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Types of Business Entity Structure in BVI

Updated: Sep 15, 2023


The British Virgin Islands (BVI) has firmly established itself as a renowned offshore jurisdiction, drawing entrepreneurs from across the globe who are interested in setting up companies. Thanks to its stable economy and efficient government system, the BVI has become the top choice for a multitude of offshore businesses. In this article, we will delve into the diverse array of business entities available in the British Virgin Islands, providing insights into the various options and structures you can explore when considering business ventures in this jurisdiction.


An Overview of Business Entities Available in the British Virgin Islands:


The types of legal entity options available are:


BVI Business Companies


The formation of business entities in the British Virgin Islands is governed by the BVI Business Companies Act of 2004. This Act provides for the establishment of various types of business entities, including:

  • Corporations limited by shares

  • Corporations limited by guarantee without the authorization to issue shares

  • Corporations limited by guarantee with the authorization to issue shares

  • Unlimited corporations without the authorization to issue shares

  • Unlimited corporations with the authorization to issue shares

In addition to these options, the British Virgin Islands also allows for the registration of businesses in other formats, such as:

  • Segregated Portfolio Company

  • Restricted Purpose Company

  • International Business Companies (IBCs)

These different entity types and formats provide flexibility and options for entrepreneurs and businesses looking to establish themselves in the British Virgin Islands.


1. Corporation Limited by Shares


A company limited by shares is among the most favored business structures in the British Virgin Islands. These BVI companies have the capability to issue shares, and individuals who own these shares are known as shareholders or proprietors. Shareholders enjoy a distinct legal status, which means their legal liability is limited to the value of the shares they hold, while the company's directors are responsible for its day-to-day operations.


Key Characteristics:

  • Such business entities in the British Virgin Islands are required to have at least one shareholder, who can also serve as a director.

  • Shareholders are only liable for the amount outstanding on their shares.

  • The initial shares of the organization must be issued by the first director(s) after their appointment.

2. Company Limited by Guarantee


In accordance with section 5 of the BVI Business Companies Act, organizations have the option to establish themselves as a corporation limited by guarantee in one of two ways:

  • A corporation limited by guarantee that is not authorized to issue shares.

  • A corporation limited by guarantee that is authorized to issue shares.

This type of company structure in the British Virgin Islands is commonly utilized by nonprofit institutions. Such BVI companies must have at least one member who acts as a guarantee member. Each guarantee member is entitled to a single vote in decision-making processes unless otherwise specified in the memorandum or articles of the organization. It's worth noting that shareholders and guarantee members of these business entities in the British Virgin Islands each maintain their distinct legal identities.


3. Unlimited Company


Within such BVI companies, it is mandatory for at least one of the members to be an unlimited member, assuming limitless liability for the company's obligations. The responsibility of these unlimited members is typically seen as their commitment to contribute to the company's assets in case of liquidation.


There are two primary categories of unlimited corporations:

  • Unlimited corporation authorized to issue shares

These types of business entities in the British Virgin Islands have the capacity to issue an unlimited number of shares. The unlimited members can also act as shareholders, with each member holding one vote, unless otherwise specified in the memorandum or articles of the company.

  • Unlimited corporations not authorized to issue shares

In these kinds of companies in the British Virgin Islands, members are not considered shareholders because the company does not offer shares. As per the BVI Business Companies Act, an unlimited corporation that is not authorized to issue shares is required to submit annual statements in the prescribed format on behalf of its directors.


4. Segregated Portfolio Companies (SPCs)


SPCs, or Segregated Portfolio Companies, represent unique entities in the British Virgin Islands that provide an efficient framework for the management and segregation of assets and liabilities. These are a type of BVI company that allows for the creation of distinct portfolios within a single legal entity. Each portfolio operates independently, safeguarding its assets and liabilities from potential impacts related to other portfolios. This particular type of company in the British Virgin Islands is particularly valuable for investment funds, where each portfolio can represent a distinct investment strategy or clientele.


Advantages:

  • SPCs facilitate the segregation of diverse portfolios within a single legal entity, thus mitigating cross-liability risks.

  • SPCs enjoy the same tax benefits as regular BVI corporations, including no taxes on corporate earnings, capital gains, or withholding tax.

  • The straightforward administrative requirements associated with SPCs make them an attractive choice for use in investment management.


5. Restricted Purpose Company (RPC)


A restricted purpose company is explicitly established in the British Virgin Islands for the sole purpose of executing a specific function or operation outlined in its Memorandum of Association. These particular types of business entities in the British Virgin Islands provide a robust legal framework for conducting activities with limited liability and streamlined administrative procedures. The intended purposes for setting up such companies in the British Virgin Islands could encompass various legitimate activities, including holding specific assets, undertaking a particular project, or serving as a special purpose vehicle for a transaction.


To establish a restricted-purpose company in the BVI, certain requirements must be met:

  • The company must be structured as a company limited by shares.

  • The memorandum of the business should explicitly state that it is an RPC and delineate the company's specific objectives.

Advantages of RPC:


  • RPCs benefit from the jurisdiction's high level of confidentiality and privacy. Shareholder information remains confidential, and nominee directors and shareholders can be appointed to enhance privacy.

  • Shareholders enjoy an elevated level of asset protection offered by RPCs.


6. International Business Companies (IBCs)


International Business Companies (IBCs) are among the most favored types of companies in the British Virgin Islands. IBCs present an attractive option for global business operations due to their straightforward incorporation process and flexible corporate governance. To establish an IBC in the BVI, the company needs to be registered with the Financial Services Commission (FSC) of the territory, and this process requires selecting a registered agent and submitting the necessary documentation.


Advantages:

  • IBCs are exempt from local corporate taxes, providing a favorable tax environment for these companies.

  • IBCs can be established quickly and have minimal reporting obligations.

  • IBCs benefit from stringent confidentiality regulations that safeguard the privacy of shareholders and directors.


Limited Partnerships


Formation of limited partnerships in the British Virgin Islands is governed by the Limited Partnership Act of 2017. To establish a limited partnership, a written limited partnership agreement is essential, outlining the rights and responsibilities of the partners. This agreement may also cover the management of the limited partnership's affairs and its business operations.


To register a limited partnership, an application must be submitted to the Registrar, including the following information:

  • A statement specifying the limited partnership's name.

  • The name and address of the Registered Agent.

  • The address of the registered office within the British Virgin Islands.

  • The names and addresses of each general partner.

  • The duration for which the limited partnership is formed, or if it's of unlimited duration, a statement indicating so.

  • A declaration confirming that the limited partnership does not possess legal personality, if applicable.

  • A document signed by the proposed Registered Agent, indicating their consent to act as the Registered Agent.

Furthermore, a registered office and a registered agent within the British Virgin Islands must always be maintained by the limited partnership. General partners are obligated to maintain a register of general partners and a register of limited partners or provide details of where these registers are kept. These registers should include:

  • Names and addresses of all general and limited partners.

  • Dates of when individuals became general or limited partners.

  • Dates of when individuals ceased to be general or limited partners.

  • Details of any general or limited partnership interests, if applicable.

Additionally, the limited partnership is required to maintain financial records and retain any other pertinent documentation related to its operations.


Micro Business Companies


These structures are designed to cater to small businesses, especially startups that might find the incorporation requirements of the BVI BCA to be overly burdensome and cost-prohibitive. An MBC (Micro Business Company) possesses the capacity to engage in various transactions, but these are restricted to activities directly related to the MBC's specified business purpose. There are also limitations on the size of the MBC in terms of the number of employees, gross asset value, and annual turnover.


The MBC's charter must include details such as the name and nationality of the principal and any participants involved.


An MBC can establish its primary business location and operate from any jurisdiction outside of the British Virgin Islands. The number of shares that can be issued is restricted to the principal and a maximum of five participants, each holding one share, and these shares can only be issued in registered form. Shareholders must be natural individuals.


An MBC is obligated to maintain records and relevant documentation of the company either at its registered office in the British Virgin Islands or at its operational address, which serves as its primary place of business.


It's important to note that MBCs are not permitted to engage in regulated financial service businesses.


All legal entities incorporated in the Virgin Islands are required to maintain basic ownership information and details about their purpose. This information is the responsibility of the registered agent, who is tasked with keeping a record of the beneficial ownership of the legal entity and providing it to the authorities.


Please be aware that the MBC Act is presently suspended until further notice.


Trusts


Express Trusts are the most prevalent form of trust established, with the Trustee Ordinance (Cap. 303) outlining the general requirements and specifying the duties and powers of trustees. Trusts themselves are not mandated to be registered.


Virgin Islands Special Trusts (VISTA)


VISTAs are established under the Virgin Islands Special Trusts Act of 2003. A VISTA trust is exclusively designed for holding shares in a BVIBC (British Virgin Islands Business Company). Consequently, the assets held in the trust must consist of shares in a BVI company, which must be transferred into the trustee's name.


When setting up a VISTA trust, it's a requirement for at least one of the trustees to be a BVI licensed trust company, or a BVI Private Trust Company should serve as one of the trustees or the sole trustee.


VISTA trusts are commonly employed by individuals with family-owned businesses, particularly if they are the sole director/shareholder, and they wish to retain independent control over their company while benefiting from the estate planning advantages that a trust offers. VISTA trusts are also utilized for trust assets invested in what trustees might consider high-risk investments.


Types of Trust :

  • Discretionary Trust: This trust offers flexibility, with beneficiaries and entitlements determined by the settlor-defined criteria, not fixed.

  • Fixed Trust: In a fixed trust, beneficiaries have unchanging entitlements to trust income and capital as per the trust deed.

  • Charitable Trust: These irrevocable trusts serve charitable causes and are established for altruistic purposes.

  • Purpose Trust: Purpose trusts have no beneficiaries; instead, they exist to advance non-charitable objectives.

Revocable vs. Irrevocable Trusts

  • Revocable Trust: Settlors can modify or revoke this trust anytime, provided they're mentally competent.

  • Irrevocable Trust: Terms of an irrevocable trust cannot be altered by the settlor until the trust's goals are fulfilled.

Common Trust Utilizations

  • Asset Administration

  • Private Investments

  • Property and asset holding.

  • Managing shareholding interests.

  • Strategic planning for succession.

  • Safeguarding business interests.

  • Recurring Payments: Providing for future generations.

  • Prenuptial Substitute

Benefits of Trusts

  • Trusts are exempt from local taxation.

  • Assets can be safeguarded from government expropriation.

  • Trust deeds can include clauses for revocation, trustee removal, and jurisdiction relocation, offering adaptability in changing circumstances.


Disclaimer: To explore the ideal entity type for your business and receive expert guidance, feel free to reach out to us at team.offshorelawyer@gmail.com. We're here to support you in making well-informed decisions that can pave the way for your business's success. Thank you for reading our blog, and we look forward to assisting you on your entrepreneurial journey.








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