The BVI Government has passed new legislation that requires Registered Agents for BVI entities to make certain information on the beneficial owners of all BVI companies and limited partnerships accessible by a secure Government search system. The Beneficial Ownership Secure Search System Act, 2017 (the “Act”), which was further amended on 16 June 2017, enables the creation of a new Beneficial Ownership Secure Search System (“BOSS system”). The new law is in addition to the BVI’s existing AML legislation, which already requires Registered Agents to collect and maintain beneficial ownership information for the entities to which they provide services.
The Act, which enters into force on 30 June 2017, was drafted to implement the terms of the Exchange of Notes which the governments of the BVI and the United Kingdom entered into on 8 April 2016. It provides the legal framework for recording accurate beneficial ownership information and the disclosure of that information to law enforcement authorities in jurisdictions with which the BVI has entered into bilateral agreements similar to the UK Exchange of Notes.
At the moment, only UK authorities can request the BVI authorities to provide beneficial ownership information that will be accessible through the BOSS system. The information accessible through BOSS will be the name, residential address, date of birth and nationality of each beneficial owner of a BVI company.
Key Features of the BOSS system
The BOSS system, developed by BDO, is set up as a decentralised data repository. This means that each Registered Agent maintains its own isolated, secure database which is encrypted with a unique, private key. A grid of network security technologies has been developed to encrypt the data and to block cyber-attacks while beneficial owner data is being uploaded to the BOSS system and while it is at rest in the Registered Agent’s database. The infrastructure of the system has been set up in a secure, stable G7 jurisdiction trusted by and independent of the BVI and the UK.
The BOSS system allows a search to be conducted across all of the separate Registered Agent beneficial ownership information databases. The searches cannot be traced and are invisible to Registered Agents.
Only designated persons who have passed security vetting tests and who are considered to be fit and proper will have access to the BOSS system to run a search. At this time, searches will only be conducted upon receipt of a bona fide search request from the UK Financial Intelligence Unit of the National Crime Agency and the request has been vetted and certified as proper, lawful and in compliance with the Exchange of Notes.
Fines and Penalties
Significant penalties and fines can be levied against both companies and Registered Agents which fail to comply with their respective obligations under the Act or which intentionally provide false information. A designated person who fails to treat search requests as confidential or who otherwise acts contrary to the search protocols established under the Act may also be liable to a substantial fine and/or a term of imprisonment.
Key Provisions of the Act
The Act applies to all BVI business companies, except those companies that were struck off the Register of Companies before 1 January 2016 and which have not been subsequently restored.
Prescribed Beneficial Owner Information
The prescribed information to be collected for the beneficial owner of a company is: (i) name; (ii) residential address (iii) date of birth and (iv) nationality. (In cases where the beneficial owner is a company – see ‘Definition of a Beneficial Owner’ below – the prescribed information is: (i) name/alternative names; (ii) incorporation number or equivalent; (iii) date of incorporation; (iv) status (e.g. active/dissolved); and (v) registered address.)
Obligations of Corporate and Legal Entities
Each company must identify and inform its Registered Agent of its beneficial owners within 15 days. Any changes to the prescribed beneficial ownership information must be communicated to the registered agent within 15 days of the change.
Registered Agent Obligations
Registered Agents must create a database which is accessible to the BOSS system and upload to it beneficial ownership information for each of the companies under their administration by 30 June 2017. Registered Agents must also upload any changes to the beneficial ownership information communicated to them by a company within 15 days of receiving such notification. The information kept on the Registered Agent’s database will be kept confidential and will be accessible only by the Registered Agent or a specially designated person from a BVI law enforcement agency.
Definition of Beneficial Owner
The beneficial owner of a company (other than a company with securities listed on a stock exchange) is the natural person who owns or controls 25% or more of the shares or voting rights in a company or who exercises control over its management. (It should be noted that a company incorporated prior to 22 January 2009 may, in some cases, have a beneficial owner which is a corporate legal entity.)
In instances where a legal arrangement such as a partnership or trust is the beneficial owner, the beneficial owner is the natural person who controls the partnership or the trust (e.g. the general/managing partner of a partnership or the trustee of a trust) or the natural person by whom the legal arrangement was made (e.g. the settlor of a trust).
Where a company is in insolvent liquidation, the beneficial owner is the natural person who has been appointed as liquidator and where the beneficial owner is deceased and was a shareholder in the company, the personal representative or executor of that shareholder’s estate is considered the beneficial owner for the purposes of the Act.
The Act provides for a number of exempt persons for which companies and Registered Agents do not have to collect the prescribed beneficial owner information. These include: (i) a company which is recognised, registered or approved as a mutual fund under the BVI Securities and Investment Business Act, 2010; (ii) a company whose shares are listed on a recognised stock exchange; (iii) a person licensed under BVI financial services legislation; (iv) the subsidiary of a mutual fund or a listed company or (v) a company exempted by regulations.
While the company does not have to provide the four pieces of prescribed beneficial owner information for exempt persons, it has to collect and provide the following prescribed particulars for the exempt person: (i) name/alternative names; (ii) incorporation number or equivalent; (iii) date of incorporation; (iv) status (e.g. active/dissolved); and (v) registered address. The company also needs to provide the reasons why the exempt person is designated as such.
Registrable Legal Entity
A registrable legal entity is a legal entity which would be considered a beneficial owner but for the fact that it is a corporate entity and to which one or more of the following factors apply: (i) it is an exempt person; (ii) it is a legal entity whose securities are listed on a recognised stock exchange; (iii) it is a licensee or a foreign regulated person; (iv) it is a sovereign state or a wholly owned subsidiary of a sovereign state.
For example, where the beneficial owner of a BVI company is a corporate entity which is owned by the government of a country or if the corporate beneficial owner is regulated in a foreign jurisdiction, the corporate beneficial owner can be recorded and the Registered Agent does not need to identify the natural person who owns 25% or more of the shares in the corporate beneficial owner.
The Registered Agent will need to record the same prescribed particulars for the corporate beneficial owner as it does for an exempt person, i.e. (i) name/alternative names; (ii) incorporation number or equivalent; (iii) date of incorporation; (iv) status (e.g. active/dissolved); and (v) registered address. The basis for the corporate beneficial owner’s designation as a registrable legal entity will also need to be recorded.
Entry into Force
The Act enters into force on 30 June 2017. By that time, Registered Agents in the BVI must have collected and uploaded the prescribed beneficial owner information onto their respective secure databases.