The History of the BVI Company

International Business Companies (IBCs) have become one of the most common corporate entities used for conducting business internationally. They are a product of the internationalisation of business and the increase in capital and labour mobility that the world has seen as a result of globalization and advanced technology. Most importantly, an IBC is a legal structure that allows individuals to conduct business in virtually any part of the world and provides a secure means of asset protection and financial success.

The history of the British Virgin Islands International Business Company is an interesting one. The anecdote of how the idea of forming the first IBC in the BVI was suggested to then Chief Minister is often related; explaining the origins of the BVI financial services industry, which eventually led to the enactment of the British Virgin Island International Business Act in 1984. This Act established the grounds for the formation, organizational structure, functioning and regulation of IBCs that were to be registered in the British Virgin Islands and was drafted by Paul Butler, then Attorney General of the BVI including a few other U.S. based lawyers. Due to this, the 1984 IBC Act very much resembled Delaware corporate law, which was the main model used for drafting the Act.

Upon passing the Act in 1984, offshore companies were already being formed, totaling 1,000. This figure steadily increased during the following years, as the British Virgin Islands gained popularity internationally both as an offshore jurisdiction and a tourism destination, making the financial services and tourism sectors significant income earners. By 2000, 41% of the world’s IBCs (like Belize IBC) were incorporated in the BVI. In 1997 alone, a total of 60,000 incorporations were made. Such vigorous offshore activity and expansion called for the creation of a regulatory body both by local and international authorities. In 2000, the British Virgin Islands Financial Services Commission (FSC) was established to serve as the official institution that would regulate the growing financial services sector through its collaboration and cooperation with private and public sector stakeholders, enforcement of offshore legislation and policies, monitoring of financial services, advice to local authorities on important issues and implementation of educational programs for the public and offshore services providers. The FSC has played a significant role in ensuring that international and local standards are met within a legal and beneficial environment for all stakeholders of the industry.

The British Virgin Islands also became a member of the Caribbean Financial Action Force (CFATF), which was established to confront the problem of financial terrorism through the implementation of effective and preventative anti-money laundering measures. The CFATF was created following meetings convened in Aruba and Jamaica in 1990 and 1992 respectively, and includes countries from the English and Dutch speaking Caribbean as well as Latin America.

Yet still, in facing competition from both international and regional financial centers and the challenges presented by globalization and technological advancement, further measures needed to be implemented to ensure the continued success of the BVI’s financial services industry. Such action was taken by the enactment of the BVI Business Companies Act, 2004, which came into operation on January 1, 2005. Under the BVI Business Company Act new improved features were incorporated with existing ones into a single instrument that would serve as the main corporate statute for regulating both local and foreign business entities; removing the differences that exist between “offshore” and “onshore” and “domestic” and “foreign” companies. It also ensures that the BVI remains compliant with the implementation of policies required by the United Kingdom by its Overseas Territories, such as the Code of Conduct for Business Taxation established by the Council of Economics and Finance Ministers (ECOFIN) in 1997 under the European Commission and the European Saving Tax Directive (STD) which came into effect 2005.

The IBC Act, 1984 was allowed a two year transition and phase out period (2005 – 2007) after which it was fully replaced by the new BVI Business Companies Act. During that time, both Acts operated parallel to each other until January 1, 2007 when all existing IBCs formed under the IBC Act were automatically re-registered and became subject to the BVI Business Companies Act.

The new Act allows the incorporation of seven main types of companies. These include companies limited by shares, companies limited by guarantee that are unauthorized to issue shares, companies limited by guarantee that are authorized to issue shares, unlimited companies that are not authorized to issue shares, unlimited companies that are authorized to issue shares, restricted purposes companies and segregated portfolio companies. Meanwhile, the standard set of documents needed to be filed at the Companies Registry for the incorporation of a company include the Memorandum and Articles of Association, which must be signed by the company’s registered agent as the incorporator and a Letter of Consent issued by the Registered Agent consenting to be the registered agent for the company or the Commission’s written approval if the company is to be incorporated as a segregated portfolio. Under the Act, all applications to register a company must be filed by a registered agent. To date, the BVI records approximately 800,000 companies, about 500,000 of which are active.