Practically Speaking

Our podcast series Practically Speaking was launched to provide our listeners with practical advice and insights on issues applicable to stakeholders of BVI entities. 

In our seventh episode, Transactional Partner Rachel Graham and Director of Fiduciary & Custodial Kerry Graziola discuss how to establish substance for relevant in scope entities in the BVI, outlining: 

• The obligations facing both passive and active entities conducting holding business and how they differ.   
• The requirements for direction and management and how they might be managed practically in a Covid 19 world. 
• How the ITA has been responding to the current travel climate and its effects on obligations. 
• The obligations facing entities which are required to conduct core-income generating activities relating to the relevant business and how outsourcing certain roles and functions to professionals on island might assist. 
• How the requirements for adequate premises and adequate employees in the BVI might be met by companies conducting the relevant activities of finance and leasing, fund management and headquarters business. 

Find out more about the ITA’s updates regarding compliance and reporting in response to the COVID-19 outbreak here. 

Our podcast series Practically Speaking, was launched to provide our listeners with practical advice and insights on issues applicable to stakeholders of BVI entities. 

In our sixth episode, Transactional Partner Rachel Graham and Transactional Counsel Thomas Dugdale discuss the following:

• What a continuation, “re-domiciliation” or “migration” is 
• Why continue or migrate to another jurisdiction
• Practical considerations of continuing your company in or out of a jurisdiction
• How continuations might affect creditors and other interested parties
• Commonly encountered issues and solutions
• To read more about continuations into the BVI click here 

Our podcast series Practically Speaking was launched to provide our listeners with practical advice and insights on issues applicable to stakeholders of BVI entities. 

In our fifth episode, Director of Client Services Amy Roost and Global Head of Investment Funds, Philip Graham discuss the following: 

• Private Investment Funds (PIFs), what they are and why they were introduced  
• the various ways in which you can determine whether this new regime affects your BVI entity  
• the need for PIFs to apply to be recognised by the Financial Services Commission in the BVI on or before the June 30, 2020 deadline 
• the application process  

Read more about PIFs in our initial post published back in January 2020.  

To schedule an immediate formal assessment of your BVI vehicle and to discuss the exemptions that are available please contact our legal team by clicking here. 

Our podcast series Practically Speaking, was launched to provide our listeners with practical advice and insights on issues applicable to stakeholders of BVI entities. 

In our fourth episode, Transactional Partner Rachel Graham and Director of Fiduciary & Custodial Kerry Graziola discuss the following: 

• the liquidation process in the BVI 
• the external factors that might affect how quickly the company can be liquidated 
• how to reorganise the company to help simplify the liquidation process 
• the on-going duties and annual reporting obligations under the economic substance regime 

Our recently updated article on Bringing your BVI company to an end: strike off vs liquidation can be found here.  

During this episode of our Practically Speaking podcast series, Rachel Graham and Amy Roost discuss the ins and outs of de-enveloping BVI companies, outlining:

• which companies may want to de-envelope and why 
• commonly used structures involving BVI companies for holding real estate and other assets
• options available for de-enveloping assets from these structures
• key steps to be taken before de-enveloping can occur, including the need for the company to be in good standing
• relevant timings

In our second episode, Transactional Partner Rachel Graham and Director of Client Services Amy Roost discuss the options available to directors and shareholders when a BVI company has reached the end of its useful life, with a particular focus on the on-going annual reporting obligations under the economic substance regime.  

Key Takeaways: 

Where an entity is no longer required there are two options available: first is solvent liquidation, a formal process to wind up and dissolve the company, bringing it to an orderly end; second is to allow the company to fall out of good standing and be struck off the register and eventually dissolved some 7 years later. 

Liquidation: 

This formal but straight-forward process brings the company to an orderly end. It brings formal closure and much greater certainty as well as mitigating risk for directors, shareholders and other stakeholders. In many cases, where the company has already disposed of its assets and settled all its liabilities, the entire liquidation process can be completed within four to six weeks. 

Once a company which has been voluntarily liquidated and dissolved, it no longer exists and can no longer incur liabilities or sue or be sued.

The date of dissolution is significant, however, since the company will continue to have reporting obligations under the economic substance regime, for the financial period that the entity is in at the time of its liquidation. 

Strike off: 

For decades it has been the norm to leave entities that are no longer required to be struck off. Strike off is automatic, when an entity no longer meets certain requirements eg not paying its annual licence fee. 

A company remains struck off for 7 years before it is formally dissolved and during that period the company, as well as its directors and shareholders, are exposed to ongoing risk of liability and uncertainty.

The risk and uncertainty is increased with the introduction of ongoing reporting obligations under the economic substance regime, which continues to apply during this 7 year period, even if the struck off company is not carrying on any activity.

Fines and penalties for non-reporting under the economic substance regime

Potential penalties are severe with significant financial and criminal actions available to the competent authorities. 

Conclusion: 

Where an entity is no longer required, directors (and shareholders) of BVI companies are strongly advised to consider liquidating the company rather than allowing the company to be struck off. Entities may wish to consider seeking further legal advice to go over their options, and the ongoing implications. 

Stay tuned for more episodes of Practically Speaking.

Transactional Partner Rachel Graham and Director of Client Services Amy Roost host the first episode of our new podcast series: Practically Speaking. This series was launched to provide our listeners with practical advice and insights on issues applicable to stakeholders in BVI. We hope that the series will be of interest to directors, shareholders, trustees and others concerned with BVI entities. 

In this episode, Rachel Graham and Amy Roost discuss two topics: the implications of COVID-19 on economic substance compliance and reporting, and matters directors should be considering if they find their company is moving towards financial difficulties. Take a listen below. 

Key takeaways 

• Travel restrictions due to COVID-19 and how directors of BVI entities can still comply with their economic substance obligations. 
• Directors duties in turbulent times. 
• The BVI ITA released some temporary guidance on the 27 March 2020, outlining that they do expect the economic substance requirements to be met. 
• Decisions involving Core Income Generating Activities (CIGA) require meetings to be held in the BVI. 
• BVI ITA has provided alternative ways for entities to meet their economic substance requirements. 
• Documentation is key; directors are responsible for recording when they are unable to meet requirements and the steps they have taken to attempt to meet these requirements. 
• Directors are expected to use virtual board meetings and/or alternate directors when they are unable to travel to the BVI. 
• Directors are required to be aware of the financial position of their company at all times, but this obligation is even more pertinent in times of worldwide economic disruption. 
• Directors need to monitor their relationships with their bankers, insurance providers, and other external creditors and take legal advice at an early stage. 
• Directors are advised to consider and action those steps which allow them to make prudent and reasonable decisions in the circumstances and to keep supporting documents relating to those decisions. 
• Directors should be mindful of the fact that when a company becomes insolvent or is at risk of insolvency, their duties shift from being owed to the company and its shareholders to being owed to creditors. 

Stay tuned for more episodes of Practically Speaking.