According to Calum McKenzie, Director of Folio Corporate Services Limited, the BVI remains a great place to do business. He stated that there have been changes in a legislative and product sense, however these changes can only be seen as positive.
Folio Corporate Services Limited
The firm has been working hard with the BVI Finance Centre and the BVI Investment Funds Association to continue to promote the BVI as a first class venue of choice for investment business by highlighting its great existing products and services as well as introducing its new products to new clients and new markets.
“In October 2015 I spoke on a panel at the Markets Group Private Wealth Latin America and Caribbean Forum in Miami to promote the BVI in general as well as to draw more attention to the introduction of the approved fund and the incubator fund,” said Mr McKenzie. “We will be attending a hedge fund start-up conference in New York in March. Our goal is to make BVI the first choice as an international business partner.”
M&A and trends in 2015
The general consensus in the industry is that 2015 was another very good year for M&A activity in the BVI. Mr McKenzie is aware of a number of significant very large cross-border deals done in 2015 involving BVI companies.
“This is not surprising given BVI’s reputation for corporate business transactions and our position as industry leader,” he remarked. “However we must ensure that as a jurisdiction we continue to enhance our reputation and respond to the demands of the industry, hence why we continue to update and amend legislation and develop new products.”
A recent trend seen in the BVI with positive implications for Folio Corporate Services Limited is the increasing number of companies being set-up in the jurisdiction requiring substance and value added services. Mr McKenzie noted that the BVI has traditionally been known as an incorporation centre and will continue to dominate this market.
“However with the increase in regulation and demands being placed on offshore financial centres and companies and businesses setting up there, clients are moving away from the simple vanilla company set-up and are seeking more specialised and value oriented services such as director, corporate governance and accounting services,” he elaborated. “This is where we as a business are focusing our attention and we are seeing a great deal of success.”
Changes and new investment fund products
The BVI Business Companies (Amendment) Act 2015 has introduced a number of fine tuning modifications which Mr McKenzie believes should be warmly welcomed by the industry in general.
“We have seen the formal introduction of the new investment funds products – the Approved Fund and the Incubator Fund and the Approved Manager continues to be a very popular product, even more so now that people are becoming aware that they can be used for managed accounts and non BVI funds,” he commented.
The approved fund and the incubator fund essentially allow emerging or start-up managers a swift and uncomplicated entry into the market at a price point they can afford and sustain. Both funds are primarily aimed at those managing funds for friends and family/non-institutional offerings and start-up emerging managers.
The incubator fund is aimed at managers who do not necessarily have the benefit of seed investor capital but who wish to set up quickly and establish a track record with minimal set-up costs and without having to comply with onerous regulatory obligations. The product is therefore very attractive to start-up managers who are seeking the best environment to grow their assets under management in the most cost-efficient manner.
The approved fund is aimed at managers who wish to establish a fund for a longer term, but on the basis of a more private investor offering, which may appeal to family offices or an investor base of close connections.
Mr McKenzie explained that the regulatory obligations of both funds are appropriate for the product with approved and incubator funds having the option to only appoint the service providers that the manager strictly believes the fund requires, although he noted that an approved fund will be mandated to appoint an Administrator.
“They offer almost immediate time to market (able to commence trading within two business days of lodging the application for approval with the Commission) and they offer significantly lower costs to launch and ongoing running costs than those associated with a traditional fund structure,” he added. “That said we do still reasonable levels of demand for our existing fund products such as the private’ and ‘professional’ funds.”
Advantages for offshore funds
A number of offshore jurisdictions offer similar advantages, such as: English speaking; absence of currency exchange controls; US dollar as currency; stable democracy; and a common law legal system with final appeal to the Privy Council in London. However, Mr McKenzie stated that not all jurisdictions are equal in all respects.
He highlighted the BVI’s modern yet proven and trusted legal framework with appropriate regulation, as evidenced by the BVI being recognised as the leading jurisdiction for corporate vehicles.
“BVI is home to a dedicated network of high quality sophisticated corporate and financial service providers,” he explained. “We offer legal services from the full array of global offshore law firms and also all of the ‘Big 4’ accounting & audit firms, along with a very good range of niche and boutique service providers.”
BVI securities laws are recognised by regulators worldwide, (BVI is a member of IOSCO -International Organisation of Securities Commissions). BVI companies can list their shares on stock exchanges worldwide, including the London Stock Exchange, LSE's AIM exchange, the New York Stock Exchange, NASDAQ, the International Securities Exchange, the Toronto Stock Exchange, and the Hong Kong Stock Exchange.
“We have cutting edge insolvency legislation and leading insolvency practitioners which should provide comfort to people doing business with BVI companies,” he continued. “Build in to this the fact that BVI companies offer unsurpassed administrative flexibility and highly competitive fees (in many instances vast cost-savings over comparative jurisdictions) and you see what differentiates BVI.”
BVI has no income tax, corporation tax, capital gains tax, wealth tax or other similar punitive fiscal laws. Using a BVI company for any commercial purpose offers the benefits of tax neutrality. Generally companies will pay taxation based on the regimes of the countries in which they operate and conduct business.
“This allows for streamlining or simplification of the taxation involved when using a BVI company as the tax questions revert to the relevant domicile of each individual investor, shareholder, partner etc. where each party will have a clear understanding of their obligations and presumably will have reporting arrangements already in place,” he added.
Company formations
Mr McKenzie re-iterated that the BVI has long been recognised as the ‘go-to’ domicile for the incorporation of offshore companies. He attributes this in large part to the basic tenets of the jurisdiction being tax neutral, highly cost efficient and offering a good degree of privacy within which to conduct business affairs.
“The total number of companies registered now is around 1 million with approximately 500,000 remaining active,” he observed. The main single reason for this is the product… the BVI company is quick and simple to obtain/register, easy to use and understand.”
He highlighted a number of significant factors:
• Speed - Subject to satisfying relevant KYC requirements, companies can be incorporated quickly by licensed registered agents via the BVI’s online electronic interface, usually within 24 hours.
• Names - BVI companies may be incorporated with foreign character names (e.g. a Chinese name) in addition to their English name.
• Cost - BVI companies are still comparatively inexpensive compared to other premium jurisdictions such as Cayman and Bermuda, and most mid-shores such as Hong Kong or Singapore. The regulatory fees, both on formation and on an annual basis therefore are also extremely competitive.
Predictions for 2016
With the increasing regulatory obligations that surround the global financial industry at present, the BVI recognises the need to adapt and respond to the demands of the global financial community and this is backed up by a regulator who recognises and understands the commercial reality of the industry.
Mr McKenzie believes that there will continue to be positive levels of demand for products across the spectrum of the BVI financial services offering in 2016, not least in investment business products. Specifically he expects that there will be continued development in creating substance and seeking value added services such as director services.
“Whilst we undeniably foresee a lot of work in the near future as a result on ongoing global regulatory demands such as AIFMD, FATCA & CRS, we must continue to be responsive to industry demands and view the implementation of these industry changes as necessary and indeed positive developments for the jurisdiction. Our view is that by adopting and implementing global financial standards it demonstrates the BVI’s continuing maturity as a jurisdiction and our position as an important financial centre,” he concluded.
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