In 2000 the British Foreign & Commonwealth Office commissioned the accounting firm KPMG to conduct a survey of the British offshore territories and the subsequent report indicated that amazingly 41 percent of the world's offshore structures were registered in the BVI. This was followed by a special report in 2007 by the Financial Times which indicated that by country the BVI had the second largest share of outgoing direct investment in the world (only behind Hong Kong).
The popularity of the BVI as an international finance centre has evolved over the years for a number of reasons. International finance centres all seek to be the jurisdiction of choice for high-net-worth individuals and families throughout the globe and in this way they are in direct competition with one another to remain at the cutting edge of international financial planning.There is therefore a constant need for such jurisdictions to review and enhance their offerings, which is only to the benefit of clients. In the case of BVI, its attractiveness to international clients as a preferred jurisdiction for corporate and trust structures has been achieved through its innovative range of structuring solutions (achieved through regular refinement of the legislation), the quality of the service providers and professionals and the effective regulatory systems in place to oversee the activities of the financial services industry.
Clients are attracted to the BVI as a jurisdiction for corporate and trust structures because of its political stability and the importance of the preservation of the rule of law. The laws of the BVI are primarily based on English common law and equity, but in addition statutory laws and a substantive body of local case law provide a modern legal framework. Classic English law principles relating to companies and trusts have been updated and refined to offer user-friendly and flexible vehicles for clients seeking to establish effective structures for succession planning, asset protection and legitimate confidentiality preservation. For example, in the case of the trusts regime, the development of the VISTA regime and Private Trust Companies (commonly called PTCs) in recent years now allows clients to establish BVI trust structures so as to take advantage of all the classic benefits of a trust (effective succession planning, asset protection) while at the same time being able to retain effective control of the assets held in the trust structure.
All the major offshore law firms have offices in the BVI and so clients in need of BVI legal advice have a wide selection of experienced legal professionals to choose from. The lawyers in BVI are used to acting for clients from all parts of the world and are therefore able to adapt specific structuring solutions so as to be as efficient as possible for clients from different countries. Additionally, the majority of these law firms have offices in Hong Kong, where BVI qualified lawyers, speaking the local languages, are able to work with clients and their advisors "in real time", while at the same time communicating with their colleagues and other professionals and service providers in the BVI.
The Court system in the BVI can now be favourably compared with that of any other international finance centre and this is often an important factor for ultra-high-net-worth clients when considering where to set up their private wealth holding vehicles. In 2009, a Commercial Division of the BVI High Court, with a specialist judge, was established as a specialist division for the hearing corporate and commercial matters and trusts disputes. The highest court for BVI legal proceedings is the Judicial Committee of the Privy Council, which is based in London and is the highest court of the United Kingdom. Whilst there is a danger not to consider such factors when looking to set up an offshore vehicle, wealthy international families and their advisors do take great comfort from the robust legal systems in place in the BVI.
In addition to the quality of available lawyers and the developed legal system, the BVI enjoys an abundance of professionals working in the various strands of financial services offered from the jurisdiction. In addition to service providers focussing on the provision of registered agents to BVI companies and the growing Investment Funds business in the territory, there are over 300 licenced trust companies in the BVI. These trust companies are regulated by the Financial Services Commission (as to which see further below) and must thereby confirm to government regulations in relation to the business they carry on.
There is a wide variety of options for international clients looking to set up a BVI trust structure. This means that the role of the trustee will vary from one trust to the next. For example, if the BVI trust is established as a Vista trust, the role of the trustee in the everyday management of the BVI company held in the trust will be limited, and control is retained by the directors of that BVI company. However, where a BVI trust is not a Vista trust, the trustees can have a more active role in the administration of the assets held in trust. BVI trusts are allowed to hold any type of asset anywhere in the world and so the professionals in the BVI trust companies have a very wide range of experience and expertise allowing them to deal efficiently with BVI trusts holding all types of assets located in a wide range of geographical locations.
Many BVI trusts are established as discretionary trusts, which mean that there is a class of beneficiaries. None of the beneficiaries of a discretionary trust has any fixed or automatic right to distributions of income and capital from the trust; they only have the right to be considered for benefit by the trustees. Discretionary trusts are effective for asset protection because none of the beneficiaries have any automatic access to the trust assets, but as a result it can be the case that the trustee has a high level of responsibility in respect of distributions from the trust. Individuals establishing BVI trusts, known as settlors, typically leave Letters of Wishes to the trustees to provide guidance as to how the trustees might consider exercising their discretion in relation to the distributions. Trustees are entitled to attach weight to the wishes of a settlor, although the Letters of Wishes are not binding on the Trustees. In any event, the skill and expertise of the trust professionals in the BVI will enable the trustee to discharge their duties effectively, acting in the best interests of the beneficiaries, when it comes to decisions about distributions from trusts and their administration generally.
In relation to the regulation and supervision of trust companies and other financial services providers in the BVI, the Financial Services Commission ("FSC") was established in 2001 to act as the autonomous financial services regulatory authority for the jurisdiction. The role of the FSC is wide and continues to expand, reflecting the growth of the financial services industry in the BVI. Its main functions are as follows:
- Supervising and regulating licence holders (which includes trust companies);
- Monitoring and regulating all types of financial services business carried on in the BVI;
- Taking enforcement action against persons carrying on unauthorised financial services business; and
- Monitoring compliance by all regulated entities with the jurisdiction's anti-money laundering regulations.
In general, the FSC will expect all licence holders to have a thorough knowledge and understanding of the applicable law and regulations which will impact the financial services business which they carry on. This ensures that all regulated entities, such as trust companies, will be appropriately staffed and have all necessary systems and controls in place to carry on their business effectively and efficiently for their clients and within the laws and regulations of the BVI. Failure on the part of any such entity to do so will result in penalties and other enforcement action from the FSC.
Accordingly, the sophisticated regulatory system of financial services providers in the BVI means that clients will deal with well trained and experienced professionals working in an effectively supervised industry. This aspect of the BVI as an international finance centre is also of comfort to the international high-net-worth families which have chosen to set up vehicles in the jurisdiction.
Overall, the BVI has successfully developed into a leading international finance centre and in a very competitive global market, much of this success can be attributed to the available structures in BVI (such as very flexible trusts), a developed legal and court system, access to a pool of expert professionals in all areas of financial services and a robust regulatory system supervising the wider financial services industry.
