Innovative Legislation and Public-Private Partnership Ensure Continued Success in the BVI

By Humphry Leue, Chief Operations Officer
BVI International Finance Centre

In the early 1980s, when the British Virgin Islands launched itself as an offshore jurisdiction, all involved were hoping for success. However, even the wildest of optimists amongst them would have been hard pressed to envisage the extraordinary growth the territory has achieved in this extremely competitive market.

Today, the BVI is the leading offshore domicile for company registrations, with more than 750,000 companies registered here since 1984. This surpasses any other jurisdiction by far, and the figures for 2007 are set to match, if not exceed, the impressive figures of 2006 — which saw some 65,000 new BVI Business Companies registered.

The latest boost to this evolution took place on January 1, 2006, when the BVI Business Companies Act 2004 (BVI BC Act) replaced the long-established International Business Companies (IBC) Act, the latter of which lay at the heart of the BVI's development as a leading offshore jurisdiction. This new legislation has created a flexible, forward-looking and, in many ways, radical framework within which highly sophisticated companies can operate effectively.

This talent for seizing and making the most of opportunities by providing the right supporting environment has not only proved successful in ensuring the BVI remains the dominant force in company registration, but has also brought about success in other sectors such as investment business, trusts and captive insurance.

Mutual / Hedge Funds

The BVI has developed a reputation as an attractive and established jurisdiction in which to domicile offshore funds. With some 2,500 funds now operating in or from within the jurisdiction, the BVI is the second-largest domicile of hedge funds, with approximately 10 percent of the global market share.

The hedge fund industry has grown substantially since the introduction of the Mutual Funds Act 1996, which is the primary legislation governing the funds industry in the BVI. The legislation provides for three categories of regulated funds and it is this distinction between public, private and professional funds that is a core strength of the BVI.

Another major factor where the BVI really scores high is that it is significantly less expensive to establish and maintain a fund in the BVI than in its competitor jurisdictions.

The new BVI BC Act has also had an impact on the investment funds sector by providing fund managers with more options and flexibility, including the ability to establish funds as Segregated Portfolio Companies.

Trusts & Private Wealth Management

Private trust companies (PTCs) have become increasingly popular in Offshore Financial Centres (OFCs) in recent times, and the BVI enacted special provisions for PTCs in January 2007 to further strengthen its world-renowned trusts and estate planning offer.

In addition, the coming into force of the Virgin Islands Special Trusts Act 2003 (VISTA) and the BVI's Trustee Act 2003 (the Amendment Act) on March 1, 2004 were momentous occasions for the sector and jurisdiction alike.

Both VISTA and the Trustee Amendment Act were based on proposals that were made to the BVI government by the BVI branch of the Society of Trust and Estate Practitioners (STEP). This demonstrates the close collaboration between government and the private sector in terms of working together to meet the needs of the jurisdiction's international client base.

To make it easier for trustees to deal with third parties, the BVI has also adopted many of the recommendations of the English Trust Law Committee, thus making the BVI the jurisdiction of choice when setting up trusts to use in commercial transactions.

STEP BVI is now working on further proposals for trust law reform, so watch this space!

Captive Insurance

The BVI's captive insurance sector has continued to show substantial success and can now proudly boast 12 uninterrupted years of growth since the introduction of the BVI Insurance Act in 1994. The jurisdiction now has the fourth-highest number of captive insurance registrations in the world, with some 400 captives licenced in the jurisdiction by the end of last year.

The aforementioned Business Companies Act enables structures to be created that combine both the insurance and capital markets. Sophisticated structures such as catastrophe bonds and credit derivatives are increasingly being used to offer insurance-linked solutions to large and complex risks.

In addition, the Segregated Portfolio Companies legislation has undoubtedly attracted more captive business to the BVI. It provides an alternative for organisations with similar businesses and risks to form joint ventures while segregating their respective risks, assets and liabilities.

Public / Private Partnership

Essential and sound legislation and prudent regulation can only go so far. It is the on-island professionals who do the hard work and provide the necessary expertise on a day-to-day basis.

The BVI is the only Caribbean jurisdiction to boast the presence of six of the largest offshore law firms in the region. The world's top accounting and auditing practices are also present in the BVI. Their professional services not only include the traditional accounting, audit and risk management practices; increasingly specialist areas such as forensic accounting, corporate restructuring and insolvency management services are also being offered from within the BVI. In addition there are of course the many leading international trust and corporate service providers who, through their efficient systems, procedures and people, have helped build the BVI into the world's corporate domicile capital.

All this growth and success has been supported by the British Virgin Islands International Finance Centre (BVI IFC), which has played a pivotal role in the promotion and marketing of the BVI as a leading financial centre.

The BVI IFC last year launched "Team BVI," which includes a dynamic unit of ambassadors whose principal objective is to create a competitive advantage by presenting the territory as a modern and progressive jurisdiction to a global audience, thereby ensuring continued growth and success for decades to come.

Continuing to spread the positive and powerful message about the territory's competitive advantage is the central focus of the BVI IFC's partnership with Team BVI. With the current and growing popularity of the BVI's financial services products, Team BVI and the BVI IFC will surely have much to talk about over the coming months.

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