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Offshore Services- British Virgin Islands

This update reviews why British Virgin Islands (BVI) companies have become such popular vehicles for financing transactions of all kinds.

 

Commercial Advantages

The commercial advantages of carrying out financing transactions in the BVI are as follows:

 

  • The BVI is a well-established offshore jurisdiction (the world's most popular by number of companies).
  • Transactions carried out in the BVI are readily accepted around the world by counterparties, banks and institutions.
  • BVI companies may be listed on leading stock exchanges around the world.
  • BVI companies have a strong reputation for speed and flexibility.
  • The country has the right level of regulation.
  • The BVI is a British overseas territory.
  • Carrying out financing transactions in the BVI is cost effective and tax efficient.

 

Legal Advantages

 

The legal advantages are as follows:

  • BVI law follows English common law and equity.
  • There is no requirement per se for corporate benefit.
  • There is statutory confirmation that a BVI company can create charges governed by any law and that such charges will be binding on the company to the extent of - and in accordance with - that governing law.
  • There is statutory confirmation that a share charge over BVI shares can be governed by any law and that the remedies of the governing law will apply.
  • There is a system of public registration of charges (priority is governed by the order of registration).
  • Failure to register a charge does not affect its validity.
  • Priority agreements are recognized by statute.
  • BVI companies have statutory power to give financial assistance in connection with the acquisition of their own shares.
  • The Insolvency Act 2003 is cutting edge and modern.
  • Vulnerable transactions follow English insolvency law, but have considerable enhancements and appropriate safe harbours to protect arm's-length secured lending transactions.
  • The BVI netting provisions, following the International Swaps and Derivatives Association Model Netting Act, validate market contract netting agreements through insolvency.
  • Recent trust legislation enhances the efficacy of off-balance-sheet financing structures.
  • Sealing is unnecessary for deeds.
  • There is no requirement for surplus or distributable profits when paying dividends, or redeeming or buying back shares.
  • Par value and par value shares are unavailable.
  • Companies have no capital maintenance concerns and enjoy full flexibility when dealing with shares.
  • The use of treasury shares is allowed.
  • Directors' and shareholders' meetings can be held anywhere, telephone participation is catered for and written resolutions may be used.
  • There is no director or shareholder residency requirement and companies may have a sole director/shareholder.
  • Restricted purposes companies, which have special rules and status, are very attractive for structured finance and securitization transactions.
  • It is possible to use segregated portfolio companies for certain transactions.
  • It is possible to use guarantee and unlimited companies, with or without shares.
  • It is possible to migrate BVI companies to other jurisdictions (and vice versa), including other offshore jurisdictions.
  • Statutory mergers and court-approved arrangements provide certainty to various types of transaction.

 

International Law Office