BVI TRUSTS

Some of the features of the new Act are as follows:

• The Act does not apply to BVI trusts generally: it only applies where there is a provision in the trust instrument directing the Act to apply.
• Where the new Act applies, designated shares will be held on “trust to retain” and the trustee’s duty to retain the shares as part of the trust fund will have precedence over any duty to preserve or enhance their value. The trustee will not therefore be liable for the consequences of holding (rather than disposing of) the shares.
• The Act specifies that, subject to any contrary provisions in the trust instrument, unless the trustee is acting on an “intervention call” (as defined in the Act), the trustee may not exercise its voting or other powers so as to interfere in the management or conduct of any business of the company; the management or conduct of the company’s business will be left to those appropriate to deal with it, namely its directors, whose fiduciary duties to the company remain intact, except to the extent that the trustee/shareholder is refrained qua trustee from exercising some of the powers of a shareholder.
• The new statute also provides that the trust instrument may include “office of director rules” specifying how the trustee must exercise its voting powers in relation to appointment, removal and remuneration of directors, and the trustee is generally required to follow these rules. Except in compliance with these rules, the trustee must generally take no steps to procure the appointment or removal of the company’s directors.
• The Act further provides that the trust instrument may specify that the trustee may intervene in the affairs of the company in specified circumstances, ie when required to do so by an “intervention call” by a beneficiary, an object of a discretionary power of appointment, a parent or guardian of either of them, the Attorney General (in relation to charitable trusts), the enforcer (in relation to purpose trusts) or other specified persons.
• The Act specifies that (unless the trust instrument provides otherwise) the trustee is permitted to dispose of designated shares in the management or administration of the trust fund, but can only do so with the consent of the directors of the company (and that of such persons as are specified in the trust instrument).
• The new statute contains provisions enabling beneficiaries, directors and others to apply to the court for enforcement of the terms of the Act and, on the application of a specified person, the court is empowered to authorise the trustee to sell designated shares where retaining them is no longer compatible with the wishes of the settlor.
• The Act is confined to shares in BVI Business Companies and Companies Act companies.
• The trustee of a VISTA trust must be a company which holds a licence to undertake trust business under the Banks and Trust Companies Act, 1990.

The Trustee (Amendment) Act makes a number of amendments to the BVI Trust law. These include: new regulations improving the BVI's purpose trusts regime and some amendments in relation to conflicts of laws provisions, including robust, comprehensive and carefully crafted provisions protecting BVI trusts (and dispositions to their trustees) against “forced heirship” claims.

The Property (Miscellaneous Provisions) Act provides that deeds executed by individuals no longer need to be sealed.

In July, 2005, the BVI said it would amend its trusts legislation so that special trust vehicles can hold shares in private trust companies (PTCs), thus broadening the appeal of the vehicles.

According to Robert Mathavious, Managing Director and Chief Executive Officer of the BVI Financial Services Commission, speaking in November 2006, the legislation has been introduced by amending the Financial Services Commission Act and issuing a new Regulatory Code under that Act which enables certain categories of companies to apply, on a fast-track basis, for exemptions from the licensing requirements and other provisions of the BVI’s Banks and Trust Companies Act.

The changes were applauded by the Society of Trust and Estate Practitioners (STEP), which has said that the introduction of the measures would make the BVI a highly attractive jurisdiction to use for the incorporation of private trust companies.

According to the Order issued by the BVI Executive Council, the incorporation fee and annual fee for a private trust company will be:

• where the company is authorised to issue 50,000 shares or less, USD750 instead of the normal fee of USD350
• where the company is authorised to issue more than 50,000 shares, USD1,450 instead of the normal fee of USD1,100. (for changes and any other fees, contact our MTL office in BVI)

The majority of BVI trusts are exempt from all taxes provided there are no beneficiaries resident in the BVI, and that the trust does not conduct any business in the BVI or own any land in the jurisdiction. A trust duty of $100 is imposed on each trust instrument subject to BVI proper law.

The Amendment Act provided for the appointment of a 'protector of trust', effectively a supervisor of the trustee(s), and also managing and custodian trustees.

BVI Trusts are formed under the Trust Ordinance 1961 (based on the English Trustee Act 1925), as updated and amended by the Trustee Amendment Act 1993.

Since the 1993 Act, there is no requirement for registration of trusts in the BVI, and there is no public disclosure of information regarding trusts. Trust duty of $100 is payable on each trust instrument, which is achieved by buying and affixing stamps, creating no record.

Due to the Amendment Act, the regime for trusts in the BVI is very flexible. The following are some of the main features of BVI trust law:

• the proper law of a trust can be specified by the trust instrument; in the absence of a specified jurisdiction, a trust will be under BVI legislation if the trustee or the trust administration is situated in the BVI;
• trusts can migrate into and out of the BVI; but outwards migration is only possible if the 'receiving' jurisdiction recognizes the validity of the trust;
• purpose trusts are permitted in perpetuity and must have at least one BVI trustee (resident professional or equivalent);
• the perpetuity period can be set at 100 years, but 'lives in being' is still possible;
• 'wait and see' provisions are included as standard;
• 'protectors' are explicitly permitted, and their powers are clearly defined;
• forced heirship provisions are excluded;
• trustees may be given wide discretionary investment powers;
• BVI trusts are exempt from all taxation provided that there is no resident beneficiary and no BVI assets.

The establishment of a VISTA trust may be considered seriously in the following circumstances:

1. Where the underlying assets of the trust are to comprise of speculative investments or investments which involve a degree of risk which would otherwise be regarded as inappropriate for the trustees of a non-VISTA trust.
2. When the settlor wishes to retain control, because the trust can generally be structured so that settlor-control can be retained at the director (company) level.
3. When the settlor intends the shares which he wishes to settle on trust and the underlying assets of the company to be retained.
4. Where purpose trusts are needed for securisations and off-balance sheet transactions.
5. When trustee involvement in the underlying company’s affairs is undesirable or inappropriate.

Note: For establishment of a Trust see your BVI Registered Agent/Representative for requirements, fees and required due diligence information.