Changes in BVI Company Registration Laws: What You Need to Know

With its flexible corporate structures and neutral taxation, the British Virgin Islands (BVI) has long been an attractive business hub for incorporating holding companies. However, major changes are in motion as the BVI Business Companies (Amendment) Act, 2022, takes effect in 2023.

For companies utilising the BVI for offshore listings or as part of the Variable Interest Entity (VIE) structure, especially foreign investors investing in China’s restricted sectors, a reassessment of business structures is vital. But which areas should companies be mindful of to ensure compliance and operational efficiency under the updated regulations?

1. Disclosure of Director Information

For starters, the amended Act mandates the disclosure of current directors’ names by businesses looking to incorporate in BVI. While previously private and only privy to the company’s registered agent with the company’s approval, the names are now accessible via the BVI Registry of Corporate Affairs upon request and payment of prescribed fees.

The move comes as part of efforts to align the BVI with global requirements on transparency and the fight against financial crimes. However, there are exceptions to this rule: Information on former directors that predates the amended Act’s enactment and sensitive personal details of directors remain confidential.

2. Abolition of Bearer Shares

Another pivotal aspect of the amended Act is the conversion of all existing bearer shares into registered shares. A bearer share is a type of equity security owned by whoever holds the physical share certificate, making the ownership and transfer of the share anonymous and easily transferable.

The transition from bearer shares to registered shares can reduce the liquidity of shares for BVI companies while increasing the administrative burden and responsibility of ensuring regulatory compliance. Despite these challenges, the Act’s amendment is generally favourable for several reasons.

For instance, BVI companies with bearer shares are traditionally perceived to be riskier due to untraceable share ownership and negative association with illicit activities. As such, their removal can help businesses with such shares avoid additional scrutiny from financial institutions, simplifying tax reporting and compliance, ultimately lowering related costs for businesses.

3. Revised Strike-Off, Dissolution, and Restoration Rules

Previously, BVI companies struck off (due to non-payment of government fees) could be reinstated through a straightforward form submission process and payment of outstanding fees and penalties. However, the process has become more stringent following the enforcement of the amended Act, and businesses now have a 90-day grace period to settle outstanding fines and penalties after the company has been struck off. Failure to comply within this timeframe will lead to dissolution by the Registrar of Companies.

A silver lining is that the Registrar of Companies is now authorised to reinstate BVI companies to the Register even after dissolution. This change in the Act simplifies the administrative process for restoring businesses that have been automatically dissolved post-strike-off subject to certain conditions being met.

4. New Financial Reporting and Record-Keeping Mandates

The amended Act also introduced mandatory annual financial return submissions for BVI companies. These returns, comprising a balance sheet and profit and loss statement, must be submitted to the business’s registered agent within nine months after the company’s financial year-end. The submitted information will not be available for public viewing. If a return is not submitted within 30 days of the deadline, the registered agent must report this to the BVI Financial Services Commission. The registered agent must retain the returns for at least five years after their service ends.

Implications of Regulatory Changes

While the amended Act does not alter the entire business structure, it necessitates a focused review and adaptation by companies. This is especially so for companies holding assets in China. Some key recommendations in response to the amended Act include:

• Keeping your BVI company in good standing: This is achieved through timely payment of annual fees, filing of the economic substance declaration and adherence to the new annual financial statement submission requirements. Meeting these new requirements and aligning with the financial periods quickly can be challenging. In such situations, engaging the offshore accounting services of experienced partners like Segovia Financial Services can be helpful. With professional assistance, your business can navigate these complexities effectively to preserve your good standing in the BVI jurisdiction.
• Restoration: Prompt restoration is recommended for BVI companies struck off before January 1, 2023, but are not dissolved to avoid complex and costly court processes.
• Compliance with filing: Businesses should also prepare financial records in line with new filing requirements. Otherwise, companies that intend to liquidate should expedite the processes to avoid complications.
• Nominee director arrangements: For those preferring anonymity, the new disclosure norm for directors’ information also necessitates timely arrangements for a nominee director, which Segovia can also advise on.

Stay Ahead in the BVI Regulatory Environment with Segovia

Adapting to the new BVI regulations, a key to seamless business operations, requires staying informed and proactive, and this task is made simpler when you partner with professionals like Segovia. At Segovia, our team comprises consultants with over 20 years of global experience in legal and accounting fields. This rich and comprehensive expertise enables us to guide your company through diverse, complex regulatory requirements, ensuring you remain compliant and well-positioned in the BVI landscape.

Whether you require offshore corporate services like nominee director services or advice on BVI company incorporation, we’re happy to help with strategic insights and practical solutions tailored to your needs. Speak to our team today and take the first step towards navigating the BVI’s new regulatory framework with confidence and ease.