The British Virgin Islands International Business Company. As stated above, many foreign jurisdictions have taken the International Business Companies (IBC) Act of the British Virgin Islands (BVI) and adopted it with hardly any change. For this reason the BVI’s laws are the “gold standard” in IBC legislation. As such, this outline will cover some of the particulars of the BVI IBC law.
History of the IBC in the BVI. The BVI Business Companies Act, 2004 (as amended, the Act), is the sole corporate statute in the British Virgin Islands (“BVI”) and regulates all BVI companies. The old International Business Companies Act, 1984 (the IBC Act) was repealed on 1 January 2007.
Restrictions, Incorporation, Requirements, and other Characteristics of an IBC.
Restrictions. Some of the IBC restrictions are as follows:
- No IBC business may be transacted with residents in the BVI;
- No ownership interest in BVI real property is permitted through an IBC;
- Real property may be leased by the IBC for office use only;
- Banking, trust company, insurance, and reinsurance business may be transacted only if the appropriate licenses are obtained by the IBC;
- Engaging in the business of company management or providing registered facilities for BVI incorporated companies is not permitted.
Incorporation and amendments. The requirements for incorporating an IBC or amending its governing documents are as follows:
- Process of incorporation. An application for incorporation can only be made by a licensed registered agent; to incorporate a company the Memorandum of Association and Articles of Association signed by the registered agent must be filed with the Registrar of Corporate Affairs; certain points must be stated in the Memorandum and Articles, such as: (i) The name and type of company; (ii) The name and address of its first registered agent; (iii) Companies authorized to issue shares must state the maximum number of shares that can be issued or that the company is authorized to issue an unlimited number of shares (it should be noted that there is no longer a concept of authorized share capital); (iv) Companies limited by guarantee must specify the amount which a guarantee member must contribute to the assets on liquidation; and (v) There is no requirement to state the objects or purposes of the IBC in the Memorandum (thus, the ultra vires doctrine may be essentially abrogated); unless it is a restricted purposes company, in which case it must state the purposes for which it is incorporated;
- Timing. Normally, the IBC incorporation process takes no longer than a couple days; however, for banks, trust companies, insurers, and re-insurers the process can take much longer (such process is beyond the scope of this outline).
- Amendment. The Memorandum and Articles may be amended by the Members or Directors; A vote of the majority of those entitled to vote is required to make an amendment, unless the original Memorandum and Articles require something greater than a majority vote; A notice of amendment or a restated Memorandum or Articles must be filed with the Registrar and take effect immediately upon filing;
Requirements and characteristics. Some of the IBC requirements and characteristics are as follows:
- Only one director is required, and the director(s) can delegate most powers to committees of directors but certain important powers cannot be delegated to committees
- (e.g. the power to amend the Memorandum or Articles, the power to appoint and remove agents, and the power to appoint and remove directors);
- Only one member is required;
- Members, directors and officers need not be residents of the BVI and there are no other restrictions as to their nationality;
- Capitalization requirements
- There is no minimum capital requirement; shares may be either registered or bearer and may be issued in any currency; however, any bearer shares now have to be deposited with an authorized intermediary, who must record the identity of the beneficial owner;
- Incorporation fees
- As an example, statutory incorporation fees for an IBC might be based on the company’s authorized share capital as follows: (i) No authorized capital – $350 fee; (ii) Up to $50,000 of authorized capital – $350 fee; (iii) Over $50,000 of authorized capital – $1,100 fee; and (iv) Companies with bearer shares deposited with an authorized intermediary, as discussed above, may pay higher fees; and
- Accounts need not be kept; however, if accounts are kept there is no audit requirement;
- Member and director meetings
- Member and director meetings need not be held in the BVI; Member and director meetings can be held by telephone;
- Documents kept by the registered agent
- The company must keep certain documents with the registered agent, including: (i) A copy of the memorandum and articles; (ii) The register of members (or a copy of it); (iii) The register of directors (or a copy of it); (iv) Copies of all notices and other documents filed by it with the Registrar in the previous 10 years; and (v) A company is required to have a seal an imprint of which must be kept at the office of the registered agent;
- Public records
- The Memorandum and Articles of Association are the only documents to be made part of the public record;
- IBCs are permitted to own shares in other BVI companies, maintain bank accounts in the jurisdiction and employ the services of local professionals;
- BVI taxes
- IBCs are exempt from BVI taxes by statute;
- Distributions of the company’s assets can only be made if the directors are satisfied on reasonable grounds that the company will immediately after the distribution satisfy the solvency test (i.e. that the value of its assets will exceed its liabilities and it will be able to pay its debts as they fall due);
- A foreign company may redomicile under the BVI Act but only if the laws under which it is otherwise registered authorize it to continue in another jurisdiction. Certain limitations do exist.
The Nevis Limited Liability Company. If the BVI is the “gold standard” in IBC legislation, the laws are Nevis set the standard in offshore LLC legislation. As such, this section will cover some of the particulars of the Nevis Limited Liability Company Ordinance (1995).
Features of the Nevis Offshore LLC.
Taxes. No corporate tax, income tax, withholding tax, stamp tax, asset tax, exchange controls or other fees or taxes are levied on assets or income originating outside of Nevis.
Who can be members? Members may be individuals or business entities of any nationality or domicile; there may be a single member. The operating agreement typically names the members of the LLC which can be natural or corporate persons along with their proportionate interest in the LLC. There are no limitations on the number of members.
Flexibility. A Nevis LLC is a distinct entity created by statute that offers business an alternative to the partnership and corporate forms by combining the corporate advantage of limited liability with the pass-through tax advantage of a partnership. The structure of the Nevis Limited Liability Corporation or LLC is extremely flexible, and is a matter of contract among its members.
Shares and certificates. There are no shares with a Nevis LLC, no bearer share certificates or registered shares. This solves any problems with filing beneficiary owners’ names in public registry or with the registered agent being required to hold the shares.
Records, reports, and privacy. LLC records may be kept anywhere in the world and no annual or other reports are required by the ordinance. Nevis LLCs offer their members full privacy, as there is no public filing requirement regarding member identities.
Titles for managers. In governing the LLC, its members are free to adopt any titles they desire to use. For instance, they may call themselves directors, owners, officers, presidents, vice-presidents, secretaries, etc.
Powers of attorney. The members of an LLC are free to issue powers of attorney to third parties to conduct the affairs of the LLC on its behalf. Generally these powers of attorney should be notarized.
Redomiciliation. Foreign LLCs or other business entities may re-domicile to Nevis, provided they are allowed to do so under the governing law and instruments of the foreign LLC.
Naming the LLC. The name of an LLC must end in one of the following: “Limited Liability Company”, “LLC”, “L.L.C.”, “LC” or “L.C.”; and the name shall not be the same as or deceptively similar to the name of another LLC on file with the Registrar.
Existence. The LLC can have either limited or perpetual existence.
Timing of organization. “Shelf” companies may be available immediately; the formation of an LLC normally takes up to four working days.
Bringing and action against the LLC. Legal judgments obtained against a Nevis LLC in a foreign jurisdiction must be domesticated in Nevis. A creditor can always try to do this or to bring an action in a Nevis court, however this can expensive, time consuming, and often the Nevis court will require the posting of a cash bond equal to an amount of damages that might be experienced by the Nevis LLC should the plaintiff not prevail. Nevis attorneys are not allowed to work on a contingency basis. They must be paid up front.
Bringing an action against the member(s) of an LLC. Members’ interests in a Nevis LLC are protected by the “charging order” protection.