On 1 January 2007 the British Virgin Islands Business Companies Act 2004 (the BVI BC Act) became the sole Business Companies Act in the jurisdiction, creating an environment where financial institutions and corporations can undertake a wide range of structured asset and project finance transactions in the BVI.
In October 2004 Chief Minister Dr. D. Orlando Smith had informed the country’s Legislative Council that a two-year transition period would be put in place to smooth the changeover to the new Business Companies Act, which lowered the income tax rate to 0% for both local and International Business Companies and effectively removed the distinction between 'offshore' and 'onshore' entities.
The new IBC legislation was drafted to ensure the territory was fully compliant with the European Union (EU) Savings Tax Directive and EU Code of Conduct on Business Taxation, as required by the United Kingdom of all its Overseas Territories.
Under the transition arrangements, new incorporations were possible under old legislation throughout 2005. From 2006, new incorporations had to be made under the new Business Companies Act, although companies already on the register were permitted to operate under the old IBC Act or Companies Act for an additional year.
The Act requires companies to use a registered agent to ensure compliance with the new laws.
Under the 1984 IBC Act, which preceded the 2004 Business Companies Act, just one corporate form was available, that of the company limited by shares. Under the new regime, several different types of companies can be incorporated. These are:
- Companies limited by shares. Likely to remain the most popular form of BVI company. (For more detailed information, see the British Virgin Islands International Business Company section below);
- Companies limited by guarantee not authorised to issue shares. This corporate form is likely to prove useful for not for profit organisations;
- Companies limited by guarantee authorised to issue shares. This 'hybrid' type of company provides greater flexibility in structuring transactions, as a result of its combined equity and guarantee membership;
- Unlimited companies authorised to issue shares. This structure provides greater transparency, as it is possible to look through the company to its shareholders; and
- Unlimited companies not authorised to issue shares. This type of company could be used to ensure effective estate planning.
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