The following is a brief summary of the significant features of a British Virgin Islands Companies Act Company ("CapCo") together with an outline of the incorporation procedure under the Companies Act (Cap 285). The summary includes a schedule containing details of current Government fees.
SIGNIFICANT FEATURES OF CAPCOS
CapCos are used mainly as vehicles to conduct business in the British Virgin Islands as one of the prohibitions on International Business Companies is that they may not carry on business with persons resident in the British Virgin Islands. CapCos are also used by persons wishing to carry on business outside the British Virgin Islands since these companies can be incorporated with a number of different corporate structures as follows:-
- Where the members' liability is limited by shares.
- Where the members have unlimited liability.
- Where the members' liability is limited by guarantee and the company may or may not have a share capital.
ANNUAL GENERAL MEETING
An annual meeting of members is required.
PRIVATE AND PUBLIC COMPANIES
A) A private CapCo;
- must have two or more members;
- must have restrictions on the transfer of its shares;
- is prohibited from inviting members of the public to subscribe for its shares; and
- must limit the number of its members to fifty
B) A public company must have five or more members. Otherwise, none of the restrictions set out in point A) above apply.
SUBSCRIPTION FOR SHARES
Subscribers to the Memorandum and Articles of Association of a CapCo are obliged to take shares unless the company is a company limited by guarantee without a share capital.
FILING REQUIREMENTS
The filing requirements for CapCos are more onerous than for International Business Companies. There are also different filing requirements depending on whether the company is a public company or a private company.
TAX
CapCos are subject to British Virgin Islands income tax and stamp duty but dividends are exempt from tax. Non resident CapCos are only subject to income tax on income arising or received in the British Virgin Islands.
BEARER SHARES
CapCos cannot issue bearer shares although public companies with a capital limited by shares may issue share warrants to bearer.
FORMATION
The constitutional documents of a CapCo are its Memorandum of Association and Articles of Association which (in most cases) have to be filed simultaneously at the Companies Registry, along with the requisite incorporation fee.
Memorandum of Association ("Memorandum")
The following matters must be set out in the Memorandum for all three types of corporate structure permitted for CapCos:-
a) Name - The name of a CapCo must end in the word "Limited" unless the liability of members is unlimited.
b) Address - The address of the registered office in the British Virgin Islands.
c) Objects or Purposes - Unlike the Memorandum of an International Business Company, the Memorandum of a CapCo has to set out in full the objects and purposes for which the company is incorporated
If the company is a company limited by shares, or a company in which the members have unlimited liability but with a capital divided into shares, or a company limited by guarantee with a share capital, it must, in addition to the items detailed in points a-c, set out:-
d) The number of shares to be taken by each subscriber (not less than one) which must be set against each subscriber's name.
If the company is a company limited by shares, it must in addition to the items detailed in points a-d, set out:-
e) A declaration that the liability of the members is limited.
f) The amount of capital with which the company proposes to be registered, divided into shares of a certain fixed amount.
If the company is a company limited by guarantee or a company limited by guarantee with a share capital it must in addition to the items detailed in points a-c, set out:-
g) A declaration that each member undertakes to contribute to the assets of the company, in the event of it being wound up during the time that he is a member or within one year afterwards, such amount as may be required, not exceeding a specified amount for payment of the debts and liabilities of the company and other costs and expenses of winding up the company.
The Memorandum has to be signed by each subscriber in the presence of a witness who must also sign the Memorandum. In the case of a company with share capital, the subscriber agrees that it will take the number of shares set out opposite its name.
Articles of Association ("Articles")
The Articles prescribe regulations for the company.
A CapCo limited by shares does not have to register Articles of Association with its Memorandum of Association but if it does not do so the regulations applicable to the company will be those contained in Table A of the First Schedule of the Companies Act. If it does register Articles of Association, it can either exclude Table A or adopt it in its entirety or in parts. It should be noted, however, that the provisions of Table A will apply where they are not expressly modified or excluded.
A company limited by guarantee and a company in which members' liability is unlimited must submit Articles for registration together with the Memorandum. The Articles may adopt some or all of the provisions in Table A or they may exclude Table A. Those provisions of Table A which are not modified or excluded will not automatically constitute regulations for these companies.
In the case of a company limited by guarantee with a share capital or an unlimited company with share capital the Articles must state the amount of capital with which the company proposes to be registered. If the companies do not have a capital divided into shares, the Articles must state the number of members with which the company proposes to be registered.
The Articles have to be signed by each subscriber in the presence of a witness who must also sign the Articles.
FEES
An annual licence fee is payable by all CapCos. All non-resident companies pay an annual licence fee of US$250.00. For resident companies the fee depends on the gross value of the assets of the company situate outside of the British Virgin Islands, with a minimum fee of US$25.00 and a maximum fee of US$10,000. A list of the current incorporation fees is set out in the Schedule.
TAXES
Income Tax
If the company is deemed to be "resident in the British Virgin Islands" it will pay income tax of 15% on its worldwide income. Whether or not it is resident will depend on the location from which the company is managed and controlled. It will be deemed to be resident in the British Virgin Islands if more than one half of the members of the board of directors are resident in the British Virgin Islands. A company which is deemed "non-resident" is only liable to tax of 15% on the profits arising or received in the British Virgin Islands. If, however, the company is resident, but is an "offshore trading company", meaning that 90% of its profits arise from business carried on exclusively outside of the British Virgin Islands, it is then only liable to pay income tax at the rate of 1% rather than 15%.
Dividends
Dividends paid by CapCos are exempt from British Virgin Islands income tax.
Stamp Duty
A CapCo is liable to stamp duty in accordance with the provisions of the British Virgin Islands' Stamp Act and will, therefore, be liable to pay stamp duty on documents relating to transactions undertaken in the British Virgin Islands or transactions involving British Virgin Islands entities or property. Shareholders will have to pay stamp duty on the transfer of shares effected by an instrument in writing. If the transfer is not by way of sale, the stamp duty is nominal.
STANDARD GOVERNMENT FEES (AS AT FEBRUARY 1999)
Government Fee on Incorporation
For a company with a capital divided into shares:
i) where its nominal capital
does not exceed US$10,000 US$ 200.00
iia)where its nominal capital
exceeds US$10,000 US$ 200.00
iib)for every subsequent increase
of US$10,000 or part thereof US$ 15.00
For a company without a capital
divided into shares US$ 100.00
If you would like further information on Companies Act companies or the other corporate vehicles available in the British Virgin Islands or details of how Harney Westwood & Riegels can help you with your incorporation enquiries, please contact Sheila George or Richard Parsons.
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