a simple and short application to the Financial Services Commission and then automatically commence business seven days later unless the Commission raises an objection during that period. This compares to a minimum of four weeks to process an application for a Part I licence.
Under the regulations, an Approved Manager can act as the investment manager or investment adviser to any number of private or professional funds recognised under SIBA, as well as any number of closed-ended funds domiciled in the BVI, which have the key characteristics of a private or professional fund. The Approved Manager can also act for non-BVI feeder funds into BVI master funds.
The key restriction is that aggregate assets under management of all of the open-ended funds cannot exceed US$400 million and the capital commitments of all of the closed-ended funds cannot exceed US$1 billion. An Approved Manager will also be subject to a small number of ongoing obligations and the Commission has powers to take enforcement action against an Approved Manager should it determine it to be necessary.
BVI Aircraft Registry
Also brought into force for 2013 was the Mortgaging of Aircraft and Aircraft Engines Act 2011 and the Mortgaging of Aircraft and Aircraft Engines Regulations 2012, which are intended to support the expansion of the island's aircraft registry by enabling locally-registered operators to secure aircraft financing.
The new law complements the jurisdiction’s status as a US Federal Aviation Authority Category One aircraft register under the International Aviation Safety Assessment programme by creating a framework for registration in the British Virgin Islands of security over aircraft, and separately, aircraft engines. It anticipates the appointment of a registrar to establish and maintain a register of aircraft mortgages, and a register of aircraft engine mortgages, that will be available for inspection by the public, and over which the registrar will have administrative and operational control.
Lenders prefer lending to companies whose aircraft or aircraft engines are registered in jurisdictions that offer arrangements for registration of their interest in the event it becomes necessary to realise their security if a default occurs. The BVI Government is confident that the aircraft mortgage register will leverage off the BVI’s successful record in registering companies, and will make the BVI a leading offshore centre for aircraft registration.
The BVI is a popular jurisdiction for investors from the emerging markets of China and the other BRIC countries. Many industry leaders have noted that no other corporate vehicle has had quite the impact in Asia as the BVI Business Company (BC), which in China is simply referred to as ‘a BVI’.
It is standard practice for the expanding class of high net worth individuals (HNWIs), businesses and even governments of the BRIC countries to acquire BVI BCs for a multiplicity of investing and other cross-border transactions.
BVI BCs are an integral part of business in these jurisdictions , for example, China is experiencing economic growth that outpaces global averages and it is investing in mineral rich countries to feed its need for more resources - it uses the BVI BC to make many of these investments.
BVI trusts and fiduciary services and funds and investment business are also popular in the BRIC countries for wealth management, investing, structuring ownership and control, and for planning for the succession of assets. By using BVI structures globally that are easy-to-use, flexible, widely-accepted and cost-competitive, the BRIC countries are able to stimulate their economic growth and increase wealth creation. Conversely, the BVI has also benefited from their growth; it shares a symbiotic relationship with the BRIC countries.
Looking to the Future
There are several areas that we are working on to improve our financial services product and make it more sustainable for the long-term. The Government has introduced financial services education in the secondary school curricula to allow our students to be more prepared to pursue careers and training in the financial services industry in order to provide a sustained pool of local professionals in the industry. Investments in infrastructure, such as business hotels and conferencing facilities, are also priorities for enhancing the industry. We are also strengthening and expanding in our current markets and exploring new products and emerging markets to diversify our industry.
Evidence points to a strong correlation between successful economic growth and doing business with the BVI. The BVI provides advantages and value to businesses, individuals and countries to successfully navigate the global landscape and maximise their economic growth and increase their wealth potential. A clear example of this is the Asia/Pacific region and its expanding class of high net worth individuals for whom the BVI is the preferred jurisdiction of choice. Asia-Pacific is the fastest growing economic region and, arguably, this may be partly due to the region’s professionals’ business acumen in choosing BVI structures.