This note provides a general introduction to the British Virgin Islands (“BVI”) beneficial ownership regime that has created a secure, non-public search platform called BOSS (Beneficial Ownership Secure Search System).
1. The legislation
On 30th June 2017, the Beneficial Ownership Secure Search System Act, 2017 (the “Law”) came into force (although the deadline for full compliance was extended to 31st December 2017). The Law gives effect to commitments made by the BVI Government to the UK Government (by way of an Exchange of Notes in April 2016), to further strengthen existing arrangements on the exchange of beneficial ownership information to assist law enforcement agencies combat tax evasion and money laundering.
The Law requires that each registered agent maintains a database of the BVI corporate and legal entities for whom they act as registered agent (the “Registered Agent Database”). The Registered Agent Database will be private but searchable by specifically designated BVI Governmental bodies via BOSS, which enables an electronic search of each Registered Agent Database.
2. Which BVI entities does the Law apply to?
2.1 Subject to specific exemptions, the Law applies to companies incorporated or registered under the BVI Companies Act, 2004. The obligation does not extend to partnerships formed in the BVI or trusts domiciled in the BVI. Any dissolved company, company struck off prior to 1 January 2016 or any company that has continued as a company incorporated under the laws of a jurisdiction outside the BVI are excluded from BOSS.
2.2 The relevant companies are required to identify and collect details of their beneficial owners who ultimately own 25% or more of the shares or voting rights or who otherwise exercise control over the management of the company, together with details of certain registrable intermediate holding companies through which any such interests may be held (the “UBO”). Relevant entities shall identify any UBO and notify the registered agent of that information within 15 days of identifying such person or entity. The penalties for non-compliance by an entity may reach a fine not exceeding US$250,000, imprisonment for a term not exceeding 5 years or both. In addition, providing false information can lead to a fine of up to US$75,000, up to 5 years’ imprisonment or both. An entity must within 15 days of becoming aware of a change in any of the prescribed information relating to any UBO notify the registered agent of such changes and the dates that they took place. The registered agent must then cause the updated information to be included on the Registered Agent Database within 15 days of being notified or otherwise becoming aware of a change. Penalties for a breach can reach US$10,000. In addition, proving false information can lead to a fine of up to US$75,000, up to 5 years’ imprisonment or both.
2.3 It is important that effected companies liaise closely with their registered agent with respect to filings made under the Law to make certain that the information being disclosed is correct, complete and up to date and that no unnecessary information is being disclosed. There is a statutory defence under the Law for registered agents that over disclose information when making a BOSS filing.
2.4 In relation to the relevant companies where there is no 25% or more UBO an entry must still be made on the Registered Agent Database. In such cases the company will need to identify who otherwise exercises control over the management of the company which may be one of more of the directors, depending on the circumstances in each case (see section 4 below).
3. The ‘exemptions’
Certain entities are ‘exempt’ from parts of the Law and accordingly will not have to maintain their own beneficial ownership information. They include those that are either:
• listed on a recognised stock exchange (eg NASDAQ, NYSE, Hong Kong
• recognised, registered or otherwise approved as a mutual fund under
the Securities and Investment Business Act, 2010 including an
approved, incubator, public, professional or private fund;
• a corporate ‘subsidiary’ of an entity whose securities are listed on a
recognised stock exchange or of an approved mutual fund, where
‘subsidiary’ means a company over which the exempt person has a
beneficial interest in 75% or more of the shares or voting rights;
• a BVI licensee (as defined in the BVI Regulatory Code, 2009), including
an insurance company, bank or trust company; or
• exempted by regulations.
1. Not all listed companies will be exempt, only those whose securities are listed on a recognised stock exchange (as defined in section 2(1) of the Regulatory Code 2009). This excludes a considerable number of stock exchanges including AIM, the Canadian Stock Exchange and the Over the Counter Bulletin Board. In these cases, the Registered Agent Database will need to include all relevant details of the UBO; and
Companies which have been stuck off since 1 January 2016 are not exempt from the BOSS requirements.
4. Who is a ‘beneficial owner’?
4.1 A beneficial owner is generally an individual that ultimately owns or controls a company and is defined by the Law as:
(a) in the case of a legal person other than a corporate and legal entity whose securities are listed on a recognised stock exchange, a natural person who ultimately owns or controls, whether directly or indirectly, twenty-five or more percent of the shares or voting rights in the legal person;
(b) in the case of a legal person, a natural person who otherwise exercises control over the management of the legal person;
(c) in the case of a legal arrangement:
(i) the partner or partners who control the partnership;
(ii) the trustee or other person who controls the legal arrangement; or
(iii) the settlor or other person by whom the legal arrangement is made;
(d) in the case of a corporate and legal entity which is in insolvent liquidation, administration or administrative receivership under the Insolvency Act, 2003, the natural person who is appointed as a liquidator, administrator or administrative receiver of the corporate and legal entity;
(e) in the case of a receiver being appointed over twenty-five or more per cent of the shares or voting rights in a corporate and legal entity, the creditor who appoints the receiver; or
(f) in the case of a shareholder in the corporate and legal entity who would otherwise be a beneficial owner but is deceased, the natural person acting as a personal representative of the deceased’s estate.
4.2 However, if the beneficial owner of a corporate and legal entity is a registrable legal entity, provided the registered agent of the corporate and legal entity identifies the registrable legal entity, the details of the natural beneficial owner of the registrable legal entity are not required to be kept on the Registered Agent Database.
The Law defines a registrable legal entity in relation to a corporate and legal entity as a legal entity which:
(a) would be a beneficial owner of the corporate and legal entity if it were an individual (this exemption does not therefore apply to such entities holding shares as nominees); and
(b) one or more of the following applies to it:
(i) it is a legal entity which is an exempt company
(ii) it is a legal entity the securities of which are listed on a recognised exchange;
(iii) it is a licensee or a foreign regulated person (as defined by the BVI Anti-Money Laundering Regulations 2008). This ‘exemption’ under the Law in relation to foreign regulated persons is not available in many other overseas territories. It will be useful in terms of managing UBO disclosures where for example a private bank is the registered shareholder or where a fund regulated in another jurisdiction holds the shares); or
(iv) it is a sovereign state or a wholly owned subsidiary of a sovereign state.
5. What information is required to be held?
In relation to each beneficial owner to whom the Law applies, registered agents will be required to retain the following information (as specifically required by the Law):
• residential address;
• date of birth; and
The Registered Agent Database must also include information setting out the date on which such individuals became or ceased to be a beneficial owner for the purposes of the Law.
Information held by registered agents will be retained for 5 years following the dissolution, or other cessation, of the corporate and legal entity. No passport details are required.
6. Who may request a search using BOSS?
The following authorities are entitled to request a search of the Registered Agent Database:
(a) BVI Financial Investigation Authority;
(b) BVI Financial Services Commission;
(c) BVI Tax Authority; and
(d) BVI Attorney General’s Chambers.
Beneficial owners will not be informed when a search is made via BOSS.
The authorities may request the designated person to search BOSS solely for the purpose of assisting the BVI in complying with its obligations under the Exchange of Notes Agreement, 2016. Searches will only be conducted upon receipt of a bona fide search request from the UK Financial Intelligence Unit of the National Crime Agency and the request has been vetted and certified as proper, lawful and in compliance with the Exchange of Notes.
7. Security and confidentiality of stored information
The registered agent is responsible for compiling a Registered Agent Database containing details of the beneficial owners of the corporate and legal entities for which it is the registered agent and to keep that Registered Agent Database confidential and secure.
The Law requires that any person designated to access BOSS must do so from physically secure premises and a secure IT system. The designated persons must pass security vetting tests and are required to take an oath of confidentiality prior to being designated by order of the BVI Minister of Finance.
It is an imprisonable offence for any person other than a registered agent to maintain the Registered Agent Database and a person designated by the Law to access the information retained on the Registered Agent Database.
This legal guide is intended to provide a general overview of the BVI beneficial share ownership reporting requirements and is for the use of the clients and professional contacts of Forbes Hare. It is not intended to be comprehensive, and should not be relied on as a substitute for independent legal advice in any circumstances. Where a director is unsure of their position regarding the new reporting requirements imposed on them under BVI law they should take professional advice at the earliest opportunity.
DD: +1 284 852 1899
DD: +44 (0) 207 0143 225