British Virgin Islands

Mitigation of Risks of Sanctions and other Violations by Directors, Trustees and Beneficiaries

Scrutiny on offshore transactions and their participants is at an all-time high. Through an ever growing number of regulations and laws, parties to transactions and third party providers from banks to corporate service providers are required to gather and, in some circumstances, share information with governments and regulatory authorities.     For the underlying officers and entities as well as the providers, breach of these regulations and laws attract scrutiny, can spark out-of-proportion penalties and – maybe worst of all – potential severing of business services, suspension of licences, or freezing of assets and accounts, while things are sorted out.  For everyone involved there is also reputational risk.  We attempt below to draw attention to what can be done on a proactive basis to reduce risk.  This piece is not exhaustive because specific facts and circumstances can change things radically, so please contact us for specific advice before taking the leap on some of these recommendations. Dealing with sanctions breaches, we highlight the increasing scope and breadth of the directives, laws and regulations that have extended the sanctioned or restricted parties involved to include service providers such as trustees and corporate services providers.  Further it is increasingly common to use the word “connected” in reference to the transaction(s).  This is very broad and seemingly catches any reasonably involved party to a transaction.  Strict accountability is assumed at the outset with little wriggle room for mitigating circumstances.  Sanctions transactions and sanctioned parties can be particularly hard to keep track of given the sheer volume and frequency of additions and changes. Given these complicating factors, we recommend pro-active action by trustees, directors, and counterparties. The ability to provide rationale and compliance can make

Winding up BVI companies following the reform of the BCA

The British Virgin Islands (BVI) is a popular jurisdiction for establishing companies due to its favourable tax and regulatory environment. However, there are instances when a BVI company is no longer needed, and the decision must be made to either strike it off or initiate a voluntary liquidation. This article aims to shed light on the recent reform in BVI company regulations, highlighting its significance, potential impact, and the consequences of ignoring these changes.

Why is this new reform important?

The new reform in BVI company regulations introduced crucial changes that affect the process of striking off or liquidating a BVI company. Previously, a company struck off the BVI register would remain in a suspended state for seven years before automatic dissolution. However, effective 1 January 2023, companies failing to pay their licence fees can now be struck off and dissolved after a notice period of up to 90 days. This revision streamlines the dissolution process and eliminates the prolonged waiting period.

Impact on stakeholders

The reform has significant implications for various stakeholders, including BVI company owners, directors, and creditors. Voluntary liquidation is now considered the recommended method for closing a BVI company, as strike off and dissolution can leave the company in a vulnerable state during the waiting period. By opting for voluntary liquidation, stakeholders can ensure a formal and secure closure of the company, protecting their rights and interests.

Consequences of ignoring the reform

Failure to comply with the new regulations can have severe consequences for companies that choose to ignore them. If a dissolved company had remaining assets at the time of dissolution, those assets may be vested in the Crown authority (the BVI state). To reclaim rights to the assets, a formal application must be submitted to the BVI court within five years. Ignoring the reform puts the company’s assets at risk and may lead to potential loss and legal complications.

Furthermore, disregarding the new regulations can hinder the company’s ability to conduct business or defend itself against legal actions during the suspension period. This lack of legal standing can have adverse effects on the company’s reputation, financial stability, and ability to engage in future business activities.

Conclusion

The recent reform in BVI company regulations emphasises the importance of opting for voluntary liquidation over strike off and dissolution. By adhering to the revised process, stakeholders can ensure a secure closure of their BVI company, protect their assets, and avoid potential legal complications.

Ignoring these changes not only jeopardises the company’s assets but also exposes it to reputational damage and limited legal standing. It is crucial for BVI company owners and directors to stay informed and act in accordance with the new regulations to safeguard their interests and ensure a smooth transition out of their BVI company.

BVI Business Companies Annual Financial Return (AFR) – a guide

As noted in our previous updater, amendments to the BVI Business Companies Act (Revised) came into force on 1 January 2023 introducing the requirement for BVI companies to file an annual financial return (AFR) with their registered agent. The BVI Business Companies (Financial Return) Order, 2023 (the Order) enacted in March, details (1) the form of the AFR, (2) the due and filing dates, and (3) entities exempted from filing the AFR.

We provide a comprehensive guide to the AFR requirements and what BVI companies need to know in order to be ready to prepare their AFR.

Reminder: Changes to Strike off Regime and Restoration Process in BVI – Transitional period ends 30 June 2023

The BVI Business Companies (Amendment) Act introduced changes to the strike off regime and restoration process that may impact your BVI company. Specifically, these changes affect BVI companies that were struck off after 1 July 2016 and before 1 January 2023, and that have not yet been dissolved.

If you have any such existing struck off companies that you may need to restore, it is recommended that you take action now to avoid the costly, complicated, and potentially lengthy process of restoration through a Court application.