Offshore Intelligence - British Virgin Islands

Trust Companies and Corporate Services Providers

Brief background -- Trusts

The fiduciary market in the BVI is highly lucrative through its association with the incorporation of IBCs. Often a trust is established to hold shares in an IBC, which in turn holds a variety of assets based outside the BVI.

The BVI's trust law is based on the English rules of equity, and the BVI High Court follows English case law even though it is not technically binding, except where this specifically departs from local legislation or case law. The relevant legislation is the Trustee Act Cap 303, the Trustee (Amendment) Act No 7 of 1993 and the Trustees Relief Act Cap 304.

The legislation allows for:

* a fixed-term perpetuity period not exceeding 100 years;

* determination and change of proper law;

* the establishment of a purpose trust;

* disposition of personal property and avoidance of forced heirship;

* statutory exemption from all taxes.

The UK Recognition of Trust Act 1978 has been extended to the BVI by the Recognition of Trust Act (Overseas Territories) Order 1989, which incorporates the Hague Convention into the law of the BVI.

Requirements/Confidentiality

Trusts are not subject to compulsory registration in the BVI, with no provisions to register.

There are no statutory accounting or auditing requirements and there is no need to file tax returns. It is possible to draft the trust instrument so that the identity of the settlor and the beneficiaries do not appear on the face of the instrument.

Regulation and Code of Conduct

Trust companies require a licence from the Financial Services Department under either the Banks and Trust Companies Act 1990 or the Company Management Act 1990. Licensing and supervision is overseen by the Assistant Inspector of Banks, Trusts and Company Managers, Financial Services Department, Road Town, Tortola BVI Tel: (284) 494 6430 Fax: (284) 494 5016.

Corporations acting as trustees of a family trust with no remuneration are not considered to be carrying on trust business. Individuals and partnerships acting as trustees are also not required to be licensed.

Two categories of trust licences are available -- general and restricted.

Licensed trust companies are also subject to the Code of Conduct adopted by the BVI Asso ciation of Registered Agents, the umbrella organisation for over 90% of the licensed service providers in the BVI's offshore industry. The Code, which sets out general guidance for the conduct of offshore practitioners and is designed to enhance regulatory vigilance, was ratified by the government and the BVI Association of Registered Agents in 1996. Under the Code, BVI-licensed service providers are required to ensure that all business referred to them by overseas professionals has been subject to due diligence and 'know your client' principles.

The Code seeks to ensure that, while legitimate confidentiality is protected, any criminal paper trail does not become frustrated in the BVI.

Contact: Ms Rosa Restrepo, President of the Association of Registered Agents, PO Box 3150, Road Town, Tortola, BVI Tel: (284) 494 4977 Fax: (284) 494 4980.

The Code has been given legal status by the government through amendments to the Banks and Trust Companies Act 1990 and the Companies Management Act 1990.

To reinforce the Code of Conduct, the government has introduced due diligence audits. The policy enables independent auditors to review BVI-licensed service providers to ensure they are meeting the 'know your client' procedures.

Another leading local association is the Society of Trusts and Estate Practitioners ('STEP') BVI Branch, c/o Mr Peter Goodard PO Box 933, Abbott Building, 2nd Floor, Road Town, Tortola, BVI Tel: (284) 494 6122 Fax: (284) 494 624.

Breach of Trust

As with other jurisdictions whose law incorporates the English rules of equity, a beneficiary of the trust may apply to the court to stop a trustee form dealing with trust assets in an unauthorised manner. Loss as a result of unauthorised conduct will result in the trustees being responsible for making the loss good.

Where a breach of trust is committed by a corporate trustee, every person who at the time of breach was a director of the trustee is deemed to be guarantor of the trustee (ie personally liable) in respects of damages awarded by the court. Principles of constructive trusteeship also apply.

Fees

Government fees for an application for a general licence is $4,000 and a restricted licence $100 with respective annual fees. Stamp duty for each trust deed of $50 is also payable.

Formation fees vary depending on the complexity of the structure and documentation. Fees will generally start at approximately $1,000. Annual fees also vary with a standard fee

about $1,000 normally payable.

Brief Background -- Companies

The BVI is generally acknowledged as being the most popular jurisdiction for offshore company formation with over 260,000 companies registered. The influx is primarily credited to the introduction in 1984 of the International Business Companies (IBC) Act 1984. Astonishingly IBC registrations and annual fees are bringing in some $60 million a year to the BVI coffers. The reason for the success of IBCs is that they are designed to be the optimum offshore corporate vehicle by:

* being exempt from all local taxes;

* allowing maximum confidentiality -- availability of bearer shares; no requirements to file accounting information with the Registry; share registers available for inspection only by shareholders or by order of the BVI court;

* having no disclosure or minimum capital requirements;

* allowing the holding of shareholders' or directors' meetings, and the keeping of books of account, records and minutes outside, the BVI;

* having no statutory requirement to hold annual general meetings.

IBCs cannot engage in the following businesses: banking or trust business; insurance or reinsurance; company management.