Changes in the British Virgin Islands Concerning Bearer Shares and Director Requirements
The International Business Companies (Amendment) Act, 2003, which was passed by the British Virgin Islands’ Legislative Council on April 17th, 2003, is making several changes in regard to bearer shares and Director requirements for International Business Companies (IBCs). The law is not yet effective until signed by the Governor.
The new rules follow more than two years of study by the government concerning ways in which the use of bearer shares can be continued without jeopardizing the anti-money laundering and anti-terrorist financing goals of the international community.
The new rules do not abolish bearer shares. Companies can continue to issue bearer shares but they must be held in custody by an Authorized or Recognized Custodian (see below). In addition, companies that issue bearer shares will pay higher government incorporation and annual fees ($1,000.00). Note that the identity of the shareholders either of registered shares or bearer shares held by a custodian are not disclosed to the government.
The legislation introducing the new bearer share rules also contains a provision requiring that details relating to directors of an International Business Company (IBC) be maintained at the Registered Office.
Companies may continue to issue bearer shares. However, the shares have to be lodged with an Authorized or Recognized Custodian.
Existing companies will have until 31st December 2004 to deposit their bearer shares with a Custodian, exchange the shares for registered shares or otherwise cancel or redeem the shares.
Authorized Custodians are institutions such as banks that are licensed under the BVI Banks and Trust Company Act.
Recognized Custodians are likely to consist of two categories:
Category 1 will be investment or securities clearing organizations or settlement systems that specialize in the custody business and who have been specifically designated by the BVI Financial Services Commission as Recognized Custodians. This list will include custodians in the USA, Europe, UK and Hong Kong.
Category 2 Custodians will be financial institutions subject to regulation, wherever located, and who are subject to recognized customer due diligence obligations and principles and who satisfy the BVI Financial Services Commission that necessary and sufficient safeguards are in place for the secure custody of bearer shares.
Owners of bearer shares must provide to the Custodian:
The full name of the beneficial owner of the shares.
The full name of any other person having an interest in that share or a statement to the effect that no other person has an interest in the share.
Any other information as may be prescribed by the BVI government.
Bearer shares not deposited with an approved custodian will be deemed “disabled”. During the time a share is “disabled” it will not be entitled to vote, receive dividends or to obtain a share of the assets of the company on winding up or liquidation.
The BVI Financial Services Commission can apply to court to wind up a company which does not comply with the new bearer share rules.
The government incorporation and annual license fee for a company with the right to issue bearer shares will be US$1,000.
A company that wishes to avoid paying higher fees for the right to issue bearer shares must include in its Memorandum of Association a prohibition against the issuance of bearer shares. It is not yet known if existing companies will need to amend their Memoranda of Association to comply with this requirement.
DIRECTOR REPORTING REQUIREMENTS
Currently, the Register of Directors does not have to be maintained at the Registered Office of the company or with the Registrar of Companies.
However, the new rule will require that the Register of Directors be maintained at the Registered Office. Existing companies will be allowed a one year transition period in order to provide the registers to the Registered Office. Companies formed after the effective date of the new legislation will be required to comply immediately with the filing requirement.
Only director information commencing with the effective date of the enactment of the legislation will be required. This means that companies do not have to file historical information on persons or companies who were directors before the enactment date.
There also will be a requirement to appoint a director within 30 days of incorporation. A number of alternative ownership structures exist for shareholders owning bearer shares. These include the use of registered shares, nominee shareholders, trusts and share warrants. In addition, some jurisdictions continue to permit the use of bearer shares. If you are an advisor to clients who currently hold bearer shares in BVI companies we invite you to contact us during the next 18 months before the law comes into effect to discuss how your clients should respond to the new legislation.
information can be found by visiting
our website at www.ibcf.com,
or by emailing us at [email protected].
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found at: http://www.ibcf.com/news/newshome.php
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