The Virgin Islands Special Trusts Act (VISTA) came into force on 1 March 2004. Trusts established under the Act, known as 'VISTA trusts' are unique to the British Virgin Islands.

The VISTA regime was introduced as a solution to what is commonly referred to as 'the prudent investor problem'.

The prudent investor problem

Trustees are required to act in the best interest of the beneficiaries. In doing so, a trustee is required to act prudently, and to invest the trust assets with the diligence and prudence that a reasonable person would be expected to exercise in making an investment of his own money.

BVI trusts are routinely used to hold the shares in a BVI company which is itself the holding vehicle of a family business. The family business may be involved in activities which would be considered too risky for a prudent investor. As such, a trustee may find himself under a legal duty to intervene in the management decision of the directors, or even diversify out of the family business. The duty of prudence imposed on trustees will be irreconcilable with a settlor who believes that risk taking is an integral part of business practice. There may also be wider considerations than pure investment return. For example, when a trust holds a family business, issues such as family tradition, as well as ethical and environmental considerations may also be relevant factors.

The VISTA legislation modifies the trustee's duty to monitor and intervene in relation to the management of the underlying BVI company. The trustee will retain a statutory right to information about the company's affairs, but otherwise, the management of the company will be the responsibility of the directors.

Mandatory requirements

The key conditions of a VISTA trust are that:

  • The trust can only hold shares in a BVI company (or companies).
  • At least one of the trustees must be a BVI licensed trust corporation or a BVI Private Trust Company (PTC) (please click here for more information on PTCs).
  • The trustee cannot be a director of the underlying BVI company.

If the VISTA criteria are satisfied, then the trustee not only does not have a duty to monitor or interfere with the management of the company, but is in fact prohibited from doing so (except in extreme circumstances known as 'intervention calls'). Further, there is a restriction on the trustee's ability to sell the BVI company shares, which must be retained indefinitely.

The default position of VISTA trusts is that the trustee has no fiduciary responsibility in respect of the BVI company (unless acting on an intervention call), but it is possible to introduce specific duties on the trustee in respect of the shares. This allows for the creation of bespoke trust vehicles to address any type of structuring situation.

The VISTA regime can be applied and dis-applied to trust, providing significant flexibility. BVI trusts which are not VISTA trusts can be converted into VISTA trusts, assuming that they satisfy the relevant conditions (eg hold BVI company shares etc).

Office of Director Rules (ODRs)

The VISTA provisions also contain detailed rules by which the appointment, removal and remuneration of the directors of a BVI company held in a VISTA trust can be controlled by the settlor or another. Through the use of suitably drafted ODRs, a settlor can retain the ability to appoint and remove directors of the BVI company, free from interference from the trustee.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.