The vast majority of companies formed in the BVI for offshore purposes are incorporated under the International Business Companies Act 1984. 

However this law did not supersede the existing Companies Law 1963, also known as Cap. 285, which is based on English law and is used to form various types of company used by businesses trading in the BVI, and also for certain other special purposes.

Companies formed under the Companies Act 1963 are often referred to as 'CAC', 'CapCo', or 'Cap. 285' companies.

They can be:

Private companies limited by shares, by guarantee, or hybrid; or they can be unlimited, but that is rare.

Public companies can also be formed under the Act.

All these types of company needs:

Memorandum and Articles of Association must be filed at the Companies Registry, along with the registration fee.

For companies limited by shares the Articles of Association can follow the Memorandum -

Foreign companies can re-establish themselves in the BVI without the necessity for reciprocal arrangements in the original country of incorporation. An IBC wishing to leave the BVI may do so.

Responding to international pressure, the BVI Government enacted the International Business Companies (Amendment) Act 2003, limiting the use of bearer shares and introducing other measures to increase transparency. The Government also plans to amalgamate the regimes for IBC's and Cap 285 companies. In future, bearer shares must be held in the custody of either an "Authorised Custodian" or a "Recognised Custodian". If bearer shares are not in the hands of an appropriate custodian after the end of 2004, the shares will be disabled and there is a risk that the company may be wound up.

An Authorised Custodian is a person who holds a valid licence issued under the Banks and Trust Companies Act 1990 ("BTCA"), and whose licence specifically includes an authorisation permitting the holder to act as a custodian. Recognised Custodians are persons not licensed under the BTCA and not resident in the British Virgin Islands but who are specifically approved by the Financial Services Commission as Recognised Custodians..

A company issuing bearer shares must provide the Custodian with:

The full name of the beneficial owner of the shares; and

The full name of any other person having an interest in that share or a statement to the effect that no other person has any interest in the share.

An ordinary resident company limited by shares is usually formed for the purposes of carrying on local business. It must:

Have two or more members

Restrict the transfer of its shares;

Not invite the public to subscribe for its shares; and

Must not have more than 50 members.

Residence depends on the location of management and control; usually, if more than half of the directors are resident in the BVI, then so is the company. If a resident company carries on business in the BVI it must obtain a Trade License, and will pay a license fee depending on whether the shareholders are residents or foreigners. 

The fee due on incorporation is $200 plus $15 for each $10,000 of nominal capital in excess of $10,000. Annual registration fees are from $25 to $10,000 depending on the gross value of the company's external (non-BVI) assets.

Under the Companies Act, a company limited by guarantee must have a minimum of two members; the Memorandum of Association contains a statement of the amount up to which the members guarantee the company's debts. The Articles can provide for the members to have differing 'shares' of the assets and liabilities.

The Company Limited by Guarantee has certain advantages, including that there is no list of members on the annual return, and that control over assets can be achieved without the use of shares; in some jurisdictions, profits realised from such companies are classified as capital gains rather than as income. Specialist advice is required by anyone considering the use of a company limited by guarantee.

Companies limited by guarantee can be resident or non-resident, as for those limited by shares. The fee payable on incorporation is $100, and annual registration fees are as for companies limited by shares.

A hybrid company under the Companies Act usually has a group of shareholding members which is distinct from the group of guarantors. The shareholders can have 100% of the voting power, and can execute a trust deed in respect of their shareholdings; under the BVI's trust legislation  a trust Protector can be appointed to oversee the trustees' actions. The result, if the company is set up correctly (specialist advice needed!), is to separate control and membership of the company from beneficial interest, which is sometimes desirable.

Hybrid companies can be resident or non-resident, as for companies limited by shares. The fee payable on incorporation and the annual registration fees are as for companies limited by shares.

The International Business Company is the most widely used vehicle for offshore operations in the BVI; it normally takes the form of a private company limited by shares. 

The governing legislation is the International Business Companies Act 1984, updated by the International Business Companies (Amendment) Act 1990 and the International Business Companies (Amendment) Act 2003, which restricts bearer shares (see above) and imposes record-keeping requirements on professional intermediaries. 

Under the International Business Companies (Amendment) Act 2003, from December 31, 2004, all international business companies (IBCs) located in BVI will be required to establish and maintain a Register of Directors, and must appoint their first director within 30 days of the IBC's incorporation. Other statutory requirements however remain minimal, and flexible:

Only one director and one shareholder are required;

Shareholders, directors and officers need not be resident in the BVI and there is no stipulation as to their nationality;

There is no minimum capital requirement; shares may be either registered or bearer and may be issued in any currency (bearer shares now have to be deposited with an authorised intermediary, who must record the identity of the beneficial owner);

Accounts need not be kept; however, if they are kept there is no requirement for an audit;

No returns are needed of shareholders, directors or officers;

Shareholders' and directors' meetings need not be held in the BVI and can be held by telephone;

The Memorandum and Articles of Association are the only documents to be held on the public record.

No business may be transacted with residents in the BVI;

No ownership interest in real property in the BVI is permitted; property may be leased for office use only;

Banking or trust business may be carried on only if an appropriate license is issued;

Likewise, a licence is required to carry on insurance or re-insurance business;

Engaging in the business of company management or providing registered facilities for BVI incorporated companies is not permitted.

IBCs are permitted to own shares in other BVI companies, maintain bank accounts in the jurisdiction and employ the services of local professionals. IBCs are exempt from BVI taxes by statute.

It is usual to use a registered agent in the BVI to incorporate an IBC (eventually it is obligatory to appoint one anyway; there are about 70 of them, licensed by the Government). Fees for incorporation of an IBC are based on the company's authorised share capital. Normally, the incorporation process takes no more than one day; however, for banks, trust companies and insurers the process is lengthier.

Statutory incorporation fees are $300 for capital up to $50,000 and $1,000 thereafter. 

The annual license fee is:

BVI Limited Partnerships are governed by the Limited Partnerships Act 1996; as regards general partnerships this act reproduces almost exactly the common law provisions of the English Partnership Act 1980, but the clauses dealing with limited partnerships follow modern US Delaware precedent.

Formation of a limited partnership is normally carried out by a registered agent (it is obligatory to nominate one on formation in any event). The agent files the Memorandum and Articles of Association with the Registrar of Limited Partnerships, who issues a Certificate of Limited Partnership; the partnership then exists; but if there is no certificate, the partnership will be deemed to be a general partnership. The fee payable on registration if $500 and there is an annual license fee, also $500.

The rights and limitations of limited partnerships under the Act mirror those of the International Business Company (see above); however the Act distinguishes between local and international partnerships - local partnerships may transact local business but are not tax-exempt, while international partnerships are tax-exempt but barred from local business.

The BVI limited partnership legislation was designed to facilitate the use of such vehicles in investment and mutual funds. As is usual in limited partnerships, there are one or more general partners with unlimited liability and management responsibility, while limited partners are liable only to the extent of their capital contributions, and their identity does not need to be disclosed. It is possible for the same person to be both a general and a limited partner in the same partnership. A limited partner's interest in the partnership is assignable. 

There are no minimum capital requirements or prescribed debt:equity ratios.

The trust law of the British Virgin Islands is based on English trust law. The Trustee Amendment Act 1993 (the "Amendment Act") updated the original British Virgin Islands Trustee Act (itself largely based on the English Trustee Act 1925).

The Amendment Act introduced a fixed perpetuity period not exceeding 100 years, and has modern 'wait-and-see' provisions to deal with interests that might vest outside the perpetuity period. The Amendment Act also introduced purpose trusts..

BVI trusts are exempt from registration under the Registration and Records Act, and trustees are exempt from any need to file annual returns and from any other reporting requirements.

The majority of BVI trusts are exempt from all taxes provided there are no beneficiaries resident in the BVI, and that the trust does not conduct any business in the BVI or own any land in the jurisdiction. A trust duty of $50 is imposed on each trust instrument subject to BVI proper law.

The Amendment Act provided for the appointment of a 'protector of trust', effectively a supervisor of the trustee(s), and also managing and custodian trustees. A company offering trust services must obtain a licence under the Banks and Trust Companies Act 1990 and conform to various conditions.

The British Virgin Islands seem to have got as close to being a perfect 'private' offshore international financial centre as can be imagined. For 25 years the Government has welcomed offshore business, and has created a world-standard regulatory structure to avoid money-laundering and other criminal activity. Like Bermuda, the BVI decided not to encourage the gracowth of offshore banking, but the BVI International Business Company must be the world's most successful offshore entity, and is used extensively in financial holding and investment structures, as well as in trust management. 

The BVI have also been successful in developing mutual funds and captives, although not being the leading jurisdiction in either case. Finally, the BVI have a strong position in yachting both as a registry and as an operating base.

This section of the lowtax.net site describes the most important types of offshore business activity carried out from the British Virgin Islands.

In common with many other offshore jurisdictions, the British Virgin Islands is responding to pressure from the OECD and FATF by tightening up its regulatory regime. The BVI Government established an independent regulatory body - the Financial Services Commission (FSC) - on 1 January 2002. Then, in October, 2002, the BVI Finance Centre was established under the FSC as a dedicated financial services marketing unit designed to promote the BVI as a premier international centre for financial services.

The Finance Centre is responsible for providing information on the BVI and its activities, co-ordinating BVI participation at industry conferences and events, liaising with the media and producing marketing material including advertising, brochures and a new web-site.

Government plans for improved legislation in 2003 include a new Money Services Bill aimed at policing the perimeter of regulated activities, Protected
Cell legislation to embrace both insurance companies and mutual funds, a new investment business legislation aimed at regulating investment intermediaries, a long-awaited Insolvency Bill, and an amendment Bill in respect of all current financial services related legislation to update and modernize current practices.

The phenomenal growth of the BVI International Business Company (IBC), with more than 300,000 IBCs incorporated by 1998, has been fed by political instability in Latin and Central America, and more recently the handover of Hong Kong to mainland China. 

It is difficult to be sure why the BVI became the jurisdiction of choice for these markets: of course, the IBC is highly flexible; secrecy is good; the BVI's reputation is good; there is common law; and so on. But other jurisdictions could make similar claims. 

At all events, it happened, and the IBC's success has a knock-on effect in terms of the diversity and professionalism of supporting services in the BVI. 

The authorities are keen to expand into new markets, and will no doubt legislate further to open up new possibilities.The great majority of existing IBCs have been formed as asset protection vehicles, sometimes in association with trusts, either to hold shares or other types of asset.

IBCs are allowed to issue bearer shares, but in response to international pressure, the BVI Government enacted the International Business Companies (Amendment) Act 2003, limiting the use of bearer shares and introducing other measures to increase transparency. The Government also plans to amalgamate the regimes for IBC's and Cap 285 companies. In future, bearer shares must be held in the custody of either an "Authorised Custodian" or a "Recognised Custodian". If bearer shares are not in the hands of an appropriate custodian after the end of 2004, the shares will be disabled and there is a risk that the company may be wound up.

An Authorised Custodian is a person who holds a valid licence issued under the Banks and Trust Companies Act 1990 ("BTCA"), and whose licence specifically includes an authorisation permitting the holder to act as a custodian. Recognised Custodians are persons not licensed under the BTCA and not resident in the British Virgin Islands but who are specifically approved by the Financial Services Commission as Recognised Custodians. There are 80 such custodians.

Over 500,000 international business companies have been registered under the Act, with over 380,000 IBCs believed to be currently active.

When the BVI began their development as an IOFC, the authorities decided not to encourage offshore banks to establish themselves in large numbers, as a defence against money-laundering. Unlike Bermuda, however, which created local banks to the exclusion of external banks, the BVI authorities allowed in a small number of international banks. There are in fact a total of 7 banks in the BVI, including Barclays Bank and Chase Manhattan.

Lately there has been pressure on the Government from the business community to allow in larger numbers of respectable offshore banks; professional firms in particular feel that the BVI's legislative and regulatory apparatus is well up to global standards and well able to defend the BVI and its good reputation against scams, criminals and drug money. By now it's likely that the Government would not refuse new applications from top banking institutions.

Banks are regulated under the Banks and Trust Companies Act 1990, and supervised by the Inspector of Banks, Trusts and Company Managers.

Trust Management has been a major activity in the British Virgin Islands for 30 years or more. Originally the trust was used primarily by wealthy individuals from the major common law countries, but it is now accepted as a major technique of asset protection in all parts of the world. Trusts in the BVI have a basis in common law, and are formed under the Trustee Ordinance 1961. The Trustee (Amendment) Act 1993 considerably modernised and updated the legislation, allowing for purpose trusts among other things. The new legislation, together with the highly flexible BVI International Business Company, has opened up wider markets for the BVI trust, in which clients are not necessarily interested so much just in tax avoidance, but also in the efficient management of wealth in a more general sense.

There is a large and sophisticated community of professional advisers on trust matters in the BVI. Companies offering trust services must be licensed under the Banks and Trust Companies Act 1990, and supervised by the Inspector of Banks, Trusts and Company Managers.

The main forms useful for offshore operations in the British Virgin Islands are the International Business Company, the various types of non-resident Cap. 285 company, the International Limited Partnership, and the Trust.

Offshore operations may take place within the following forms:

Non Resident Private Company Limited by Shares.-

Non Resident Private Company Limited by Guarantee.-

Non Resident Hybrid Company

IBC´s (International Business Company)

International Limited Partnership

Trust

Offshore BVI companies are taxed as follows:

Non-resident limited liability companies (whether limited by shares, by guarantee or both, ie hybrid) are exempt from income tax on foreign-derived income, but pay BVI income tax at 15% on any chargeable income derived locally or remitted to the BVI.

Resident limited liability companies which obtain not less than 90% of their net profit from trading outside the BVI (known as offshore trading companies) pay 1% income tax on their chargeable profits.

International Business Companies are exempt from income tax and from stanp duty.

International Limited Partnerships are exempt from income tax and from stamp duty.

Trusts without BVI beneficiaries, local land holdings or business activities are exempt from income tax and stamp duty.

International Business Companies (and International Limited Partnerships) are permitted certain local activities:

Make and maintain deposits with banks;

Professional contacts with solicitors, barristers, accountants, book-keepers, trust companies, administration companies, investment advisers etc 

Prepare or maintain books or records;

Hold meetings of directors or members;

Hold a lease of property to use as an office for other permitted purposes;

Hold shares, or other securities, in another IBC;

Hold shares, or other securities, in a company owned by a BVI resident or a BVI-incorporated company.

Non-resident Companies Act (Cap. 285) Companies may do business locally but will pay income tax on the profits.