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Reasons to Use BVI Companies for Financing Transactions

The British Virgin Islands (BVI) is home to more than 416,000 active companies. This article considers the benefits of using a BVI company in financing transactions.

BVI’s appeal

BVI’s attractive features include political stability, tax neutrality and the absence of exchange controls and currency restrictions. Creditor-friendly, it has a well developed, English-based legal system, a bespoke commercial court and flexible, commercial legislation. BVI also upholds international compliance standards.
These factors all contribute to BVI being a ‘jurisdiction of choice’ for corporate vehicles entering into financing transactions.

Advantages

  • BVI companies are legal entities in their own right, separate from their members, and have legal capacity to sue and be sued in their own name under BVI law.
  • There is no income or other tax of the BVI withheld on any payment made to or by the company.
  • It is not necessary to ensure the legality, validity or enforceability of documents registered with any governmental authority in the BVI unless the documents create a charge.
  • Documents are generally not subject to stamp duty, and no registration, documentary recording, transfer or similar tax is payable in connection with the execution, delivery, filing, registration or performance of transaction documents.
  • BVI companies are free to acquire, hold and sell foreign currency and securities without restriction.
  • A financial institution is not deemed to be resident, domiciled or carrying on business in the BVI by reason of the execution, performance and/ enforcement of transaction documents.
  • A financial institution may bring an action or proceedings before the appropriate courts in the BVI for enforcement. The institution is not required to be licensed to carry on business in BVI to enforce its rights under the transaction documents.
  • The choice of foreign laws, typically New York law and English law, is recognised before a court of competent jurisdiction save for exceptions, eg. in public policy and penal instances.
  • A final and conclusive judgment is enforceable under the reciprocal enforcement of judgments legislation or, where such legislation does not apply, a new claim can be brought in BVI based on a final judgment in a foreign court under which money is payable.

A Share Mortgage

The most common types of security are mortgages, charges and assignments. As most BVI companies are holding companies their assets are often shares in subsidiaries, BVI security usually consists of an equitable mortgage over shares – a ‘Share Mortgage’.
Under a Share Mortgage, the lender receives certain deliverables, to allow control of the company on enforcement. Articles of association may also be amended to include certain share charge-related provisions. It is also standard for a notation that the shares have been charged to be placed on the register of members and filed with the registrar, thereby putting third parties on notice.

Security over assets

There is no concept of perfection of a charge in the BVI. BVI companies are required to keep a register of all relevant charges created. Where a company creates a relevant charge an application to register the charge may be made to the Registrar of Corporate Affairs pursuant to Section 163 of the BVI Business Companies Act. A charge so registered has priority over any subsequently registered and unregistered charges. Third parties are deemed to have notice of any publicly registered charge.

Conclusion

BVI companies feature prominently in all types of financing structures. We regularly act on behalf of lenders and obligors on acquisition finance, structured finance and asset finance transactions in sectors including European property, oil in the Middle East, energy in North America, telecoms in South America, worldwide resorts and hotels, and shipping in the North Pacific, to name but a few.

 

To continue reading full articles in PDF format:
Reasons to Use BVI Companies for Financing Transactions

 


Audrey M. Robertson
Counsel

British Virgin Islands   +1 284 852 1111


This article was originally published in The Lawyer July/August 2017 issue

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