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In this episode, Partner Rachel Graham and Managing Director of Client Services Amy Roost, along with guest expert Sonia Dhesi, Owner and Managing Director of Appleton Company Services Limited, provide key information in relation to the newly implemented Overseas Entity register.
Key takeaways
Any non-UK entity, which holds land in the UK, needs to register as an Overseas Entity at Companies House. The deadline for registration is 31 January 2023. There are significant penalties (£2500 per day) for failure to register before the deadline, and restrictions are imposed on the ability to acquire and transfer land. If you have not already begun the registration process, do so urgently. Where an entity held land on or after 28 February 2022 but disposed of it before 5 September 2022, it will likely still need to register with Companies House. As part of the registration process, the entity will need to identify its registrable beneficial owners – in simple terms, anyone holding at least 25 per cent of the shares or voting rights in the entity or with significant control of the entity (where there is a trust involved in the ownership structure the process can be quite complicated). Seek advice if you need help determining which registrable beneficial owners should be identified and verified.Current certified proof of identity and address will need to be presented to a UK verification agent to complete the process. We can assist with the registration and verification process via an authorised agent in the UK, where we are the registered agent of an entity. Once registered, there is an annual renewal obligation.
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As part of the BVI’s commitment to the FATF Recommendations on the availability of basic company information via a company registry, from 1 January 2023, the names of directors of BVI companies will be made available by the Registry of Corporate Affairs in the BVI (the Registry) for payment of a fee.
What we know so far:
A list of directors will be available via the Registry on payment of a fee of US$75If a BVI service provider is approached to obtain the information from the Registry, it is likely they will charge an additional fee The information available will be limited to the names of current directors - other personal information such as dates of birth and addresses will not be includedThe details of any former directors will not be availableIt will only be possible to request a list of directors of a particular entity – it will NOT be possible to request a list of entities which a particular person is a director ofWhat do you need to do?
While we are not yet clear on the exact mechanism for the provision of the list of directors by the Registry it is important that you are aware that the Registry will make available, on request and payment of a fee, the names of the directors as at the date of the search.
Take action now to check your register of directors to ensure the copy held by your registered agent is up to date. Harneys Fiduciary clients can log on to the Harneys Connect Portal to check.
We recognise that some clients may have legitimate concerns about their director names being public, and we would be happy to discuss those with you.
If any changes need to be made to the register of directors, please contact your usual Harneys contact urgently to ensure there is time for the registered agent to file the necessary update at the Registry before the 1 January 2023 effective date.
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Fehlende Folgen?
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In this episode, Transactional Partner Rachel Graham and Dispute Resolution Counsel Francesca Gibbons look at information disclosure and the available options in respect of BVI companies
Key takeaways:
The information a BVI company is required by law to maintain and retain includes:
Statutory records and registers – relating to the company Financial and other Records relating to business of the companyAll BVI companies are required to have a registered agent in the BVI – they are required to hold copies of statutory registers, they make most of the filings, they are considered the administrator of the company in the BVI
Not all information is available publicly – registered agents can be contacted to request additional information (and sometimes those requests may be declined)
There are three main options available for requesting information about a BVI company:
Norwich Pharmacal Orders (NPO) – Allows parties to apply to Court on an ex parte basis most commonly against the registered agent for documents they holdSection 100 (of the BVI Business Companies Act 2004) applications– Directors can make this application to Court with statutory backing for an order for delivery up of documents Disclosure – A stage within the litigation process that grants parties disclosure and inspection of documents in the control of other parties where they are directly relevant to an issue in dispute in the claim.
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Key takeaways
A chargee is someone who has the benefit of security that has been granted by a BVI companyNumerous features make using a BVI company attractive to lenders for structuring finance transactions including: Clear and simple registration processRobust insolvency legislative regime providing protection – very similar to UK lawThe ability for companies to provide financial assistance to those acquiring their sharesThe validity and effectiveness of any security document that a BVI company enters into is determined by the governing law of the particular documentThere are two registration regimes to consider: Mandatory registration – private registration at the companies registered office, on the register of charges maintained by the registered agentPublic registration (optional) – where filings are made with the Registrar of Corporate Affairs in the BVI and which confers priority over any privately registered or any unregistered chargeNotations included in the register of members of a BVI company whose shares have been charged by way of security, provide notice of the security for those dealing with the companyNotice of variation or cessation of a charge can also be filed in the BVI, the variation and release of the underlying charge will be determined by the law of the charge not the filing process
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In this episode, Transactional Partner Rachel Graham and Director of Client Services Amy Roost outline the process of becoming a shareholder of a BVI company.
Key Takeaways:
Do your due diligence as to what your rights as a shareholder will be, BVI law is very flexible in this regard. Key documents will be the memorandum and articles of association. Decision making for BVI companies tends to be predominantly at board level but protections for shareholders are possible. Compliance and regulatory obligations with respect to information about shareholders of BVI companies, different to those in the United Kingdom.
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In this episode, Transactional Partner Rachel Graham and Directorof Client Services, Amy Roost discuss the significance of corporate governance from a legal and fiduciary perspective.
Key takeaways
The statutory and corporate administration considerations for the average user of a BVI company.The importance of ensuring entities' legal and accounting record keeping requirements are met.The impact of economic substance requirements on corporate governance.Practical steps directors can take to ensure they are up to speed with economic substance and compliance related matters for their BVI company.
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Welcome to season two of our Practically Speaking podcast. This season London based, Transactions Partner, Rachel Graham and Director of Client Services, Amy Roost will be exploring the ins and outs of the lifecycle of a BVI company.
In the first episode, Rachel and Amy will be talking about becoming and acting as a director of a BVI company.
Key takeaways
The importance of directors for BVI companiesThe appointment process for a BVI directorResignation and removal of a directorUse of reserve directorsKey duties of a BVI directorFind out more information about BVI company directors here.
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Providing practical advice and insights on issues applicable to stakeholders of BVI entities. This season focuses on the lifecycle of a BVI company.
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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 eighth episode, Transactional Partner Rachel Graham and Senior Associate within Harneys’ Private Wealth team, Matthew Howson discuss the following:
What happens when a non-resident holder of BVI shares passes away, whether they held the shares absolutely or via a nomineeship? How to bridge the gap between the law of the BVI company and the law of the Deceased’s home jurisdiction: covering some near universal misperceptions. What works to ensure that BVI assets and shares are transferred directly to beneficiaries, and what doesn’t. Provisions necessary for nominating a reserve director for a BVI company holding vehicle, in the event that the sole individual shareholder and director passes away.
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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.
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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 jurisdictionPractical considerations of continuing your company in or out of a jurisdictionHow continuations might affect creditors and other interested partiesCommonly encountered issues and solutionsTo read more about continuations into the BVI click here
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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 processRead 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.
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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 regimeOur recently updated article on Bringing your BVI company to an end: strike off vs liquidation can be found here.
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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 assetsoptions available for de-enveloping assets from these structureskey steps to be taken before de-enveloping can occur, including the need for the company to be in good standingrelevant timings
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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.
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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.
