Benefits of a BVI Business Company
September 3, 2015
Benefits of a BVI Business Company
Offshore financial centers (OFC), also called tax havens, are an integral part of the modern business environment. Being referred to international finance centres offshore jurisdictions provide economic and political stability, advanced financial systems and business-friendly legislation, attract significant amounts of money from businessmen and investors around the whole world and serve as destinations for capitals of the richest global corporations. There is a chance to avoid additional tax burden for investors who open an offshore company in British Virgin Islands (BVI) which makes the jurisdiction very attractive. The islands attract attention of business owners and investors by numerous advantages they get when starting a company in BVI.
Owning a BVI company means significant deal costs reduction, ease of maintenance and governance, being levied with a friendly tax policy. The jurisdiction is famous for its common law principles, simplified bookkeeping and reporting system as well as for the opportunity to limit liabilities. Due to BVI securities legislation investors have a chance to take advantage of a major stock exchange through a listing or a private sale. Companies’ shares may be listed on any of the major stock exchanges including NASDAQ Stock Market, London Stock Exchange, the International Securities Exchange, Hong Kong, New York and Toronto Stock Exchange.
BVI companies are not subjects to double layer of regulation which means that the owner of the company issuing shares is not required to be publicly filed as well as there is no takeover code. It is very simple to incorporate company and to run it as there are no strict statutory requirements. The ease of raising finance for working capital purposes is a distinctive feature of a BVI company.
On the one hand simplified regulation and reasonable taxation make the cost of starting and using a BVI company law and on the other hand BVI being a member of IOSCO, International Organization of Securities Commissions, is obliged to maintain high standards.
So why is it beneficial to register a company in BVI?
- The company’s development strategy may be designed with the aim to serve business needs above all. The country doesn’t provide any requirements to corporate governance. BVI’s legislation is based on English common law and it regulates entrepreneurs’ rights and duties providing certainty to investors and directors. Business may be managed exclusively by directors without the intervention of investors. That means that directors are able to make financial decisions and to take independent steps in the direction of raising capital.
- Joint venture being run by elected director may be ruled in accordance with interests of the joint venture party. The head of a subsidiary may take interests of a parent company as a main course and each decision should serve this goal even if it is undesirable for a joint venture or a subsidiary.
- The BVI company is not required to have a certain amount of share capital availing the opportunity of issuing unlimited number of shares or issuing specified shares. This brings advantages to the company in numerous cases when declaring distributions, reassessing shares, effect redemptions, carrying out reverse share splits.
- Directors are responsible for declaring the dividends in accordance with a basic solvency test. The amount of dividend money is not restricted and after the dividends are paid the company will still have a chance to cover liabilities.
- Shares of the members may be purchased by a BVI company as result of a solvency test, member’s consent (the issue may also be regulated by company’s articles and memorandum).
- There are no restrictions on financial relationships with third parties. A BVI company may buy shares as well as provide financial assistance guarantees and security for other companies.
- Voting majorities are allowed to be created by a BVI law in order to approve corporate matters being not restricted to statutory majorities.
- The members of the company are protected by the well understood English common law. Moreover shareholders who take such actions as assets’ disposition, merger or acquisition are provided with appraisal rights and statutory dissent. Thus shareholder may easily leave the company if done honestly.
- A BVI law allows corporate migration so the corporation may be shifted to or from another jurisdiction.
- Major shareholders owning 90% shares and more have rights to redeem the minority shares. The fair value doesn’t require court proceedings and may take place within the statutory process.
- The court-approved scheme, adopted by company’s members and third parties, regulates almost all transactions carried out by the company.
- Mergers are allowed by BVI law which means that companies incorporated in the jurisdiction are allowed to merge with other BVI companies as well as with companies from other jurisdictions. There is a great ability to flexibly manage the company’s structure.
- Shareholders may gain protection from the BVI legislation in case of specific needs disclosed in the constitution of the BVI company.
Benefits available to lenders and creditors taking security from a BVI obligor
- 1. The BVI legislation unlike the ones of US or UK doesn’t provide easy opportunities for bankrupt companies. The liquidation process is regulated by the BVI Insolvency Act, 2003, according to which claims against the company are not allowed. Nevertheless, secured creditor is not safe from security enforcement.
- Transactions which have been assessed as undervalued may be challenged by a liquidator.
- Insolvent BVI company is held liable to a limited number of preferred creditors.
- Security details provided by a BVI company may go public which ensures statutory priority.
- Statutory priority is determined by contractual subordination agreements and may vary according to the business needs.
- Share security may be governed by the law of other countries.
- The BVI court is valued for fast and cost effective process, highly skilled and experienced judges and modern organization.
So the benefits of BVI jurisdiction attract many investors and business owners. BVI laws and standards enable cost-effective management, simple organization and financial flexibility for companies registered in the country.