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Welcome. Good morning. Good day. Good evening. Depending on what part of the world you are welcome to introduce our tax. Again, we’re doing another live stream. So for those, for whom this may be the first time we do this every week. And in fact, sometimes more than once per week, like today, this is our second live stream. So today we’re going to talk about BVI entities. What’s going on today. Yesterday. I was, what can we expect for tomorrow? No, we have to, of course, out of an abundance of caution, remind you that this is not meant to be tax advice. We’re having a general conversation about general principles.
You can consider it educational or even entertainment, but if it is that you need actual advice, you need to engage a tax team, a tax professional who would understand your situation inside out. So again, we are not encouraging anyone to pay less than their fair share of taxes in any jurisdiction in which they’re exposed. This is being recorded. So for those on zoom, if you do not wish your image to be captured, please keep your cameras switched off for those who submitted questions in advance. Thank you. We’ll go through them in the order in which to receive them. Thank you for sending them for those who want to ask questions here this morning, this evening, today, feel free to type in the box below. So if you’re on zoom, you can type in the chatbox below. If you in Facebook or LinkedIn, whatever you can type below line, we’ll get to them and the order in which they are received. So without further ado, I will introduce Mr. Mikhail Charles. Mikhail, would you like to introduce yourself, sir?
Yes. Good morning. Good evening. Good night, everybody depending on where you are, but I think I’d adopt part of your disclaimer in that this is not intended to be direct legal advice, and we are having a chat about the BVI part of my practice in respect of myself. My name is Mikhail Charles. I am a BVI admitted barrister. I’ve been practicing across Eastern Caribbean for a while over roughly eight, well, nine years. And I’m based in London. I work along with Derren and the rest of the team at HTJ.tax as a member of the team. And I’m happy to happy to serve and provide proportionate and accurate solutions for our clients. Yeah, so this morning is billed as a BVI companies. What’s next. Before that, I’ll probably turn it back over to you, Derren, to further set the stage.
Okay. So I guess we’ll just progress through the questions as we received them and we’d try to put them in this sort of order. That kind of makes sense. So, it’s like progressive questions. So the first one is the most basic one, right? Like what exactly is the BVI British Virgin islands and what’s its relationship with UK?
Well, to answer that directly on its head, the BVI or the British Virgin islands is a collection of island, roughly, maybe 55 island, in a grouping called the Leeward islands in the great Antilles of the Western. So basically the Eastern Caribbean, the main islands Matua , Virgin Ghada, and Ghada, the Western Dike. And then about 50 other smaller islands or keys, the capital in Tartula and it’s called road town. BVI is a United Kingdom overseas territory. So which means that they have internal self-government, but all of the external affairs are administered by the United Kingdom. Serial system of government was introduced in 1967. I believe. Yes. And more autonomy was given to the autonomy was given to the, to the ministers and to the aspects of the internal steet in 2007, in terms of other diplomatic situations of the BVI, they are associate members of the organization of Eastern Caribbean states and associate members of the Caribbean community. In terms of the legal system, it is a part of, or a circuit of the Eastern Caribbean Supreme court and the final court of appeal or the apex court of appeal is a judicial privy council or to judicial committee of the privy council, which sits here in London.
Okay. Very, very comprehensive. We expect nothing less, all right. Jumping into number two. So in many ju you know, when I, when I deal with clients, for them, the perception is like the BVI British Virgin islands, BVI is synonymous with offshore structures. So when they think I need to form an off shore, a so-called offshore company, they immediately think BVI. So, why is that the case? Why is it BVI so important as a brand? Or is it just branding? Is it just marketing or is there a real substance behind that?
Well, I’ll answer that this way. I’d say yes, in both senses yes. In terms of branding. So the team over at the BVI, ITA and BVI companies regulated they’ve really have a wide to them as a really joined up approach in terms of marketing, because remember Cayman and Bermuda, Turks and Caicos ticks and of course, and of course my own islands, St.Vincent and Grenadines, ST. Lucia, St. Kits and Nevis, all have similar products. So in terms of markets, and I think it’d be VA has really, has really jumped on on it. And that could only be evidenced by the deleted reports. I think the latest reports coming out was that there was a 68% raise in new company in corporations in the first half of 2021. And that’s against the backdrop of COVID-19 no, the importance of a BVI company is because I think because BVI companies number into the hundreds of thousands, and there are several, several of the major offshore law firms with headquarters or offices there, the product that the push is that the BVI company is tax neutral. So what that means is, I didn’t know, direct taxes, assessment, the BVI on a BVI company on a partnership by its investors, not income capital gains tax inheritance, audit, Erik taxes are assessable. No, as they’re in, as you well know, as a us accountant, apart from withholding tax that could be potentially enforced you’re all in taxes on a BVI company. No, despite the BVI entering into a number of double tax treaties, they are often have limited or have no direct relevance to much business that is carried on by BVI companies. So it’s important to the offshore world. If there is such a thing, what I guess we could get into these saw three of that at another occasion is that as, as a leading jurisdiction, a BVI company has certain has a repute for international compliance. So for example, BVI out here. So the all UCDS white list, it’s a member of a plethora of international organizations even recognized by the European union as being fully cooperative as a tax regime. And that occurred sometime I believe in 2020. So, I think in particular is why the BVI is important to the offshore world.
And you mentioned the fact that the number of incorporations is going up, I was under, this is of course good news for the BBI as a jurisdiction, but I was under the impression that on the, on the backup Panama paradise Pandora papers, that things were actually heading in the opposite direction. So is the BVI an exception to trend seen elsewhere?
Well, I think the impact of Panama papers and paradise papers and the, the successive data breaches that have resulted in, for example, what do you care has done with twith the MPS bill MP Hodge? I believe from 2018 requiring the imposition of beneficial ownership registers by at least 20, between 2020 and 2023, somewhere around there. I think the BVI has Mead modest success of sort of handholding clients through and sort of maintaining a foom ma not only marketing, but technical expertise. So for example, some of the bigger forms out, of course we will, we will advertise to them here. Some of the bigger firms have invested a lot and you would notice online sort of very thorough guides available for free the, the very thorough responsiveness of their very senior to news in terms of hand-holding potential clients in understanding the multi-jurisdictional playing fields. So for example, if you want to set up a SPAC, if you want to set up an SPV, if you want to do business across several jurisdictions, you can actually come to a, a BVI film that has an office in, let’s say, Hong Kong and Singapore oriented somewhere in Europe and actually have the benefit of a BVI company, but you get different technical and other sort of capacity all in one shop. I think that has helped to stave off the, the, the, the effect or to blunt the effect of Panama papers. I think my last point on the Panama papers and the other data breaches is that the sort of information that was turned up is of limited use. So take, for example, the BVI, the last data breach that they had, it’s probably a couple of thousand BVI companies are listed within reality. And I, I, I would cite my source here. So for example, ICC FraudNet produces of complex a compilation of SES. And in one of those essays, they cite some detail that’s that more or less shows that all right, a couple thousand BVI companies, so listed, but only a handful of them were active by the time of the publication of the data breach. So when you really start to scratch the surface of these data breaches, does there isn’t much substance granted there’s the shock value, and, you know, the, it would help international tax regulators and domestic tax authorities and other countries to sort of have a, a greeter view of hope. Some of their citizens may be acting, but in the grand scheme of things, I think the effect of Bama papers, et cetera, is blunt for now.
Okay. Thanks for that. And for those who may have been wondering SPV, special purpose vehicles, back special purpose acquisition company, or vehicle as well. So you can Google that if you want further information, but what exactly, I guess, from what you hinted, obviously they’re different entities, entity structures available. What exactly is a BVI company, generic BVI company, what are its advantages over other jurisdictions that also have offshore companies?
Well, I think I’ll answer the last question first. Now, one of the advantages that BVI has is reputation. So since the sixties really various forms of corporate entity were in existence. And if you trace the history of the offshore industry has really PVI who sort of kicked things off, no, the first iteration of the company’s law or the offshore companies law was based on Delaware law or Delaware company’s law. So there are a lot of familiar concepts for many of the major jurisdictions and sort of recognizing, for example, the share structure, the lack of onerous corporate governance requirements, et cetera. So I guess a classic definition where we adopt the English law definition, where it’s a company as a legal entity, separate from its shareholders, which can Sue be sued in its own, right? And as a full capacity of a natural person, no due to things that are beyond the scope of this call, there is no only one type of company available, or one type of corporate entity available, but different types. And that’s set up by the companies act of 2004. So you can have your, the most common is a company limited by shares. So that has the ability to issue shares directors, manager due to the affairs and the shareholders enjoy legal personalities. So separate legal personality, which could be limited. Then you have your restricted purpose company, still a company limited by shares, but it has us very specific purpose. And usually find these companies used for securitization as structured finance transactions to hold assets. But it, it has a very specific registration requirement. Then you have your segregated portfolio company, which is very familiar to Americans in particular, in my experience, still a company limited by shares, but the assets are ring-fenced to each individual portfolio. Then you have your company limited by guarantee. So to guarantee members and the shareholders enjoy separate legal personality, but that sort of companies is usually used for nonprofit organizations. So it’s not really, it’s not really, you know, no one really uses a company limited by guarantee. Really then of course you have your unlimited company. So these companies can an unlimited amount of shares, at least one of the members be unlimited and has unlimited liability. So naturally you more discerning investor doesn’t usually go for that. So those are the types of company that are on offer in the BVI.
Okay, great. Thanks a lot for that. So within the last few years, we’ll not just in a BVI, but in the offshore world in general, there’s been a lot of buzz around economic substance. Can you talk a bit about economic substance rooms?
Sure. Well, economic substance, as an aim suggest requires an entity. Let me use the language of the statute or the language or the law requires legal entities, sorry to show that they have some material connection with, did your stick sharp? So, so now this follows the ongoing efforts of the OECD and the EU for companies not to just be people companies. And of course, because of the relevant, private international law rules, once a company is incorporated, it do lot of the dormer side of that corporation would determine things like taxis, John and residents, et cetera. So you always see the chemo to this thing called BEPS. So, you know, which is inclusive framework on base erosion and profit shifting. And as a result of that, these new rules came in. So I think around 2018, I believe, and into 2019, the new set of laws came in, which was called the economic substance act. And what does, does know the economic substance act and the economic substance rules, what is does, or how it applies is that BVI business companies and foreign companies registered in the BVI or BVI limited partnerships. And finally, we limited partnerships registered in the BVI subject, according to their activities to file reports and to demonstrate a real connection to the jurisdiction. So now these companies are entities once a carry on a relevant activity. And we’ll get into that shortly during a set period, usually a year, they have to comply with the substance requirements, right? And even if that entity does more than one relevant activity, then it has to comply with the economic substance requirements for each activity. So in order for your entity to be determined as a, as being liable for economic substance, it has to be directed and manage in the BVI niche, unskilled of the activity has to be taken into account. So that’s things like employees who are qualified and physically present in the BVI. You saw the bills that you’d be being in the BVI like mail rent utilities, and that ties into whether or not they’re appropriate physical offices or premises, or where that activity is intellectual property business. Then you have to, to show adequacy as well. Or if the legal entity conducts, what does call Sega core income generating activity, then you have to satisfy that test as well, just roughly about three tests, right? So director managed test adequacy test and seek a test in terms of outsourcing. Now, this often catches a lot of people or a lot of entities to use a correct corrector because BVI companies are usually just incorporated as holding companies or companies in a structure. A lot of services would be old sourced. No. When you outsource that particular, when you’re at PSU as part of your relevant activity, you have to be careful because you have to look at the expenditure, the extent of work that is going to be done and hold that actually ties into the use of the particular structure. So quite a number of tests, but it’s all interlinked. So a legal entity has to demonstrate on the three tests, an entity could be a business company or limited partnership in the BVI or foreign companies or foreign partnerships that are registered in the BVI. So those three tests have to be met in order for you to fall on consideration for economic substance. So just a word about what actually are those core income generating activities. So things like banking business. So we started talking things, those go income generating activities or things that are right. So things like banking business. So raising funds, managing risk, taking hedging positions, providing loans, credit, whatever you distribution and service center business.But this is difficult in a small island transporting storing goods or the logistics insurance business. What, you know, taking positions on risk, ensuring our insuring against risk fund management business, very big in the BVI financing or leasing business headquarters business. So just by way of comparison. So St Lucia has head office provisions in their offshore law, but that has been blunted because of these requirements. So I had offices more or less saying, oh right, it’s similar to a family office. You have, you have a multinational business and you want to take advantage of tax neutrality. You redo my salary headquarters, excuse me, you read almost out the headquarters to St. Lucia or VVA, but now because of the EUS push, and when you see the BEPS project, you have to demonstrate, I, I, on all three of those tests, that they have some connection to the jurisdiction shipping business and intellectual property business as well are part of consideration for the core income-generating activities. Other types of business are outside of the scope of the economic substance legislation. And typically you could have some leeway there.
Now it, sorry, in terms of just thinking about trends because with economic substance, and as you mentioned, no, you know, it’s, it’s not just manpower, but of the, I guess, with the skills, knowledge, and abilities to perform the functions that, that, that entity is expected to perform. And then I guess implicit in that too, would be office spaces, right? So perhaps gone will be the gateway, we’ll see just one office where 10,000 companies or whatever, right. It will be, you know, they need to have real office space. So, and given these space restrictions, because, you know, the BVI isn’t very big and, you know, population constraints as well. How do you see substance rules really affect in the BVI in the long run? I, you know, from our experience, I think some people they’re aware of it, but they’re not quite taking it as seriously as should as yet. But once it really kicks in is, you know, is that model sustainable, that offshore company model sustainable in a BVI then is, has these restrictions in terms of size and a number of people available?
Well, I think that’s not that answer requires a bit of philosophical reflection in terms of the trends. We can only go on what is reported and from your always experience, as it always has HTG attacks. And with all our local partners on island, there hasn’t been a donor to it. And in corporations, what we have seen is more or less careful structuring off business activities, and a very careful please sing off directors, local and otherwise shareholders, local and otherwise, and a sort of balancing act between the core income-generating activities and being willing.I think in the last cost client we dealt with, they were willing to comply with the economic substance requirements because of your tax neutrality benefit. So to answer your question in the short term, we haven’t seen, or I haven’t seen a blunting of interest in, in BVI companies simply because the BVI, it that’s, the international tax authority has been very receptive and very one would see professional in dealing with economic substance filings call and compliance procedures. One has to recall that economic substance doesn’t just exist by itself, but it’s also tied to the whole concept of beneficial. I don’t know if we have any questions on beneficial ownership, but the whole concept of the boss system that BVI has sub sword and boss system stands for the beneficial ownership secure search system. And that came in around more or less at the same time that the economic substance rules came in. And that simply means that the beneficial owners of any entity registered into VVA has to be shared with the registered agent and held on a secure stored system. So what that means practically is you set up a company to do X or Y the beneficial ownership information was to secure system. And I think this sort of assurances that the government or the BVI have given at the start of investment into their own security systems, are you always noticed that the data reaches not from, it’s never from the government side, it’s, it’s always from the service providers side, that, that aside, that there isn’t much to be said that they asked me to donate to and in business the long-term effects, however, especially as things like the pillar, two requirements coming in and the ever shifting regulatory, the ever shifting regulatory landscape, internationally, those things I believe could blunt or lessen the momentum that’d be VA has. Now, I’m not seeing that things are rosy because I’m sure you and I could do it some more business and all local partners can do it some more business, but all things considered pandemic be what it is. Things are progressing smoothly. Yes.
Okay. That’s, that’s fantastic. Now, in terms of that boss system, that reg registry of beneficial owners, is it like, like in Singapore, there’s a big file system. Anyone can just log in and see your company’s house in the UK. Anyone can just see when the directors and shareholders are, is it like completely, completely open access or are there like certain conditions for accessing such a sensitive registry?
Absolutely not. And I think, I think it’s at this point, I, and forgive me for my enemy, Sean, because this is something that is plaguing. I mean, I am, I practice across the Eastern Caribbean and advis across St. Lucia St. Vincent and St. Kitts and Nevis, the British Virgin islands, and then Willow. And the difficulty that I think most persons have is that offshore company is not a bad word. I think this is something we’ve spoken about on our previous previous calls and something that we get very ex exercised the about the boss system and the Ari, a registered agents system is not available for inspection by the general public only designated persons could search your boss system. Andrew registered he’d been system. And those designated persons are usually puts them excluded with some sort of state authority. So for example, if there is a request and there’s recent, very recent case law on what is actually remit of a reasonable request in the BVI, I think are two lines of keys. So there is the fryer top line of Friday talk line of case law and the compass star line of cases. Those are available for public reading on the Eastern Caribbean and the Supreme court website. That being said, maybe if I step back a little bit and sort of explain the, the steps, right? So under the boss system, the registered agent and a registered agent for general knowledge is the actual law on the ground party that is responsible for the formation of the business company. Now, do you have to take certain prescribing information, right? So for example, your beneficial ownership information, copies of your ID, your utilities, et cetera, and all of those registered agents. And there are a few hundred registered agents, I believe. Yes, it’s a few hundred. No, I think I may be wrong. Maybe, maybe about a hundred registered regions. All of those Ari databases are connected to the boss system, right? And under the boss legislation ordinary, a designated person could actually search by name of an individual or name of the corporate or legal entity. The results of any of any search would be available within roughly. Let’s see, I think 10 to 15 days, unless the request is urgent. If you guys as Birgit, I think you pay an extra fee and you’re getting back the information. And also, but the person could request that is only law enforcement or somewhat authority that is specified by the legislation. So I request for the search of the boss could come from somebody from the financial investigation agency, audio to attorney General’s chambers. And that request has to be proportionate and it must be certified. So it has to be what prop one law for Alexis says, are you requesting a BVI authorities powers or in response to a request from the FIU or the financial intelligence unit or UK. And that was set up since 2016. And if you look at friar tuck and COMPAS star doors, two key is this deal exactly what hole that request should be dealt with on what should be specified in the request. So this, this thing about, or, or publicly accessible registers, et cetera, as it is in the UK. And there’s a very senior attorney in the Bouvier who was written extensively on publicly accessible registers and, and the challenges and hurdles that United Kingdom itself has feast versus the brand spanking new systems in pleased in the BVI. So to answer your question in sub no, it’s not open to the general public and yes, it’s available, but on request to the relevant authorities.
Okay, fantastic. So no fishing expeditions. Okay.
The next, if they could go to get a yatch which I think we’re well overdue for.
All right. So moving on to another popular topic, virtual currencies, crypto, there’s a new virtual asset law, I believe. Can you talk a bit about that?
All right. So every year in the legislature of the BVI, there’s something called we through in speech and all that through, into speed set, sold the legislative aims of the BVI for that particular year. So take for instance, no, that’s not to say that the legislature is bound to that through in speech. Take, for instance, when the black Swan injunctions were reversed by the court of appeal, you know, within a couple of months, the legislator met and amended Eastern Caribbean Supreme court act allowing for putting statutory rules in place to allow for freezing orders and all sorts of injunctions in support of foreign proceedings mandated that 70 to came on.But in this strewn speech, the governor set up the legislative agenda for 2022. And in one of those things, and that’s sort of caused a lot of excitement in the crypto community was the prospect of a virtual assets law. No, we don’t know what that looks like as yet. Could it go the route of the other islands in the Eastern Caribbean? So for example, in Antigua, I think since it’s a nevus and a few others, there’s actually a lot called the virtual assets bill or the virtual assets act, which requires companies or individuals engaging in virtual assets or crypto coins, tall cans, what have you to be registered and licensed and PFE, but that hasn’t, we don’t know what that looks like as yet.And so equally looking forward for a draft of that to come out soon. So search more or less horizon scanning. Well, what has happened is that the, I think irregularly into just getting the name quickly, the British Virgin islands, financial services commission published some guidance in 2020 on regulation of virtual assets in the Virgin islands. So the guidance more or less says, look, this thing is complex because there’s so many variations on a particular theme. There’s so many variations on where it is. You have a token and you stick in your miner, you want to attribute whatever the result of the mining activity is to the company. What have you it’s complex? Right. So the current existing legal framework in the BVI provide for regulation on, in one of two years, I had a first at the initial issue. Our second, when that asset is actually in the hands of the holder or the subject of an investment activity. Now those last towards a very key investment activity. So let’s look at the first one. So things like virtual assets, virtual asset related products use to pay for goods, to pay for goods and services, server settings, for example, tokens or utility tokens, which you could use to get goods and services. Those aren’t captured by the current suite of financial services, languages lesion in the BVI, but where the virtual asset product already virtual assets service goes beyond a medium of just exchange, but in, into things such as investment activity, then it could be captured on the securities investment business act. So what I think the key thing for persons who, how BVI business companies are engaging in things virtually is actually look at the business model. What exactly is happening, who is issuing, what is it being used for? And then getting specialist legal advice on that to determine whether or not some sort of license should be applied for, to the BVI FSC.
Yeah, it is. It is. I mean, not just the Movio, but I think many jurisdictions right now are looking at that whole space, that whole virtual assets space. And I think there’s only one direction, which is increasing regulation. So I think this, this is to be expected and it’s good that BVI, the BVI is being proactive. I mean, yeah,
There was a recent judgment, I think, middle of last year from justice Jack, you name it skips not just as, Walbank sorry, where Crip tool was recognized as property. No, this builds, I think we have an article on that on our website. And I think we could maybe post that as a link when this is published both on the website and not on YouTube, but we, we, we discussed how the, the attitude off courts around the Commonwealth and around the world is towards crypto. It, it fulfills most of the issue for property and there was a very influential publication done here in the UK about it. And it, that publication is, is, has been stated and recited almost ad infinitum throughout the Commonwealth in particular as, you know, common law rules would apply. Yeah.
Okay. Thanks for that. And last question, before we see if there’s any more from, from those who’ve logged in is about banking and, and again, not picking on a BVI because I think banking is a challenge in almost every jurisdiction in the world right now, but for those would be I companies they’re finding it increasingly difficult to open a corresponding bank account. Can you comment on that?
Well, I think, postal experience, I, I always very and put a tombstone on my previous banking experience cause I was a banker for a brief moment in time in St. Vincent and in the UK briefly very briefly, but that landscape has changed. That was well over 10 years ago. And the banking landscape now is entirely different to the banking landscape 10 years ago. I would say I would, I would answer starting with the company law perspective. Now the company loss perspective is that there’s no requirement for a BVI company to hold a bank account in the BVI. Yes. So you can open your account in the jurisdiction where you’ve reported or business, or that could ease your KYC burden somewhat. It could. And then because then there’s no exchange control legislation in the BVI as well. That doesn’t tie you to a particular currency. Now the particular currency or the currency of usage in the BVI is a United States dollar. Right. But would it be VA company? You could have CHF, you know, Singapore dollar, Australian dollar, just Frank w what have you, the difficulty comes in because of the reputational issues? No, not reputational issues in that. The BVI is a junk jurisdiction, no matter what some left-leaning newspapers would have you think. And I said, that’s another kind of seat Triton. What the challenges from banking could be alleviated in many ways, you need to have a responsive registered agent. Yes. Because your registered agent would be the one responsible for getting your certificate of incumbency, get your stuff a POS style from the local authority, et cetera. Now, if you have a responsive, registered agent, what I have found is that the banks are able to see, okay, there’s responsiveness at Dorma sale point. And if you have a BVI company with some, with some history behind it, and you could show that you’re complying with your economic substance requirements, et cetera, and at Ford, it eases your KYC. Borden doesn’t mean that you don’t present as some bankers call it a red flag. It doesn’t mean that you don’t present a red flag, but the challenges presented to you at ease somewhat. So ensure that your registered agent is responsive. And I think in terms of pushing back against the compliance, did the faceless and nameless compliance departments in the banks, you have to make clear, look at tax neutral. Jurisdiction is quite different from a jurisdiction used by individuals or companies who want to hide income and assets from tax and other jurisdictions. And that is where I think each TJ tax comes in because of a joined up approach that we, that we take. We, we, we, we sort of show clients that look, the way that tax is going right now is that you’re going to have to pay something you got, you’re going to have to repeat something. Yes. But that’s something has to be proportionate. And that the use of a tax neutral company really is no longer a pure tax planning tool, but one of operations, our management. So for example, your management or your corporate governance, because your directors and shareholders, there’s no, there’s no residency requirements. You could have your meetings virtually very key and very topical in COVID-19 your, the execution of resolutions, et cetera, does require notarization. So you can electronically sign doors, right? There’s also data protection legislation in force in the BVI. So you could have, you know, your, your, your servers in Singapore, but they are air gapped there, secure, et cetera. So the modes of your corporate governance, et cetera, is no, almost virtual. So BVI has been doing remote and virtual since almost the inception because directors and shareholders generally don’t want to live in the BVI. Yeah. So there’s a range of things that discerning investors are discerning competently incorporators can push back with, but it’s dependent on the team who advises you. And I don’t know if there’s a question about the use of BVI professionals or whatnot, any questions coming came in about that.
But, you know, before we go on, yes, actually, yeah. Someone did ask, but before, before that, you know, they are, I mean, there are other islands as well, and we have client banking solution and Barbados, and he is, he’s comfortable with that. And then in the U S as well for, especially if you’re a US client and with the challenger banks in the US you know, I don’t want to advertise any of them, but they, they tend to be a bit more open-minded than traditional brick and mortar banks, maybe. I mean, still very diligent with their AML KYC processes, but they’re not as discouraging as some of the brick and mortar banks,
Maybe just that just set off a little in my brain functions. Cause that’s been very topical over the past week. But until those functions, no, we explained earlier what the BVI is, are UK overseas territory. So because of that, to general, whatever the general sanctions rules are in the UK, the rule of thumb is, is that it will be extended to the overseas territories as well. So whatever opt-ins in the UK for sanctions, BVI companies, et cetera, must once comply with that.
Okay. Fantastic. Thanks for that. And last but not least, can you comment on the need to use qualified experience, vetted professionals and processing would it be the BVI?
Okay. Well, I mean, firstly, in terms of advice, any sort of legal advice, now there’s a new law. Well, when I say new, but in terms of implementation, because there’s been a lot of litigation, primarily around costs in litigation, there’s been a lot of litigation about that, but I think the general principle of the law that governs lawyers in the BVI is that they must be admitted. So any form of advice, et cetera, if you’re not admitted to the BVI bar and with the current practicing certificate, I think the position is that you’d be unlawfully practicing BVI law. So you need to have somebody who is qualified appropriately qualified and has a current practicing certificate. Yeah. What this is especially painful when it comes to litigation because there are some cases as a lane of key, it’s like, especially from 2017 down some Russian cases, ironically, a boat, foreign lawyers, not going, we say foreign, meaning lawyers not admitted to the BVI bar, not being able to recoup their costs. And these costs run into the, sometimes the hundreds of thousands of us dollars. So it’s very important that whatever BVI advice you take, that the person who ultimately gives you that advice and ultimately signs off on that is BVI qualified.
Okay. Well, wonderful. So I think that’s it as we’ve coming to the close of one hour, I appreciate your time. You know, you’re very, very busy right now with other commitments and other matters. So yeah, thanks again. And for those who are still online, please know that you can access copies of recordings of what we here today and HTJ.tax as well as on YouTube, SoundCloud, Spotify, iTunes, Amazon, basically wherever you can get your podcasts, this will be available for you. And we do this every week. I need you to attack. So please feel free to RSVP to any topic that is of interest to you, Mikhail, thank you for your time. And we’ll say, okay. All right, take care. Okay. Bye-bye.
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For the purposes of this section, charitable trust” means a trust for exclusively charitable expenses.
-designated person” means
- a legal practitioner practicing in the Territory;
- an accountant practicing in the Territory who qualifies as an auditor for the purposes of the Regulatory Code, 2009 or any financial services legislation;
- a licensee under the Banks and Trust Companies Act, 1990;
- a private trust company within the meaning of paragraph 1 of Part I of the Schedule to the Financial Services (exemption) Regulations, 2007; or
such other person as the Minister of Finance may by Order published in the Gazette, designate; and “rule against trusts or powers of excessive duration” includes, but without limitation,
- the rule known as the rule against inalienability, sometimes referred to as the rule against perpetual trusts and so far as not embraced within paragraph (a),
- any rule prohibiting a trust under which trust property would, apart fro1n the rule, be inalienable beyond a permissible period, and
- any rule prohibiting a trust or power under which trust property would, apart fro1n the rule, be capable of application for a purpose beyond a permissible
- A person may create a valid trust for any purpose or purposes if the conditions set out in subsection (3) are satisfied.
- The conditions referred to in subsection (2) are
- the purpose or purposes are specific, reasonable and possible;
- the purpose or purposes are not immoral, contrary to public policy or unlawful;
- at least one trustee of the trust is a designated person;
- the trust instrument appoints a person as enforcer of the trust, and provides for the appointment of another enforcer on any occasion on which there is no enforcer, or no enforcer able and willing to act;
- The enforcer appointed by the trust instrument is a party to the trust instrument or gives his consent in writing, addressed to the trustee who is a designated person, to act as an enforcer of the trust.
- In this section a trust for a purpose or purposes that satisfies the conditions in subsection (3), not being a charitable trust, is referred to as a “purpose trust”.
- No rule against trusts or powers of excessive duration shall apply to a purpose trust.
- Nothing in this section shall operate to invalidate a trust which, apart from this section, would be a valid
- Nothing in this section affects the law with respect to charitable trusts and, in particular, nothing in this section shall affect the ability of the Attorney General to enforce a charitable trust.
- Without prejudice to subsections (6) and (7), any purported appointment of an enforcer of a charitable trust shall be of no effect.
- The Court may, whenever it is expedient to appoint an enforcer of a purpose trust and it is found inexpedient so to do without the assistance of the Court, make an order appointing an enforcer either to fill a vacancy or in substitution for the existing enforcer.
( I0) Where a trustee of a purpose trust who is a designated person has reason to believe that there is no enforcer of the trust, or no enforcer able and willing to act, and that no enforcer is likely in
In the immediate future to be appointed, that trustee shall as soon as practicable inform the Attorney General in writing of the fact and send him a copy of the instrument creating the trust.
On being informed under subsection
(10), the Attorney General shall. with all reasonable speed but in any event within ninety
says, apply to the Court for the appointment of an enforcer made subsection
(9). were any costs are incurred by the Attorney General in connection with any application under subsection
(11), the Court may make such an order as it considers just as to the payment of those costs out of the assets of the trust. were a designated person fails to comply with subsection (10) then subject to subsection (14), the designated person commits an offense and is liable on summary conviction to a fine not exceeding five thousand dollars.
– It shall be a defense to a charge of committing an offense under subsection (13) to prove that the designated person took all reasonable steps and exercised all due diligence to avoid committing the offense. Trustee of a purpose trust shall provide the enforcer of the trust with the accounts of the trust;
- b) copies of the trust instrument and of deeds and other written instruments executed pursuant to the trust instrument;
cl legal and other professional advice received by the trustees; and
- d) such, if any, other documents and information as the trust instrument requires to be
- The instrument declaring or evidencing a purpose trust may, but need not, do any of the following:
- specify an event or date upon the happening or occurrence of which the trust ceases to be a purpose trust;
- provide for the disposition of assets of the trust when the trust ceases to be a purpose trust; or
- provide that, for so long as the trust is a purpose trust, the trustees owe no duty
- to any persons entitled to such assets when the trust ceases to be a purpose trust, or
- in relation to any purposes for which such assets are then to be
- An enforcer of a trust appointed in accordance with the provisions of this section shall have both the power and the duty of enforcing
- A person may not be or become a trustee of a purpose trust while he is the enforcer of that trust.
- Where any of the persons specified in subsection (20) has reason to believe that no trustee of a purpose trust is a designated person or that no designated person is likely in the immediate future to be appointed as a trustee pursuant to the terms of the trust instrument, that person shall use all reasonable endeavors to secure the appointment of a designated person as a trustee of the trust and if such endeavors fail to result in such an appointment he shall make an application to the Court for the appointment of a designated person pursuant to the provisions of subsection (21).
- The persons referred to in subsection (19) are
- any trustee of the trust who is not a designated person;
- the enforcer of the
c2·1) If, at any time following its creation, a purpose trust does not have at least one trustee who is a designated person, on the application in relation to the trust by any of the following persons:
- the settlor, unless the trust instrument provides otherwise;
- any existing trustee of the trust;
- the enforcer of the trust; or
- the Attorney General,
Court shall make an order appointing a designated person as trustee of the trust. An application in relation to a purpose trust by any person appointed by the instrument declaring or condemning the trust for the purposes of this subsection;
- the settlor, unless the trust instrument provides otherwise;
a trustee of the trust; or
The enforcer of the trust, Court may in such manner as it thinks fit vary any of the purpose of the trust, or enlarge or otherwise vary any of the trustees or other provisions of the trust.
exercising the powers conferred upon it by subsection (22),
Court shall have regard to such factors as the Court thinks material which may include
- such changes in circumstances since the trust was created as are in the opinion of the Court relevant and
- such factors and proposals as are set out in the application.
The changes in circumstances referred to in subsection (23)(a)
may include the fact that the execution of the trust in accordance
With its terms has become in whole or in part
- a) impossible or impracticable;
- b) unlawful or contrary to public policy; or
- c) obsolete in that, by reason of changed circumstances, it fails
to achieve the intention of the settlor and the spirit of the gift.
If any costs are incurred in connection with an application under subsection (22), the Court may make such an order as it considers just as to payment of those costs, including payment out of the property of the trust.
Where any costs are incurred by the enforcer of a trust in connection with enforcement, the Court may make such an order as it considers just as to payment of those costs, including payment out of the property of the trust.
- For the purposes of section 203 of the Criminal Code, 1997 property held upon the trusts of a purpose trust shall be regarded, as against the trustee and as against the enforcer of the trust, as belonging to others, and an intention on the part of any such person to defeat the trust shall be regarded as an intention to deprive others of their property.
- The trustee of a purpose trust who is a designated person shall keep in the Territory a documentary record of
- the terms of the trust;
- the identity of any other trustees and the enforcer of the trust;
- all settlements of the property upon the trust and the identity of settlors;
- the accounts of the trust; and
- all distributions or applications of the trust property.
- This section shall only apply to trusts created on or after the date on which this section comes into force.
A purpose trust takes on added potency when combined with the BVJ’s Virgin Islands Special Trust Act (VISTA) legislation, which in essence delegates the trustee’s powers and duties as regards the investment and management to the directors of an underlying BVI company, which in turn holds the various assets of the trust fund. The trustee is not permitted to intervene, except in certain limited circumstances. The trust instrument can also specify as to how the trustee should exercise its shareholder powers to appoint or remove directors of the underlying BVI company.
Aside .from its traditional use in supporting purposes that are not recognized as charitable, we these days see BVI purpose trusts being commonly used.for:
- commercial orphan vehicles for example, to hold investors’ funds following the ‘windup of a commercial fund.
- Unusual commercial transactions –,for example, to hold a new cryptocurrency.
- Family structuring – a family may incorporate a Private Trust Company ( PTC) to act as trustee of various family use a VISTA purpose trust with a corporate trust company as trustee to hold the PTC’s shares, rather than having an individual hold the shares which may raise onshore tax and successLon concerns.
BVI levies no tax on trusts whether they be for purposes or beneficiaries every new trust instrument, or instrument changing the governing law of already existing trust to the BVI, needs affixed to the BVI postage in the current turn of US$200 .for then to be pleaded or given incidence or admitted to be good, useful or available in law or equity in proceedings.
Although the above legislation covers only non-charitable purpose trusts, BVI also has a strong charitable trust regime.