British Virgin Islands Company Formation

Narendra Kumar

01 Apr, 2023

The British Virgin Islands is simply called “The Virgin Islands” is a British Overseas Territory held at the Caribbean, East of Puerto Rico. One of the most popular offshore legal entity is the British Virgin Islands Company Formation (BVI BC). About 40% of the world’s Offshore Companies are formed in BVI. Back on January 01, 2017 the British Virgin Islands Business Companies Act, 2004 came into existence as a sole name of Business Companies Act in the BVI. BVI BC helped in removing the difference between BVI “off Shore” and “onshore “legal entity. Thereafter the term “International Business Company (IBC) was replaced by “Business Company” (BC). BVI BC helped in removing the restrictions from doing business in BVI. It also helped in conducting the business with BVI residents and buying the real estate in BVI.

What are the Advantages of British Virgin Islands Company Formation?

• Zero Corporate Income tax: BVI Companies do not add extra layers of tax on the investors who already pay in their home country. This creates a level of playing in the field for investors from all jurisdictions. This also empowers the companies to move in positive direction thereby impacting in cost and doing the ease of ongoing maintenance and governance. The fact that there is no additional layer of tax and regulation ensures that incorporation and ongoing costs are low with high standards as done by BVI which is a member of an International organization of Securities Commissions (IOSCO). BVI BC is exempt from the BVI income tax that is it is exempted from all dividends, interest, royalties and other amounts paid by the Company. Also, all the capital gains in respect of shares, debt, and other securities are exempt. Last but not the least all transactions; instruments relating to transfers of any type of assets, shares, debt, other obligations are exempt.
• Structural flexibility: BVI BC has a requirement of a minimum one owner, one shareholder, one Director. Although the management structure may be designed in accordance with the widest variety of requirements. BVI BC may be composed of individuals or Corporations of any nationality.
• Personality: the legal personality of BVI BC has a separate personality and has the same powers as a natural individual.
• The shareholders and directors meetings do not need to be held in the British Virgin Islands, that means to say that it can be held anywhere. Also, the meetings can be telephonic or through electronic means.
• There is no requirement of the Annual General Meeting of BVI BC.
• Provisions against Confiscation: in case the shares of the Company are seized by any foreign Government or any authority, or confiscatory tax, with a similar cause the BVI BC, may disregard the seizure and continue to treat the person from whom the shares are seized.
• This type of Company incorporation is not expensive and provides annual support.
• Also, the information about the corporate officers, Directors, shareholders and other beneficial owners need not be filed with the BVI Register of Companies and is closed for the public.
• There are no restrictions on conducting business operations and buying of property in the BVI and all other countries.
• There is an option to the Companies incorporated in any other jurisdiction may be continued in BVI as a BC.
• The bearer of Shares: it is a type of offshore jurisdictions where bearer shares are still permitted. There is a free and anonymous circulation of bearer shares.
• Accounting Records: BVI BC Companies have no obligation of preparation of financial accounts. The records must be kept that are sufficient to show the transactions of the Company which enable the financial position of the Company to be determined with reasonable accuracy. The available records do not have to be kept in the British Virgin Islands and the location can be freely determined by the owners of the Company by providing the registered Agent with written confirmation of the respective address. There are no audit requirements also.
• No share Capital: BVI law has any restriction on the share capital. A company may simply be authorized to issue a specified or unlimited number of shares. This helps in achieving a higher level of flexibility and also helps in declaring distributions, carry out reverse share splits and other added benefits.

Types

The various types of incorporations in BVI BC are

• Companies limited by shares
• Companies limited by guarantee (with or without authorization to issue shares)
• Unlimited Company (with or without authorization to issue shares)
• Segregated Portfolio Company
• Restricted purpose Company

What will be the Incorporation process?

In case of Individual:

• Application form with complete details along with the preferred name and details of beneficial directors and shareholders. (Residence, nationality, profession etc).
• Scanned and notarized copy of the passport of directors, shareholders.
• One official Document.
• Signed beneficial owners declaration (BOD) from all shareholders and Directors.

In the case of a Company:

• Copy of Certificate of Incorporation
• Memorandum and articles of Association of the company
• Registered shareholders details
• Registrar of Directors

The Memorandum and Articles of Association and any other associated documents are required to register as a BVI BC to be sent to the Registrar. The MOA of the Company shall include the name of the Company, address, registered office and also the functions and objectives of the Company. Also, disclosure of the share capital of the Company and an explanation of liability needs to be addressed.

When the MOA of the Company is accepted, the Certificate of Incorporation will be issued. All these documents are required to be submitted to the Companies Registrar at the time of formation of the Company. Also, no additional fees need to be paid for the incorporation.

Requirements for British Virgin Islands Company Formation

Fees Structure

BVI BC needs to pay the following fees to BVI government.

Companies with shares registered:

• USD 450 (Company registered with 50,000 shares
• USD 450 (Company limited by guarantee or unlimited Company without shares
• USD 1200 (Company with more than 50,000 shares)
• USD 7500 (Restrictive purpose Company).

Conclusion

BVI BC is considered to be a modern, purpose-built dedicated and cost-effective process. The advantages of incorporation are extensive because of the tax exemption, low cost, simplicity of ongoing maintenance has a positive impact on transaction costs, can be sound grounds for structuring through BVI companies.

Also Read: Procedure of Foreign Company Registration in India