C.M. UPDATES LEGCO ON PROPOSED BVI BUSINESS COMPANIES ACT

Chief Minister of the British Virgin Islands, Dr. the Hon. D. Orlando Smith, on 14 October 2004, updated the Legislative Council of the British Virgin Islands on the proposed BVI Business Companies Act.

The proposed new legislation, which will replace the existing Companies Act and International Business Companies (IBC) Act, is designed to appeal to international clients while providing a suitable legal framework for firms undertaking domestic business. It is anticipated that the new Act will take effect on 1 January 2005 and will completely replace current companies legislation by 1 January 2006. The proposed legislation was developed in consultation with the local private sector, the Attorney General’s Chambers and the Financial Services Commission (FSC).

“The new BVI Business Companies Act was designed to safeguard the attributes that have made the BVI the world’s premier offshore company domicile,” said Dr. Smith. “The collaborative effort to draft this new Act has resulted in legislation that not only retains all the virtues of the current IBC Act, but makes the BVI more attractive to clients by including features that have become desirable since the enactment of the current Act.”

To ensure a seamless transition to the new regime, the Chief Minister has proposed a two-year transition period that will allow companies up to one year to comply with the requirements of the new Act. The transition period will be guided by the following:

 In 2005, new incorporations will be possible under all three Acts;

 In 2006, new incorporations will only be possible under the BVI Business Companies Act. Companies already on the Register will be permitted to operate under the old IBC Act or the old Companies Act for one final year, during which they must prepare to transfer to the BVI Business Companies Act; and  By 2007, it is envisioned that all companies registered in the BVI will be operating under the new regime that will be established by the BVI Business Companies Act.

An education programme will be launched to ensure all BVI companies, both domestic and international, are aware of the new legislation’s requirements. The Act will require local companies to utilize the services of a Registered Agent to ensure compliance with the legislation.

It is anticipated that the cost of this requirement will be offset by the tax savings realized as a result of the new legislation.

The BVI Business Companies Bill is expected to be introduced in the Legislative Council by December 2004.

The BVI is the premier offshore corporate domicile, with over 600,000 companies on the VI Register. Most of these companies are registered under the BVI’s hallmark legislation, the International Business Companies (IBC) Act.

Copies of the proposed BVI Business Companies Act were widely circulated in September by the Financial Services Commission and the Attorney General’s Chambers for review and comments.

The Financial Services Commission hosted a workshop at Long Bay Beach Resort on 27 September 2004 for members of the local financial services industry to hold in-depth discussion on the proposed legislation.

Industry participants have been invited to submit comments on the proposed legislation to the Financial Services Commission. All comments received will help to shape the final Bill expected to be introduced by December 2004.

When enacted, the BVI Business Companies Act will extend the zero tax regime currently enjoyed by IBCs to local companies and will bring the BVI into full compliance with the European Union (EU) Savings Tax Directive and EU Code of Conduct on Business Taxation, as required by the United Kingdom of all its Overseas Territories.