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industry commentary <strong>The</strong> BVI’s hard-nosed flexibility related securities business, particularly in Asia and Latin America. <strong>The</strong> new BVI BC Act has also had an impact on the <strong>fund</strong>s sector with one of its principal aims being to provide increased choice in the range of corporate vehicles available, thereby adding the advantages of establishing an investment <strong>fund</strong> in the BVI. It has built on the old IBC Act by providing managers with more flexibility, including the ability to utilise Segregated Portfolio Companies and no stated par value shares as standard with no requirements to account for share capital. Other tangible and real improvements relate to the solvency tests for distributions and redemptions, which are now more flexible and straightforward under the BVI Business Companies Act. BVI AND IOSCO In April this year, the British Virgin Islands Financial Services Commission (FSC) was welcomed as an ordinary member of the International Organisation of Securities Commissions (IOSCO). IOSCO’s membership regulates more than 90% of the world’s securities markets in more than 100 jurisdictions. This was widely seen as recognition of the British Virgin Islands’ robust international cooperation framework and its long-standing commitment to comply fully with the standards and requirements as outlined by IOSCO’s Multilateral Memorandum of Understanding concerning Consultation and Cooperation and the Exchange of Information (IOSCO MMOU). In fact, the British Virgin Islands became the first country to be admitted to ordinary membership of IOSCO based on changes made to its legislation, reaffirming its position as one of the most effectively regulated offshore jurisdictions in the world. A MATTER OF TRUSTS Private Trust Companies (PTCs) have become increasingly popular in OFCs in recent times and the BVI enacted special provisions for PTCs earlier this year to further strengthen its trusts and estate planning offer. <strong>The</strong> coming into force of the Virgin Islands Special Trusts Act 2003 (VISTA) and the British Virgin Islands’ Trustee Act 2003 (the Amendment Act), on 1 March 2004 were momentous occasions for the sector and jurisdiction alike. Both are highly innovative and well thought out statutes dealing with a number of important areas of trust law in which reform was long overdue and as such, the last few years have seen considerable use made of the new statutory provisions. To make it easier for trustees to deal with third parties, the British Virgin Islands has also adopted many of the recommendations of the English Trust Law Committee, thus making the British Virgin Islands the jurisdiction of choice when setting up trusts to use in commercial transactions. More significantly still, the VISTA Act created an alternative trust regime which enables special trusts, known as VISTA trusts, to be established. Over the last few years, this VISTA legislation has generated an immense amount of positive international interest and a significant number of VISTA trusts have already been set up. Both VISTA and the Trustee Amendment Acts were based on proposals which were made to the British Virgin Islands government by the British Virgin Islands branch of the Society of Trust and Estate Practitioners (STEP). This demonstrates the close collaboration between government and the private sector in terms of working together to meet the needs of the jurisdiction’s international client base. STEP BVI is now working on further proposals for trust law reform, so watch this space! In addition to this, the Segregated Portfolio Companies legislation has undoubtedly attracted more captive business to the British Virgin Islands. It provides an alternative for organisations with similar businesses and risks to form joint ventures while segregating their respective risks, assets and liabilities. During 2006, a total of 10 SPCs were licensed with 50 segregated portfolios between them. <strong>The</strong> unrestrictive nature of the BVI’s business environment has been another attraction. For example, the BVI do not insist upon the appointment of local directors; annual general meetings do not need to be held in the jurisdiction; and it is not obligatory for the captive to establish on-island bank accounts. All this has combined to make the BVI mature enough as a domicile to have attained credibility with the regulatory bodies around the world, yet young enough to embrace new ideas and solutions. “<strong>The</strong> BVI International Finance Centre has implemented a worldwide programme of roadshows to inform, educate and discuss with the international professional and business communities the opportunities for growth in financial services on offer in the BVI. Through this global programme the story of the BVI has been taken to many of the leading <strong>centre</strong>s for international business.” Sherri Ortiz, BVI IFS PUBLIC/PRIVATE PARTNERS Essential and sound legislation and prudent regulation can only go so far. It is the on-island professionals who do the hard work and provide the necessary expertise on a day-to-day basis. <strong>The</strong> British Virgin Islands is the only Caribbean jurisdiction to boast the presence of all six of the largest offshore law firms in the region. <strong>The</strong> legal profession in the Territory continues to expand and strengthen with a steady influx of lawyers, barristers and solicitors. <strong>The</strong> world’s top accounting and auditing practices are also present in the British Virgin Islands and have been for quite some time. <strong>The</strong>ir professional service offerings include not only the traditional accounting, audit and risk management practices. <strong>The</strong>y include increasingly specialist areas such as forensic accounting, corporate restructuring and insolvency management services, all offered from within the British Virgin Islands. In addition there are, of course, the many leading international trust and corporate service providers who, through their efficient systems, procedures and people, have helped build the British Virgin Islands into the world’s corporate domicile capital. All this growth and success has been supported by the British Virgin Islands International Finance Centre (BVI IFC), which has played a pivotal role in the promotion and marketing of the British Virgin Islands as a leading financial <strong>centre</strong>. <strong>The</strong> British Virgin Islands International Finance Centre has implemented a worldwide programme of road shows to inform, educate, and discuss with the international professional and business communities the opportunities for growth in financial services on offer in the British Virgin Islands. Through this global programme, the story of the British Virgin Islands has been taken to many of the leading <strong>centre</strong>s for international business. <strong>The</strong>se include London, New York, Hong Kong, Singapore, Miami, Geneva, Zurich and Shanghai, keeping the image and branding of the Territory foremost in the minds of its stakeholders. Established in 2002, as part of the Government’s commitment to support the financial services industry in the BVI, the aim of the International Finance Centre is to give a voice to all segments of the finance sector while making sure the Territory retains the unique balance of a sound regulatory framework, an entrepreneurial business community and innovative legislation. As such, the International Finance Centre’s ultimate objective is to protect and uphold the integrity, the reputation and the standing which the British Virgin Islands has earned as a worldclass jurisdiction for the conduct of international business. Continuing to spread the positive and powerful message about the territory’s competitive advantage is the central focus of the British Virgin Islands International Finance Centre. S22 | british virgin islands supplement <strong>hedge</strong> <strong>fund</strong>s review | ctober 2007 www.<strong>hedge</strong><strong>fund</strong>sreview.com
<strong>The</strong> BVI in the blink of an eye POPULATION Approximately 26,000 THE FLAG CAPITAL Road Town, Tortola TIME ZONE Greenwich mean time (GMT) minus 4 hours GEOGRAPHY <strong>The</strong> British Virgin Islands are absolutely georgeous (Ed). <strong>The</strong>y are a series of 60 Caribbean islands, cays and rocks, at 18 degrees latitude and 64 degrees longitude, covering 59.3 square miles, about 100 miles east of Puerto Rico in the Caribbean. Its climate is sub-tropical and it does have the hurricane season as do its Caribbean neighbours. Since at least the seventeenth century, the BVI has been a Crown colony of the UK. <strong>The</strong> BVI refused to join the West Indian Federation and left the colony of the Leeward Islands on 1 July 1956, according to the British Virgin Islands Development Planning Unit (DPU). <strong>The</strong> DPU’s website continues: “<strong>The</strong> islands of the BVI form almost an oval around Tortola, the largest island. Throughout our history, until the 1960’s, the BVI had been virtually subsistent in food production and produced enough for export to neighbouring United States of America Virgin Islands.” POPULATION Approx 26,000 LANGUAGE English. CURRENCY US dollar GDP $972m (2005), forecast to surpass $1bn by 2009. 2005 figure equates to ca. $38,000 per head GOVERNMENT <strong>The</strong> government of the British Virgin Islands is legally a constitutional democracy with the Executive Authority vested in Her Majesty, Queen Elizabeth II because of the colonial relationship with the United Kingdom. <strong>The</strong> British Overseas Territory’s democracy operates through parliamentary and ministerial systems. <strong>The</strong> ministerial government has 13 representatives elected for a maximum of four years via a mixed system of nine districts and four country-wide members. <strong>The</strong> government has three branches: the executive council, the judiciary and the legislative council. <strong>The</strong> Governor, as the representative of Her Majesty the Queen in Britain, has special responsibility for the courts, the public service, the police and foreign affairs in the BVI. <strong>The</strong> civil service is divided into six ministries and a quasi-ministry consisting of the subject portfolios under the Governor. <strong>The</strong>re are approximately 44 departments spread across the full range of government services. <strong>The</strong> Constitution in the British Virgin Islands became effective in 1977 and a constitutional review took place in 2006. THE LAW <strong>The</strong> BVI’s legal system is based on English Common Law and the UK Privy Council is the final court of appeal. CORPORATE VEHICLES BVI business companies, limited partnerships, segregated portfolio companies, restricted purpose companies, companies limited by shares and/or guarantee INCORPORATION TIMESCALE 24 hours for BVI business companies and LPs, VISAS None are required for US and EU citizens for stays of less than 60 days. Work permits are required for trips that include employment while in the British Virgin Islands. To contact the customs department email vicustoms@caribsurf.com. To contact the Immigration Department see immigration@bvigovernment.org. For passport and visa services email passport@ bvigovernment.org. For reasons why the BVI is a delightful place to spend a holiday, email david.walker@incisivemedia. com. INCORPORATION FEES Government Business Companies $350– $1100 (dependent on share capital structure) Limited partnerships $500 Other – varies with registered agent/service provider ANNUAL FEES Government Business Companies $350– $1350 (dependent on shares capital structure and site of certificates issued Limited partnerships $500 Other – varies with registered agent/service provider DIRECTORSHIPS Resident directors not required, but at least one director is required in general TAX REGULATIONS Directors’ meetings not required. Income tax – resident 0%, non-resident 0% Corporate tax – resident payroll tax 10% or 14% 900BC – Amerindians discover the Virgin Islands. 1493 – Christopher Columbus discovers the islands on second voyage to the New World. Mid-1600s – First European settlers arive. 1625 – Charles I issues letters of patent and a grant of ownership of the islands to the Earl of Carlisle, no UK colonising occurred. 1666 – Britain annexes the BVI to the government of the Leeward Islands. End of 1700s – sugar and rum are BVI’s main exports. 1715–1718 – Blackbeard (Aaaaaarrrrgh!) make Soper’s Hill on Tortola the pirates’ base of operations. 1802 – Tortola declared a freeport. 1950 – Legislative Council restored, only British males over 21 could vote, islands still part of Leeward Islands Federation. OTHER BUSINESS ISSUES Beneficial ownership disclosure No Estate duty No Shareholder disclosure No Min number of shareholders One Bearer shares allowed Yes Withholding tax No Audit required No CLIMATE <strong>The</strong> British Virgin Islands is a sub-tropical nation, and has a hurricane season from June to November. On average, the temperature between January and June is 69.52F and from July to December 85.39F. <strong>The</strong> wettest months are from September to December, while February to April are the driest. REGULATION For collective investment schemes, the British Virgin Islands Financial Services Commission (FSC) is responsible. It was formed in December 2001 with the enactment of the Financial Services Commission Act 2001. It is an autonomous regulatory authority. <strong>The</strong> Financial Services Commission handles the regulatory responsibilities previously overseen by the Financial Services Department. <strong>The</strong> FSC has divisions for registry of corporate affairs; insurance; investment business; banking and fiduciary services; legal and enforcement; policy research and statistics; shipping registry and administration and support services. Key dates in the development of the local finance industry included; the 6 June 1996 approval of the Mutual Funds Act; the 27 November 1997 approval of the Mutual Funds (Amendment) Act; the 20 April 2005 approval of the BVI Mutual Funds (Restricted Public Fund) Regulations, 2005; and the 1 January 2006 approval of the Segregated Portfolio Companies Regulations, 2005. ECONOMY 797 are employed in “financial intermediation,” according to the BVI Development Planning Unit. <strong>The</strong> BVI’s employment rate is about 96%. TIMELINE OF THE BRITISH VIRGIN ISLANDS’ HISTORY bvi at a glance 1954 – New Constitution brought into effect, giving universal suffrage to all British subjects over 21 without property or literacy qualifications. 1956 – Federation of the Leeward Islands abolished 1958 – BVI declines membership of the Federation of the West Indies 1960 – BVI is separate colony directly responsible to Her (UK) Majesty’s Secretary of State 1979 – Constitutional reform, voting age now 18 1981 – British Nationality Act (1981) makes BVI citizens of British Dependent Territory 1984 – With passing of International Business Companies Act, offshore business begins 1991 – Census shows population of 16,115 1996 – Mutual Funds Act (1996) requires all mutual <strong>fund</strong>s be registered (public <strong>fund</strong>) or recognised (non-public <strong>fund</strong>) and any person providing management or admin services must be licensed. www.<strong>hedge</strong><strong>fund</strong>sreview.com October 2007 | british virgin islands / <strong>hedge</strong> <strong>fund</strong>s review | S23
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