Companies are incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004 (the "Act") by the filing of Memorandum and Articles of Association with the Registrar of Corporate Affairs. This filing is made by the first registered agent of the Company (the "Registered Agent") which each BVI company must maintain in the BVI.
The incorporation is effective from the date of filing the Memorandum and Articles of Association with the Registrar of Corporate Affairs. It generally then takes the Registrar of Corporate Affairs between three to five days to allocate a company number to the company, issue a Certificate of Incorporation and return stamped Memorandum and Articles of Association via its electronic filing system VIRRGIN.
There is no BVI law concept of subscriber shares and as such, unlike the position under English law, at the time of incorporation of the company by the Registered Agent there will be no subscriber shares in issue. Similarly, unlike the position under the English law, a BVI Company on incorporation does not have any first directors.
The Registered Agent will appoint the company's directors and company secretary, if one is required. There is no legal requirement for a company to have a company secretary following its incorporation. There is no minimum number of directors that a company must have and it can have either individual or corporate directors. There is also no residency requirement for directors.
Once directors have been appointed, they will be able issue shares to the shareholders.
There are no minimum share capital requirements, nor a concept of authorised share capital (merely the company is authorised to issue a certain number of shares). A company can be authorised to issue shares with or without par value. Shares issued with par value can be issued in any currency.
The consideration paid for the shares issued may be in any form, including money, a promissory note, or other written obligation to contribute money or property, real property or personal property, services rendered or a contract for future services. A relevant BVI law consideration for the issue of shares is that where a company is authorised to issue shares with par value, the consideration paid must be at least equal to the par value of the shares. This means that a company can not issue partly paid shares.
Choice Of Appropriate Form Of Entity
The Act provides that a company can be incorporated as either a company limited by shares (as is most usual); a company limited by guarantee which is not authorised to issue shares; a company limited by guarantee which is authorised to issue shares; an unlimited company which is not authorised to issue shares; or an unlimited company which is authorised to issue shares.
Restricted Purposes Company
A BVI company could be incorporated as a "restricted purposes company". The Act requires that the Memorandum of Association of a restricted purposes company contain certain specific statements i.e. a statement that the company is a restricted purposes company and a statement of the purposes of the company i.e. the specific objects of the company and the activities that the company is to engage in. Significantly, any action by the directors outside of the scope of these objects and activities provided for in the company's Memorandum of Association will be ultra vires.
Having been incorporated, a restricted purposes company is not able to amend its Memorandum of Association to delete or modify the statement that it is a restricted purposes company and any resolution of the members or directors of a company purporting to do this is void and of no effect. However, a restricted purposes company may amend its Memorandum of Association to modify its purposes unless it is specifically prohibited from doing so in its Memorandum of Association.
Segregated Portfolio Companies
On prior application to the British Virgin Islands Financial Services Commission (the "FSC"), insurers and professional, private and public funds may be granted approval to be incorporated or registered (if already incorporated) as a segregated portfolio company ("SPC"). The SPC must be a company limited by shares.
An SPC is a single legal entity. Each segregated portfolio does not constitute a separate legal entity. Assets of an SPC are either segregated portfolio assets or general assets of the company which are not held in any segregated portfolio. Each segregated portfolio is created with the purpose of legally separating the assets and liabilities held by that portfolio from the other assets and liabilities of other portfolios of the SPC and from the general assets of the SPC. Directors of an SPC are under a duty to establish and maintain procedures for keeping the assets of a segregated portfolio separate from the general assets of the company and from the assets of the other segregated portfolios.
Other BVI Vehicles Commonly Used
Limited Partnerships
A BVI entity can also be formed as a limited partnership pursuant to the Partnership Act, 1996. The BVI partnership legislation and its concepts are similar to those in England.
Trusts (Charitable/Purpose/VISTA/PTCs)
BVI law recognises the common law concept of a trust. In addition to the common law, the law of trusts in the BVI is governed by various statutory provisions.
The BVI Trustee Act contains numerous provisions that are relevant to BVI Trusts. In particular, it provides for statutory non-charitable purpose trusts and contains comprehensive provisions relating to conflicts of laws (including forced heir ship). The BVI Vista legislation makes special provision allowing settlers to retain control of companies when shares in a BVI company are settled into a Vista Trust. In particular it provides the retention by trustees of shares irrespective of the financial advantage of disposal, for prohibiting trustee's from intervening in the management of a company except in certain circumstances and for restriction on the appointment and removal of directors.
BVI trusts are frequently used in commercial transactions and for private client purposes. The BVI has also recently enacted provisions dealing with the incorporation of Private Trust Companies (PTCs).
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.