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Newsletter | Articles
  Major new BVI Company Law comes into force
The new BVI Business Companies Act 2004 (BVIBCA) came into force on 1 January 2005. On 1 January 2007 it will replace both the current IBC Act and the local Companies Act.
It addresses the ‘ring-fence’ issue – where a jurisdiction is considered to be a ‘tax haven’ because it offers differential tax rates to residents and non-residents. Differential rates have been eliminated by the introduction of a zero rate tax for residents and non-residents alike.
Under the new legislation, it will be possible to incorporate companies limited by guarantee, hybrid companies and unlimited companies with or without a share capital. There is also provision for a restricted purposes company, which is likely to have application as an SPV. Insurance companies and mutual funds will be able to incorporate as Segregated Portfolio Companies (elsewhere known as Protected Cell Companies).
Other features are:
- Foreign character names are now recognised
- Companies can be incorporated using their company number as a name – e.g. “BVI Company Number 2723451 Limited” -- which is really a device to assist those holding stocks of shelf companies.
- New provisions are contained concerning the registration of charges at the Registry of Corporate Affairs, a procedure that was widely regarded as unsatisfactory under the IBC Law.
- The concept of authorised capital is abolished, though a company will have to specify the maximum number of shares that it will be able to issue. This does not affect existing companies.
- Provisions regarding disclosure of directors’ interests and conflicts have been completely re-drafted
This coincides with a reform of the BVI tax system whose main points are:
- All businesses in the Territory will no longer pay any income tax on their profits
- Individuals will no longer have to pay PAYE based income tax
- IBC licence fees are increased to $350 per annum for share capitals up to and including $50,000 and to $1,100 for share capitals over $50,000. New companies formed from 1 January 2005 with the ability to issue bearer shares will pay an annual fee of $1,100.
- A payroll tax will be introduced at a rate of 14%, with 6% paid by the employer and 8% by the employee. As now, the first $7,500 will remain tax free.
Action needed:
- Existing Bearer Shares must be lodged with an authorised custodian by 31 December 2010. New bearer shares (companies registered or continued after 31 December 2004) must be lodged immediately.
- A Register of Directors must be maintained for all new incorporations. Existing companies must have a Register in place by 1 January 2006.
- Re-registration of IBC’s as Business Companies will be automatically processed by the Registrar as from 1st January 2007. No amendments to the M&AA by the shareholders or filings by the directors or registered agents will be necessary.
Transitional arrangements
There is a two-year transitional period as follows:
- During 2005, new companies can be formed under existing legislation or under the BVIBCA.
- During 2006, new companies will only be able to be formed under the BVIBCA, but existing companies can continue to operate under the existing legislation.
- During 2007, all companies that are not already registered under the BVIBCA will be automatically re-registered by the Registry of Corporate Affairs under the new Act.
Chief Minister, Dr the Honourable D Orlando Smith, commented “The IBC Act has worked well, but by drafting new legislation that builds on the very solid foundations laid by the IBC Act, the Territory is once again positioning itself ahead of the game, whilst ensuring that its financial sector related programmes are fully compliant with international standards”.
ILS is happy to help you make the necessary changes to comply with the new law. Please contact us to discuss your needs.
A full copy of the legislation (148pp 1.46Mb) is available for download.
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