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Main Characteristics of a BVI Trust

Get to know the main features of a British Virgin Islands Trust.

By: Estefanía Alemán – General Manager of Icaza Trust Corporation

 

BVI Trust legislation

British Virgin Islands (“BVI”) trust law is generally based on English law, but has developed beyond English law to allow trusts constituted under BVI law to contain modern trust provisions. The governing law of BVI trusts is the Trustee Ordinance Act 1961 (“the Trustee Act), which has been amended in 1993, 2003, 2013, 2015, and 2021. Additionally, BVI enacted in 2003 the Virgin Islands Special Trusts Act 2003, amended in 2013, to create a special trust known as (“VISTA”), which is used purely for holding shares of a BVI company, and enables the trustee holding such shares to distance himself entirely from the management of the company in which the shares are held.

 

Who are the main parties of a trust

The main parties of a BVI trust are the Settlor, Trustee, the Beneficiaries, and the Protector.

  1. Settlor: person or persons who transfers assets into a trust by divesting himself or themselves of legal ownership of these assets. The Settlor may be a trust Beneficiary. The Settlor may only act as a Trustee if he or she acts as a co- trustee. The Settlor may not simultaneously be a sole trustee and a sole beneficiary.
  2. Trustee: person who holds legal title of the trust assets and administers such assets for the benefits of the Beneficiaries in accordance to the terms and conditions of the trust instrument. The trust assets constitute an autonomous patrimony, and do not form part of the estate of the trustee.
  3. Beneficiaries: persons who have equal or conditional benefits on the trust fund, or in the case of a discretionary trust benefits in accordance to the discretion of the trustee. For a trust to be valid, the Beneficiaries shall be identifiable.
  4. Protector: the BVI Trustee Act establishes that an instrument creating a trust may contain provisions by virtue of which the exercise by the trustees of any of their powers and discretions shall be subject to the previous consent of the settlor or some other person, whether named as protector, nominator, committee or any other name. If provided in the instrument creating the trust, the trustees shall not be liable for giving previous consent for actions resulting in any loss caused by the actions of the protector, nominator, committee, etc.

 

Who may be a Trustee of a Trust regulated under the laws of the British Virgin Islands: BVI law does not require that a BVI resident be the trustee of a BVI trust. However, to engage in trust business in or from BVI, the trustee must be licensed. Trust business is defined as acting as a professional trustee, protector or administrator, or managing or administering any settlement or company management as defined in the Company Management Act. A person cannot be settlor, sole trustee, and beneficiary of a BVI trust. A person may be the settlor, act as co- trustee and be the beneficiary of a BVI trust.

 

Taxation of trusts regulated under the laws of the British Virgin Islands:

  1. Income Tax: Notwithstanding any provisions of the Income Tax Act, the income of any BVI trust in the hands of a trustee is exempt from income tax, and the Beneficiaries of any trust who are not resident in BVI are exempt from payment of income tax in respect of any moneys received by them from the trustee of any trust. Likewise, Beneficiaries who are not resident in BVI do not need to pay in BVI estate tax, inheritance tax, succession tax, gift tax, rate, duty, levy or any other taxes associated with distributions from BVI trusts.
  2. Stamp Duty: Any trust that does not have as Beneficiary persons resident in BVI are exempt from the payment of stamp duty with respect to trust documents.
  3. Trust Duty: An instrument declaring or evidencing a trust governed by BVI law, and any instrument changing the proper law of a trust to BVI law shall pay trust duty in the sum of two hundred dollars legal currency of the United States of America.

 

Regulatory requirements: Trusts constituted under the laws of the British Virgin Islands do not need to be registered in the BVI registrar. They are exempt from registration under the Registration and Records act. Trustees of BVI trusts do not have reporting or filing requirements regarding trusts.

 

Accounting records for BVI Trusts: the trustee has the obligation to maintain records and underlying documentation of the Trust whether within or outside BVI and retain these records for a period of at least five (5) years. The records and underlying documentation include accounts and records, such as invoices, contracts or other similar documentation, in relation to:

  1. All sums of money received and expended by the trust, and the matters in respect of which the receipt and expenditure takes place;
  2. All sales and purchase of goods by the trust; and
  3. The assets and liabilities of the trust.

 

Reserved Powers of the Settlor: a Settlor, Protector, Nominator, or Committee may reserve the following powers under a BVI Trust:

    1. Power to revoke the trust in whole or in part.
    2. Power to vary or amend the terms of the trust instrument or any of the trusts, purposes, or powers arising thereunder in whole or in part.
    3. A general, intermediate, or special power to appoint, advance, pay, apply, distribute, or transfer trust property (whether income, capital, or both), or to give directions for the making of any such advancement, appointment, payment, application, distribution, or transfer.
    4. Power to act as or give binding directions as to the appointment or removal of a director or an officer of any company wholly or partly owned by the trust, or to direct the trustee as to the manner of exercising rights attaching to any of the shares held in such company.
    5. Power to give binding directions in connection with the purchase, retention, holding, sale of or other commercial or investment dealings with trust property or any investment or reinvestment thereof or the exercise of any powers or rights arising from such trust property.
    6. Power to appoint, remove, add or replace any trustee, protector, enforcer, or any other office holder or any advisor including any investment advisor or any investment manager.
    7. Power to add, remove, or exclude any beneficiary, class of beneficiaries, or purpose.
    8. Power to change the proper law of the trust.
    9. Power to change the terms of the trust which specify which courts have exclusive or non- exclusive jurisdiction in any proceedings involving rights or obligations under the trust.
    10. Power to restrict the exercise of any powers, discretions, or functions of a trustee by requiring that they shall only be exercisable with the consent, or at the direction, of any person specified in the trust instrument.

For more information on BVI Trusts, contact us at icazatrust@icazalaw.com.

Icaza Trust Corporation participates in STEP LATAM 2022

ITC-NewLogoIcaza Trust Corporation participated as a sponsor in the STEP Latam Conference 2022, held September 22-23 at the Hilton Hotel in Panama. Every year, the event brings together renowned lawyers and banking, fiduciary and accounting professionals related to estate planning, structuring and management in Latin America.

 

At the event, Estefanía Alemán, our general manager, and Luis Martínez, our deputy manager, had the opportunity to share with colleagues from the region and learn about new trends in the fiduciary world.

 

Take a look at some snapshots of their participation by clicking on the images below.

Flag of the British Virgin Islands

Amendments to the BVI BC ACT and BC Regulations, 2022

The BVI government has approved important amendments to the BVI Business Companies Act 2004 that will come into force on January 1, 2023.

The most relevant areas covered by these amendments are the following:

 

Struck off and Dissolution

Under the current legislation, companies have a seven (7) year struck-off period before being automatically dissolved for non-payment of their annual fees. The new legislation abolishes the seven (7) year struck-off period and introduces a new process for stricken-off companies to be automatically dissolved for non-payment of their license fees.

 

Companies that are struck-off at the effective date of this amendment (existing struck-off companies) will have six (6) months from the Act’s effective date to be restored with the Registry. Companies that are struck off/dissolved after the six (6) month period may be restored by making an application to a BVI Court.

 

Struck-off or dissolved companies with underlying assets should take immediate action to bring them back to good standing.

 

Register of Directors

The BVI Registrar of Companies may make available upon request the name of the directors of a company, according to the register of directors filed at the Registry.

 

Financial Information and Annual Returns

Companies will have to provide the Registered Agent with certain financial information in a prescribed form once a year. The form must be provided to the Registered Agent up to nine (9) months after the end of the company’s fiscal or financial year. This form has not been released yet. As soon as it becomes available, we shall share it with you.

 

This information will be kept by the Registered Agent only, and it will not be filed with the regulator or any BVI authority. However, the Registered Agent shall inform the regulator if the company does not provide the information in due time.

 

Voluntary Liquidator

To voluntarily dissolve a company, the liquidator must be a BVI resident who has been physically living in the BVI for not less than 180 days and has liquidation experience and professional competence to liquidate the specific company concerned.

 

If you have any questions regarding this information, please contact the lawyer of our firm who usually handles your requests or email us at: bd@icazalaw.com.

Icaza, González-Ruiz & Alemán wins ‘Panama firm of the year’ at Managing IP Americas Awards 2022

Icaza, González-Ruiz & Alemán has been named Panama’s Firm of the Year at the Managing IP Americas Awards 2022.

 

Now in its seventeenth edition, the Managing IP Awards celebrate remarkable Intellectual Property achievements by law firms and in-house teams in more than fifty jurisdictions.

 

The first installment of the Managing IP Awards 2022, focused on the Americas, took place on April 7 in New York where the achievements of the winning firms were recognized and celebrated.

 

Learn more about the awards and read the full list of winners by clicking on the following link: Managing IP Americas Awards 2022.

 

Administrators Obligations related to documents of the administration of a Horizontal Property

Ricardo CeballosBy: Ricardo Ceballos

According to numeral 23 of Article 93 of Law 284 of February 14, 2022 on the Horizontal Property Regime, the administrator of the Horizontal Property (P.H.) shall have the obligation to handover to the Board of Directors, once the contractual relationship has ended, all documents pertaining to the administration and those that have been placed under his custody by the latter, which may include Books of Minutes of the Board of Directors and Minutes of the Assembly of Owners, account statements, correspondence, documentation related to bank accounts, keys of the administration office and the property.  Furthermore, all those under its responsibility, for which a Minutes of Handover shall be taken and signed by the administrator and a representative of the Board of Directors.

 

From the above-mentioned, correspondence is very important documentation that must be handled with security, protecting it from distortion.  It is for this reason that we recommend that the Boards of Directors make use of personalized e-mail accounts for the P.H., as well as that all the equipment used for administration purposes be for their exclusive use. Likewise, a technological equipment shall be used to store all the documentation and keep a backup of the same, which should always remain under the control and supervision of the Board of Directors.

 

The same would apply for the licenses of the different softwares that are used for the same purposes and that require to be used by the administrator due to his functions, we recommend that those be of exclusive use of the P.H., as, for example, the software for accounting, as well as for any other application, with the objective of having a healthy administration.

 

To adapt an office in the premises of the P.H. would be ideal, so that all the work or functions of the administrator are carried out within the P.H., in this way the service provided would be more productive and at the same time all the documentation mentioned in numeral 23 of Article 93 would be protected, said documentation should be kept in these offices under the custody of the Board of Directors and the Administrator.

 

Taking into account the aforementioned suggestions, the Minutes of Handover would be more expeditious and safe, which would end with a process of the contractual relationship to the satisfaction of the parties, even so the drafting of a Minutes of Handover signed by the administrator and the representative of the P.H., would be the most recommendable, in order to evidence that all the documentation that rests in the offices of the P.H. Administration is mentioned in the Minutes and in this way to perfect in a complete way the handover of the administration to another administrator or to the Board of Directors.

 

Keep in mind that an administrator can be a natural or juridical person, therefore, in case of being a formal company according to the law, that is to say a juridical person, it is important to check that the person who acts in representation of the juridical person or company, is the proper or designated person, since it may be necessary that she/he sign certain documentation, among these, the initial contract to hire the administration service.

For assistance regarding Real Estate in Panama, contact us at consultas@icazalaw.com.

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