The BVI Business Companies Act is the principal statute of the British Virgin Islands relating
to British Virgin Islands company law, regulating both offshore companies and local companies.
It replaced the extremely popular and highly successful International Business Companies
Act.
It came into force on 1 January 2005.
The decision to replace the International Business Companies Act was driven by two things.
Firstly, there was a general perception that the older legislation was becoming a bit dated,
and needed modernising.
Secondly, the OECD and other multinational organisations had expressed concerns about
ring-fenced tax regimes in tax havens, such as that under the older legislation and were
putting jurisdictions under pressure to repeal them.
The British Virgin Islands Financial Services Commission dealt with both issues in a single
legislative swoop.
The BVI Business Companies Act is actually based upon a New Zealand statute.
Conscious of how widely the earlier legislation had been copied by other tax havens, the BVI
Business Companies Act was drafted with a large number of forms and procedures which
specifically tied it into the Territory's regulatory structure, thereby making it much
harder to simply copy and enact.
Name The name of the statute actually commences
with "BVI".
That statute is often mistakenly referred to as simply the "Business Companies Act"
due to a common misinterpretation that the "BVI" is a description of the jurisdiction
of enactment rather than actually part of the name.
The letters BVI were deliberately inserted as part of the branding exercise, and it was
hoped that companies formed under the new legislations would be referred to as "BVIBCs".
This would neatly merge the common acronym under the old legislation and the common reference
used in Hong Kong, the which has the largest geographical concentration of British Virgin
Island companies.
Ultimately the phrase "BVIBCs" proved to be too much of a mouthful, and in the offshore
financial industry, it is more usual to refer to entities formed under the Act as "BCs",
or simply "BVI companies".
Features
The Act contains a number of specific features which are designed to make the British Virgin
Islands more attractive as an offshore financial centre.
These include: considerably restricting the requirement for
corporate benefit abolishing financial assistance in relation
to company shares abolishing the concept of a share capital
in relation to company shares removing restrictions in relation to the declaration
of dividends increasing the types of company that can be
formed modernising the regime for registration of
security interests the Act introduces statutory minority shareholder
protections companies are no longer required to have a
stated corporate object, thereby obviating a number of difficulties relating to ultra
vires and director's duties.
Transitional arrangements The intention of the legislation was to eventually
consolidate all Britith Virgin Islands company law into a single statute.
Prior to the BVI Business Companies Act coming into force, it was possible to incorporate
a company under two different statutes: the International Business Companies Act and the
Companies Act.
After the BVI Business Companies Act came into force on 1 January 2005, it was possible
to incorporate a company under any of the three statutes.
It was also possible for a company which had been originally incorporated under the International
Business Companies Act or the Companies Act to adopt new constitutional documents and
voluntarily re-register under the BVI Business Companies Act.
After 1 January 2006, it was no longer possible to incorporate a company under the International
Business Companies Act or the Companies Act, but companies which had been originally incorporated
under those Acts continued to be regulated by them.
After 1 January 2007, all companies which had been originally incorporated under the
International Business Companies Act were compulsorily re-registered under the BVI Business
Companies Act.
Detailed transitional provisions were enacted in Schedule 2 of the new Act to deal with
discrepancies between the two sets of legislation.
After 1 January 2009, all companies which had been originally incorporated under the
Companies Act were compulsorily re-registered under the BVI Business Companies Act.
Initially it was proposed that this transition date would occur on 1 January 2008, but on
31 December 2007 emergency legislation was passed, pushing it back by a year so that
the transitional provisions set out in Schedule 2 of the Act could be further amended and
modified.
Amendments The Act has already been amended multiple
times in its relatively brief life.
Although some of the amendments relate to fine tuning legislation, and others relate
to introducing new features, a great many other amendments have been necessary to fix
issues brought about by the transitional arrangements.
Registration procedures for security interests have proved particularly difficult to resolve.
Replications Although the predecessor International Business
Companies Act was widely copied by other offshore jurisdictions, it was assumed that the BVI
Business Companies Act would not be similarly replicated, as the architecture of the legislation
integrated it very closely with the systems and procedures of the British Virgin Islands
corporate registry.
However, in 2006 the Isle of Man passed new company act, the Isle of Man Companies Act,
which was nearly a word-for-word copy of the BVI Business Companies Act.
External links BVI FSC legislation library
Article on the BVI Business Companies Act Article comparing BVI Business Companies Act
to International Business Companies Act Article - key features of the BVI Business
Companies Act Video: The Story of the IBC Act
Footnotes