USE OF BUSINESS COMPANIES

On 1 January 2007 the British Virgin Islands Business Companies Act 2004 (the BVI BC Act) became the sole Business Companies Act in the jurisdiction, creating an environment where financial institutions and corporations can undertake a wide range of structured asset and project finance transactions in the BVI. In order to facilitate this, the BVI´s Legislative Council enacted a two–year transition period which would be put in place to smooth the changeover to the new Business Companies Act, which lowered the income tax rate to 0% for both local and International Business Companies and effectively removed the distinction between ´offshore´ and ´onshore´ entities.

The Act requires companies to use a registered agent to ensure compliance with the new laws.

Under the 1984 IBC Act, which preceded the 2004 Business Companies Act, just one corporate form was available, that of the company limited by shares. Under the new regime, several different types of companies can be incorporated. These are:

Likely to remain the most popular form of BVI company. Under the International Business Companies (Amendment) Act 2003, (now the BVI Business Companies Act, 2004) all Business Companies (BCs) located in BVI are required to establish and maintain a Register of Directors, and must appoint their first director within 60 days of the BC–s incorporation. Other statutory requirements however remain minimal, and flexible:

• Only one director and one shareholder are required;
• Shareholders, directors and officers need not be resident in the BVI and there is no stipulation as to their nationality;
• There is no minimum capital requirement; shares may be either registered or bearer and may be issued in any currency (bearer shares now have to be deposited with an authorised intermediary or custodian( as approved and confirmed by the BVI Financial Services Commission), who must record the identity of the beneficial owner);
• Accounts need not be kept; however, if they are kept there is no requirement for an audit;
• No returns are needed of shareholders, directors or officers;
• Shareholders´ and directors´ meetings need not be held in the BVI and can be held by telephone;

A Business Company´s status is granted subject to certain conditions:

• No business may be transacted with residents in the BVI;
• No ownership interest in real property in the BVI is permitted; property may be leased for office use only;
• Banking or trust business may be carried on only if an appropriate license is issued from the Financial Services Commission;
• Likewise, a license is required to carry on insurance or re–insurance business and also mutual fund activities;>
• Engaging in the business of company management or providing registered facilities for BVI incorporated companies is not permitted.

Business Companies are permitted to own shares in other BVI companies, maintain bank accounts in the jurisdiction and can employ the services of local professionals and are exempted from BVI taxes by statute.

It is obligatory to appoint registered agent in the BVI to incorporate a BC (there are about 120 licensed by the Government). Fees for incorporation of a BC are based on the number of shares the company is authorized to issue. Normally, the incorporation process takes no more than one to two business days; however, for banks, trust companies and insurers the process is lengthier as on a case by case basis and also the requirements that are to be met.

Statutory incorporation fees are $350 for shares not exceeding 50,000 and $1,100 thereafter including those that are formed with ability to issue Bearer Shares. The annual license fees are indicated below:

A company limited by guarantee must have a minimum of two members; the Memorandum of Association contains a statement of the amount up to which the members guarantee the company´s debts. The Articles can provide for the members to have differing ´shares´ of the assets and liabilities.

The Company Limited by Guarantee has certain advantages, including that there is no list of members on the annual return, and that control over assets can be achieved without the use of shares; in some jurisdictions, profits realized from such companies are classified as capital gains rather than as income. Companies limited by guarantee can be resident or non-resident, as for those limited by shares. Legal advice is required and recommended by anyone considering the use of a company limited by guarantee.

Companies limited by guarantee (not authorised to issue shares). This corporate form is likely to prove useful for not for profit organisations;

Companies limited by guarantee (authorised to issue shares). This ´hybrid´ type of company provides greater flexibility in structuring transactions, as a result of its combined equity and guarantee membership;

Unlimited companies (authorised to issue shares). This structure provides greater transparency, as it is possible to look through the company to its shareholders; and

Unlimited companies (not authorised to issue shares). This type of company could be used to ensure effective estate planning.

A Business Company can also provide an additional layer of privacy to your business operations. However the benefits which can be gained by use of such entities depends on certain issues including the owner´s objectives, residency or citizenship, as well as the countries in which the BC is doing business.

Note: Midland Trust Limited is NOT in the business of providing tax advice. However, in most cases, we will be able to direct you to professional tax advisors who deal with worldwide tax issues.

WHO CAN MAKE USE OF OFFSHORE COMPANIES?

• Wealthy individuals for asset protection and the avoidance of inheritance and other taxes.
• Owners of ships, yachts, real estate, airplanes etc.
• Owners of trademarks intellectual property.
• Individual selling his/her services outside their country.
• Various professionals including performing artists, entertainers, designers, private developers, architects, authors, investment managers, consultants, brokers, doctors, pilots and others.
• Companies engaged in trading, manufacturing, shipping companies, airline companies, artistic productions, project financing banking, insurance, leasing, film and software development, distribution, construction, hotels and many others.
• Charities, foundations, trusts and funds.

ADVANTAGES OF A BUSINESS COMPANY:

• An Offshore Business Company is a separate corporate vehicle having limited liability.
• Privacy, Asset Protection and Anonymity
• No requirement to disclosure of Directors, Beneficial Owners, Shareholders, Officers´ details to the public.
• Allows the owner total control over their assets in the complete privacy of an Offshore Financial Centre.
• An Offshore BC is fully exempt from tax on its income
• Exemption from all local taxes and stamp duty
• Is fully exempt from inheritance or estate tax on its shares
• No restrictions on transfer of assets, or capital movement
• No exchange controls on currency
• The only government fee is the annual fee of US$350 for standard companies
• A BC can have bank and brokerage accounts anywhere in the world
• Make deposits or maintain accounts with banks worldwide
• Investments and banking and other business, can be conducted under corporate ownership, keeping the names of the shareholders, directors and officers completely private.
• No organizational or annual general meeting requirements
• Have written minutes of meeting
• Prepare or maintain books and records anywhere in the world
• Hold company meetings via telephone and other means of telecommunications
• Hold meetings of its directors or members anywhere worldwide
• Merge or consolidate with foreign entities
• Continuation to / from other jurisdictions
• No audit requirements / no filing of annual Financial Statements
• If accounting is done, books and records can be kept anywhere in the world
• Certificates and documents verification by Company Secretary, Director, Notary, Apostille
• Government does not control the company´s activities
• Can be managed from any place of the world
• Hold shares, debt obligations or other securities in another BC or other company
• Shares may be issued as bearer (only if authorized custodian appointed) or registered.
• No restrictions concerning ownership of shares
• No minimum required share issues
• Shares may be issued in any currency or for consideration other than cash
• Minimum of one director
• Directors/shareholders may authorize amendments on the Company´s Memorandum & Articles of Association after incorporation
• Make or maintain professional contact with solicitors, barristers, accountants, bookkeepers, administration companies, investment advisors or other similar persons carrying on business
• Hold a lease of property for use as an office from which to communicate with members
• Experienced and trustworthy industry professionals.

A BUSINESS COMPANY CAN PERFORM ALL LAWFUL CORPORATE ACTIVITIES EXCEPT:

1. Do business with residents of that jurisdiction
2. Provide registered office or agent facilities for incorporated companies
3. Own an interest in real property apart from limited office leases.

Note: You should check with a lawyer, certified accountant or financial advisor in your country to confirm these legalities in your country. Each country has its own policies.