The British Virgin Islands (BVI) Business Companies Act and Regulations were amended and became effective on 1 January 2023 to include the preparation and submission of a Financial Annual Return for each BVI company. The official annual return form, which must be submitted every year, was published on 2 March 2023 in the Gazette.

What are the new requirements according to this law?
From 1 January 2023, BVI companies must prepare and file an annual return with their registered agent containing specific financial information.

The return must be completed in a form (sample here) that includes an income statement and balance sheet for each company, which:
▪ Has no specific set of accounting policies or principles required.
▪ Can be done in any currency, and
▪ Does not need to be audited.

What does the company need to do to remain compliant?
All BVI companies must submit the annual return to their registered agent. The filing is private and shall be kept confidential by the registered agent (Icaza), meaning it is not publicly available. If a company doesn’t file its annual return within 30 days of the due date, registered agents must inform the Regulator. For a streamlined reporting process, we will send a link to all clients to facilitate the submission of the information in a secure form.

When should I file the form?
The annual return is due annually for financial periods starting on 1 January 2023. It must be filed within nine months after the company’s financial year-end (which in most cases is December 31ˢᵗ each year, unless the company has chosen a different financial period). Below, you may find the deadlines for the most common financial year ends:

Financial Year  →  First Deadline
January – December 2023 → 30 September 2024

July 2023 – June 2024 → 31 March 2025

What happens if the company does not file the annual return?
The following penalties will be imposed on companies that do not provide their annual returns:
1. US$300 for the first month.
2. US$200 for each subsequent month, up to a maximum of US$5,000.

If the maximum penalty is reached and the annual return is not filed, the Registrar may remove the company’s name from the Register.

Next Steps:
▪ Maintain financial records such as invoices, receipts, bank statements, etc., to prepare the annual return.
▪ We will soon notify you of the cost of this new obligation, which shall be included in our annual fees.
▪ Contact yexadiag@icazalaw.com, domingoad@icazalaw.com or your usual contact for assistance.

The BVI Business Companies Act 2004 was amended in 2022, to include changes to the process for restoring struck-off companies.

The new applicable guidelines are the following:

• Companies that were struck off on January 1, 2023 (“existing struck off companies”) will only have until June 30, 2023, to be restored with the Registry.
• Restoration is not automatic, and payment of outstanding balances does not guarantee restoration.
• To restore a company, an application must be filed with the Company Registry, and the Registered Agent must confirm in writing that the company’s records have been audited. Registry fees will be charged to file this application.
• If a company is not restored within the given six (6) month period, January 1 to June 30, 2023, it will be deemed dissolved on the day following the end of such period (July 1, 2023). The registered agent will also be deemed to have resigned.
• To restore an existing struck-off company that dissolved on July 1, 2023, an application must be submitted to the BVI Courts. In addition to license fees, penalties, restoration, and legal fees, a penalty of US$5,000 will be imposed on the Company.

Should you have any questions regarding this matter, do not hesitate to contact us.

Get to know the main features of a British Virgin Islands Trust.

By: Estefanía Alemán – General Manager of Icaza Trust Corporation

BVI Trust legislation

British Virgin Islands (“BVI”) trust law is generally based on English law, but has developed beyond English law to allow trusts constituted under BVI law to contain modern trust provisions. The governing law of BVI trusts is the Trustee Ordinance Act 1961 (“the Trustee Act), which has been amended in 1993, 2003, 2013, 2015, and 2021. Additionally, BVI enacted in 2003 the Virgin Islands Special Trusts Act 2003, amended in 2013, to create a special trust known as (“VISTA”), which is used purely for holding shares of a BVI company, and enables the trustee holding such shares to distance himself entirely from the management of the company in which the shares are held.

Who are the main parties of a trust

The main parties of a BVI trust are the Settlor, Trustee, the Beneficiaries, and the Protector.

1. Settlor: person or persons who transfers assets into a trust by divesting himself or themselves of legal ownership of these assets. The Settlor may be a trust Beneficiary. The Settlor may only act as a Trustee if he or she acts as a co- trustee. The Settlor may not simultaneously be a sole trustee and a sole beneficiary.
2. Trustee: person who holds legal title of the trust assets and administers such assets for the benefits of the Beneficiaries in accordance to the terms and conditions of the trust instrument. The trust assets constitute an autonomous patrimony, and do not form part of the estate of the trustee.
3. Beneficiaries: persons who have equal or conditional benefits on the trust fund, or in the case of a discretionary trust benefits in accordance to the discretion of the trustee. For a trust to be valid, the Beneficiaries shall be identifiable.
4. Protector: the BVI Trustee Act establishes that an instrument creating a trust may contain provisions by virtue of which the exercise by the trustees of any of their powers and discretions shall be subject to the previous consent of the settlor or some other person, whether named as protector, nominator, committee or any other name. If provided in the instrument creating the trust, the trustees shall not be liable for giving previous consent for actions resulting in any loss caused by the actions of the protector, nominator, committee, etc.

Who may be a Trustee of a Trust regulated under the laws of the British Virgin Islands: BVI law does not require that a BVI resident be the trustee of a BVI trust. However, to engage in trust business in or from BVI, the trustee must be licensed. Trust business is defined as acting as a professional trustee, protector or administrator, or managing or administering any settlement or company management as defined in the Company Management Act. A person cannot be settlor, sole trustee, and beneficiary of a BVI trust. A person may be the settlor, act as co- trustee and be the beneficiary of a BVI trust.

Taxation of trusts regulated under the laws of the British Virgin Islands:

1. Income Tax: Notwithstanding any provisions of the Income Tax Act, the income of any BVI trust in the hands of a trustee is exempt from income tax, and the Beneficiaries of any trust who are not resident in BVI are exempt from payment of income tax in respect of any moneys received by them from the trustee of any trust. Likewise, Beneficiaries who are not resident in BVI do not need to pay in BVI estate tax, inheritance tax, succession tax, gift tax, rate, duty, levy or any other taxes associated with distributions from BVI trusts.
2. Stamp Duty: Any trust that does not have as Beneficiary persons resident in BVI are exempt from the payment of stamp duty with respect to trust documents.
3. Trust Duty: An instrument declaring or evidencing a trust governed by BVI law, and any instrument changing the proper law of a trust to BVI law shall pay trust duty in the sum of two hundred dollars legal currency of the United States of America.

Regulatory requirements: Trusts constituted under the laws of the British Virgin Islands do not need to be registered in the BVI registrar. They are exempt from registration under the Registration and Records act. Trustees of BVI trusts do not have reporting or filing requirements regarding trusts.

Accounting records for BVI Trusts: the trustee has the obligation to maintain records and underlying documentation of the Trust whether within or outside BVI and retain these records for a period of at least five (5) years. The records and underlying documentation include accounts and records, such as invoices, contracts or other similar documentation, in relation to:

1. All sums of money received and expended by the trust, and the matters in respect of which the receipt and expenditure takes place;
2. All sales and purchase of goods by the trust; and
3. The assets and liabilities of the trust.

Reserved Powers of the Settlor: a Settlor, Protector, Nominator, or Committee may reserve the following powers under a BVI Trust:

1. 1. Power to revoke the trust in whole or in part.
   2. Power to vary or amend the terms of the trust instrument or any of the trusts, purposes, or powers arising thereunder in whole or in part.
   3. A general, intermediate, or special power to appoint, advance, pay, apply, distribute, or transfer trust property (whether income, capital, or both), or to give directions for the making of any such advancement, appointment, payment, application, distribution, or transfer.
   4. Power to act as or give binding directions as to the appointment or removal of a director or an officer of any company wholly or partly owned by the trust, or to direct the trustee as to the manner of exercising rights attaching to any of the shares held in such company.
   5. Power to give binding directions in connection with the purchase, retention, holding, sale of or other commercial or investment dealings with trust property or any investment or reinvestment thereof or the exercise of any powers or rights arising from such trust property.
   6. Power to appoint, remove, add or replace any trustee, protector, enforcer, or any other office holder or any advisor including any investment advisor or any investment manager.
   7. Power to add, remove, or exclude any beneficiary, class of beneficiaries, or purpose.
   8. Power to change the proper law of the trust.
   9. Power to change the terms of the trust which specify which courts have exclusive or non- exclusive jurisdiction in any proceedings involving rights or obligations under the trust.
   10. Power to restrict the exercise of any powers, discretions, or functions of a trustee by requiring that they shall only be exercisable with the consent, or at the direction, of any person specified in the trust instrument.

For more information on BVI Trusts, contact us at icazatrust@icazalaw.com.

The BVI government has approved important amendments to the BVI Business Companies Act 2004 that will come into force on January 1, 2023.

The most relevant areas covered by these amendments are the following:

Struck off and Dissolution

Under the current legislation, companies have a seven (7) year struck-off period before being automatically dissolved for non-payment of their annual fees. The new legislation abolishes the seven (7) year struck-off period and introduces a new process for stricken-off companies to be automatically dissolved for non-payment of their license fees.

Companies that are struck-off at the effective date of this amendment (existing struck-off companies) will have six (6) months from the Act’s effective date to be restored with the Registry. Companies that are struck off/dissolved after the six (6) month period may be restored by making an application to a BVI Court.

Struck-off or dissolved companies with underlying assets should take immediate action to bring them back to good standing.

Register of Directors

The BVI Registrar of Companies may make available upon request the name of the directors of a company, according to the register of directors filed at the Registry.

Financial Information and Annual Returns

Companies will have to provide the Registered Agent with certain financial information in a prescribed form once a year. The form must be provided to the Registered Agent up to nine (9) months after the end of the company’s fiscal or financial year. This form has not been released yet. As soon as it becomes available, we shall share it with you.

This information will be kept by the Registered Agent only, and it will not be filed with the regulator or any BVI authority. However, the Registered Agent shall inform the regulator if the company does not provide the information in due time.

Voluntary Liquidator

To voluntarily dissolve a company, the liquidator must be a BVI resident who has been physically living in the BVI for not less than 180 days and has liquidation experience and professional competence to liquidate the specific company concerned.

If you have any questions regarding this information, please contact the lawyer of our firm who usually handles your requests or email us at: bd@icazalaw.com.

Icaza, González-Ruiz & Alemán has launched its Legal Insider podcast

Legal Insider is a podcast by Icaza, González-Ruiz & Alemán, in which our team of experts will decode essential information on jurisdictional regulatory updates, provide insights into the policies and services that are shaping our industry, and detail their implications in your business.  

In our first episode, Liz Barahona, Deputy Manager of Icaza (BVI) Trust Limited, and newly appointed Chairwoman of the BVI Association of Registered Agents, Mariano Oteiza Jr., our Associate expert in Company Formation and Management services, and Domingo Diaz de la Guardia, our Associate in charge of the implementation of the Economic Substance system will be discussing the Lessons from First Reporting period of Economic Substance in the British Virgin Islands. 

 The main points discussed are the following:

1. Economic Substance background and a brief recap of the Act’s requirements.
2. Initial implementation Challenges.
3. Reporting process implementation.
4. Reporting and dealing with the COVID-19 pandemic: The short period provided to make the necessary filings in the BOSS system was made even more complicated by the pandemic. Due to global restrictions, directors were unable to travel to the BVI to hold their annual meetings, some companies ceased their operations temporarily, and overall the implementation of economic substance for companies was delayed. Local authorities allowed companies to indicate the difficulties they were having to implement economic substance and properly assess their situation on a case-by-case basis.
5. Recommendations for the next reporting period:
   1. Directors must be fully engaged with the day to day operations of their entity,
   2. Directors must ensure that the entity is in good standing with all of its records updated,
   3. Registered agents must be informed of any changes to the company’s core income-generating activities,
   4. Changes to the financial period must be informed and registered,
   5. Organize the entities’ activities from the beginning of the year, such as annual meetings and other affairs.
   6. Start planning your filings early and request your filing confirmation.

Listen to Episode 1 here:

The British Virgin Islands Association of Registered Agents (ARA) has elected its new Council.

On Wednesday, January 27, 2021, Liz Carolina Barahona, Deputy Manager of Icaza, González-Ruiz & Alemán (BVI) Trust Limited was appointed by the British Virgin Islands Association of Registered Agents as its new Chairwoman. Liz had been appointed as Education Chair and council member for the past two years.

As she steps into this new role, we congratulate her and look forward to seeing her represent Icaza, González-Ruiz & Alemán (BVI) Trust Limited, while making important contributions to the industry.

About the BVI Association of Registered Agents

The BVI Association of Registered Agents is formed by companies that represent their sector to strengthen relations, form a unified front on issues and developments within the wider industry, and make recommendations to strengthen their offerings.