Asset Protection Devices in the British Virgin Islands That Creditors Need to Understand

There are approximately 800,000 companies registered in the British Virgin Islands (“BVI”). BVI entities are used as vehicles for investing in Hong Kong, Singapore and mainland China where anywhere from 40-50% of BVI entities are used.

There are three types of funds that can be organized under BVI law-private, professional and public. High net worth individuals are most interested in private funds, which is limited to 50 investors. A private fund can be set up using a partnership, a company or a trust. A director of the fund can manage the assets without restrictions other than those imposed by the offering documents. Shares can be issued to any other family member with no minimum investment. Shares can be liquidated on demand and separated into different classes with different rights.

A BVI company is a utilized for business and private arrangements. Once the company is established, the directors and shareholders can manage the company and its assets without any restrictions. BVI has no income, corporate, capital gains, inheritance, gift or wealth tax. The main benefit of a company is that organizational documents can be drafted to mirror a specific transaction. A BVI company can include a provision that a director can, in  a joint venture scenario, act in the best interests of one or more shareholders. Information on directors and shareholders is not public.

A VISTA trust came into existence in 2003 and enables a shareholder to establish a trust that disengages the trustee from management responsibility and business is managed by the directors. This trust is utilized where the underlying assets comprise investments involving a degree of risk which would be inappropriate for trustees of private trusts. At least one trustee must be a company with a trust license from BVI’s Financial Services Commission or be a BVI private trust company.

A Private Trust Company enjoys the benefits of limited liability and perpetual existence. The principal advantage is a settlor can exercise a significant degree of control over trustee’s decisions by being a director. This trust does not need a local director or have a physical presence in BVI. Only the trust’s memorandum and articles of association are public.

BVI is renowned for its asset holding vehicles. They are flexible and easy to establish.