Offshore Services- British Virgin Islands

A company incorporated under the British Virgin Islands (BVI) Business Companies Act 2004 (as amended) is best described as a chameleon. The BVI business company is capable of transforming itself with the appropriate bespoke constitutional documents into a corporate vehicle that is able to meet and satisfy the needs of any corporate landscape; it can be the perfect loan applicant, joint venture vehicle, property holding company or securities listing vehicle.

BVI companies have been very successful in fulfilling the job specifications of the perfect listing vehicle. Historically, the choice of forum was NASDAQ or the New York Stock Exchange and the Singapore Stock Exchange. However, in recent times there has been an increase in the listings of BVI companies on the Oslo Stock Exchange and, in particular, on London's AIM.

AIM was launched by the London Stock Exchange in 1995 and has grown in size and popularity with the introduction of the Sarbanes-Oxley laws in the United States, which drove many companies straight to AIM given its lighter (and more sensible) regulatory environment in terms of its listing and ongoing corporate governance requirements. It was created to offer smaller companies access to capital markets to assist with their growth and development, even though its popularity and the size of its recent listings might be pricing the very companies that it was trying to attract out of the market.

As a result, AIM has become quite a melting pot, as more and more companies incorporated all over the world are choosing the London Stock Exchange's junior market. Of the 303 international companies registered on AIM as of February 2007, BVI companies accounted for 7.6%. The honour of the second largest listing to date on AIM has been claimed by a BVI company, Renesola Ltd, a solar panel maker from China, which raised £588 million on listing. As of February 2007 Renesola is also seventh overall in terms of value for the most actively traded securities list complied by AIM; Uranim Inc, another BVI company, is sixth overall, and Dolphin Capital Investors and Playtech are 16th and 25th respectively.

Over the past four years there has been a steady increase in the number of BVI companies listed on AIM (one BVI company in 2000, five in 2004, six in 2005 and nine as of October 2006). In the majority of these listings, the businesses of the companies involved have tended to be classed as general mining, platinum or precious metals.

Attractiveness of BVI Companies

A BVI company is easy to set up and maintain. Each company must appoint a local agent domiciled in the BVI to act as liaison with the relevant governmental bodies (eg, the Registry of Corporate Affairs and the Financial Services Commission) and deal with any other domicile-specific issues. The payment of an annual maintenance fee to the registry is all that is required to ensure that a company remains in good standing. There is no need to file an annual return with the registry or have a local director or local accountant/auditor.

The BVI offers the simplest of tax regimes - that is, a zero-rated tax regime. If a BVI company's business is operated outside of the BVI, it is subject to no corporation or income tax as a matter of BVI law within the territory. There is no stamp duty payable in the BVI in respect of the transfer of shares in a BVI company. Moreover, the holders of shares in a BVI company are not subject to income or capital gains tax in the BVI; distributions or dividends need not be paid to such holders.

The act provides that the management of a BVI company is in the hands of the directors with little or no recourse to shareholders, unless the constitutional documents of the company provide otherwise. Depending on the market that a BVI company may be trying to court, the vesting of so much power and authority in the directors may not always be appealing; being able to redress the balance of power (eg, by providing that shareholder approval be obtained for key business decisions) is crucial. Appropriate minority shareholder protections based on English company law are enshrined in the BVI legislation.

The act has abolished the concept of share capital. Therefore, a company seeking to make a distribution to its shareholders need not ensure that there are distributable profits/surplus from which to make the distribution or funds/monies set aside for the retention of capital from the pot available for the distribution. The directors must simply ensure that, immediately after the distribution, the company will continue to be able to meet its debts as they fall due and that its assets exceed its liabilities.

Due to the international nature of BVI companies, the BVI has not sought to introduce its own securities laws. Apart from applicable onshore or local securities laws, there are no additional specific regulatory requirements that such a company must satisfy or meet under BVI law prior to listing. For example, there is no need to submit the listing/admission documents to the Financial Services Commission or the Registry of Corporate Affairs for their approval prior to listing. This saves time and costs.

The act offers a flexible company law regime which, although innovative, is steeped in a sufficient number of familiar and core company law principles found in English law to make it appealing. It also offers a BVI company the ability to (i) adopt provisions of foreign law and other regulatory requirements to which it is not otherwise bound and which are not contrary to BVI law, and (ii) include such provisions in its constitutional documents. This ability is one of the most significant advantages to using a BVI company as a listing vehicle. This affords the company the ability to choose and use the best elements of applicable onshore laws to its advantage.

In this regard, BVI companies can - and usually do - include in their constitution provisions relating to the disclosure of interests in shares (as contained in English law), elements of the Combined Code on Corporate Governance or certain provisions of the City Code on Takeovers and Mergers. Most BVI companies have tended to amend their constitutional documents to include certain provisions of the Takeover Code in order to provide their shareholders with certain protections.

Comment

The ability of a BVI company to accommodate the Takeover Code provides great flexibility and certainty. The number of BVI companies listed on AIM and indeed on stock exchanges around the world will undoubtedly continue to grow. One of the greatest challenges that international jurisdictions face in the initial public offering market is adapting to the ever-changing regulatory requirements of each exchange. The BVI company has demonstrated that it has ample capacity to embrace such changes and stay at the forefront of international standards.

ILO