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BVI Beneficial Ownership Regime - Frequently Asked Questions

17/08/2017

Why has the British Virgin Islands (the BVI) introduced the legislation?      


The implementation of the Beneficial Ownership Secure Search System Act, 2017 (the BOSS Act) demonstrates the BVI’s continued commitment to meeting the highest standards of due diligence and transparency imposed by the international financial services industry and reflects similar international initiatives implemented by European Union member states, British Overseas Territories and Crown Dependencies.

It entered into force on 30 June 2017 with the purpose of implementing the Exchange of Notes between UK and BVI in Respect of the Sharing of Beneficial Ownership Information (the Exchange of Notes). The BOSS Act establishes a secure search system to facilitate the effective and efficient storage and retrieval of beneficial ownership information for all corporate and legal entities.

The BVI government has established the Beneficial Ownership Secure Search System to enable designated persons (a BVI competent authority as defined in the BOSS Act) to access beneficial ownership information maintained by all BVI registered agents on the government’s BOSS portal  (the RA database) on behalf of all corporate and legal entities to which the law applies.


What entity types does this legislation apply to?


The definition of a ‘corporate and legal entity’ is a BVI Business Company incorporated under the BVI Business Companies Act (the BC Act); companies registered by way of continuation in the BVI under the BC Act; and company re-registered as a BVI business company under the BC Act that was either active on 30 June 2017 or struck off after 31 December 2015. 


What entity types does this legislation not apply to?


The BOSS Act does not apply to BVI BCs that were dissolved prior to 1 July 2017, BVI BCs struck off prior to 1 January 2016, Limited Partnerships formed in the BVI and BVI domiciled trusts.         


What is the RA database?


The RA database is the IT solution established and maintained by the BVI government for each corporate services provider (the CSP) to hold the prescribed information for all active corporate and legal entities in scope that it acts or acted as registered agent for as at 30 June 2017. The obligation to upload beneficial ownership details to the RA Database does not extend to limited partnerships formed in the BVI or trusts domiciled in the BVI.


Who is a “beneficial owner”?

The natural person who ultimately owns or controls a corporate or legal entity this includes:
  • a natural person who ultimately owns or controls a corporate or legal entity, whether directly or indirectly and meets one or more of the following criteria:
    • holds, in aggregate, 25% or more of the shares or membership interests in the   company; or
    • holds, in aggregate, 25% or more of the voting rights in relation to the company; 
  • in the case of a legal person, a natural person who otherwise exercises control over the management of the legal person;
  • in the case of a legal arrangement:
    • the partner or partners who control the partnership;
    • the trustee or other person who controls the legal arrangement; or
    • the settlor or other person by whom the legal arrangement is made;
  • in the case of a corporate and legal entity which is in insolvent liquidation, administration or administrative receivership under the BVI Insolvency Act, 2003, the natural person who is appointed as  liquidator, administrator or administrative receiver of the corporate legal entity;
  • in the case a receiver being appointed over 25% or more of the shares or voting rights in a corporate and legal entity, the creditor who appoints the receiver; or
  • in the case of a shareholder in the corporate and legal  entity who would otherwise be a beneficial owner but is a deceased, the natural person acting as a personal representative of the deceased’s estate.


Who is a “registrable person”?


For the purposes of this guide, any (a) beneficial owner and (b) “registrable legal entity” is a registrable person and their details must be included in the RA database by the CSP in relation to the BVI business company. 


What happens if there is a bona fide legal dispute?


Where there is a bona fide legal dispute as to the beneficial ownership of any interest in a corporate or legal entity which is in the process of being adjudicated by a court or tribunal, no change should be recorded with respect to the beneficial ownership of that interest in a RA database prior to the determination of that matter unless the court of tribunal so orders.


What is a Registrable Legal Entity (RLE)?


An RLE (in relation to a corporate and legal entity) is a legal entity that would be a beneficial owner of the corporate and legal entity if it were an individual and it is:
  • a legal entity which is an exempt company;
  • a legal entity listed on a recognised stock exchange;
  • a licensee or a foreign regulated person; or
  • a sovereign state or wholly owned subsidiary of a sovereign state.


What is an exempt person?

 
  • a corporate and legal entity which is recognised, registered or otherwise approved as a mutual fund under the securities and Investment Business Act, 2010 including an approved fund, an incubator fund, a public fund, a professional fund and a private fund;
  • a corporate and legal entity the securities of which are listed on a recognised stock exchange;
  • a licensee;
  • a corporate and legal entity which is a subsidiary of a corporate and legal entity that falls within (a) or (b); or 
  • a corporate and legal entity exempted by regulations.


What are the legal obligations of the CSP?


Unless an exemption applies (see above), the CSP has to take reasonable steps to identify the beneficial owner and registrable legal entities of a corporate and legal entity for which it acts as registered agent. 

For these purposes, a registered agent who takes steps to identify and verify any beneficial owner of a corporate and legal entity in accordance with its obligations under the AML/CFT legislation will be deemed to have taken all reasonable steps in accordance with this requirement.  

A CSP must establish and maintain information in the RA database in respect of exempt persons, beneficial owners and registrable legal entities for which it acts as registered agent and will collect the required information in relation to each such exempt person, beneficial owner and registrable legal entity.

The CSP must provide the required information in the RA database before 1 July 2017


What are the legal obligations of the BVI  Business Company?


Unless an exemption applies (see above), each BVI business company must take reasonable steps to identify its beneficial owners and registrable legal entities and ensure that the CSP has the correct details. The BVI business company must notify the registered agent, within 15 days of having been made aware of a change in beneficial ownership. 

The BVI BC itself is under no obligation to establish or maintain a RA database or provide any information to the BVI Competent Authority.

If you would like help identifying your registrable persons or preparing any notices to the companies you manage, please get in touch with your usual Harneys contact.


What are the consequences if legal obligations are not met?


It is a criminal offence not to comply with the provisions of the Boss Act.

On conviction, fines may be imposed on a CSP or BVI company that breaches the BOSS Act without reasonable cause in relation to its duty to:
  • identify beneficial owners (both the company and the CSP);
  • keep beneficial ownership information up to date (both the company and CSP); or 
  • maintain the RA database (the CSP).

A CSP or BVI company that breaches the BOSS Act in relation to the three duties mentioned above will be subject to penalties on summary conviction, to a fine not exceeding twenty thousand dollars or to imprisonment for a term not exceeding two years or both; and penalties on conviction on indictment, to a fine not exceeding seventy thousand dollars or to imprisonment or to a term not exceeding five years, or both will apply to both persons. Penalties are also imposed on any designated person breaching the various confidentiality provisions in the BOSS Act.

Penalties are also imposed on any designated person breaching the various confidentiality provisions in the BOSS Act. Penalties on summary conviction not exceeding twenty thousand dollars or to imprisonment for a term not exceeding two years or both and penalties on conviction on indictment, to a fine not exceeding seventy thousand dollars or to imprisonment or a term not exceeding five years, or both will apply to such persons.

It is also a criminal offence for a CSP to intentionally provide false information relating to a corporate and legal entity on its RA database. This may include any director, manager or other officer where it is proved that the offence was committed with an intention to falsify.

Likewise it is a criminal offence for a corporate and legal entity to intentionally provide false information in relation to the information it is obligated to provide under the BOSS Act. This may include any director, manager or other officer where it is proved that the offence was committed with their consent or wilful default.

A person who commits an offence in relation to misleading information is liable on summary conviction to a fine not exceeding forty thousand dollars or to imprisonment for a term not exceeding two years or both or on conviction on indictment, to a fine not exceeding seventy five thousand dollars or to imprisonment not exceeding two years or both.


Is there any protection for persons disclosing information?


A person who discloses information or produces documents as required under the BOSS Act is not in breach of any enactment, rule of law, agreement or professional code of conduct to which that person is subject only by reason of complying with the requirements of the BOSS Act, and no civil, criminal or disciplinary proceedings will lie against such a person in this regard.


Is there any protection for CSPs?


Where a CSP has collected the prescribed information in accordance with the laws of the BVI or includes information on the RA database not specified in the BOSS Act, the collection of and inclusion of such information by the CSP will be treated as done in accordance with the BOSS Act and the registered agent will not be in breach of any agreement, professional code of conduct or rule of law to which it is subject.


What are the on-going obligations of the company and registrable persons?


The BVI company, within 15 days of becoming aware of a change of any of the prescribed information relating to beneficial owners or registrable legal entities must notify its registered agent of such changes and the date such changes took place.

The CSP is required, within 15 days of being notified by the corporate and legal entity of a change of any of the prescribed information relating to beneficial owners or registrable legal entities, to cause the information previously provided in the RA database to be updated.


Who can access the RA database?


The beneficial ownership information in the RA database is not available to public inspection and will only be accessible pursuant to a proper and lawful request made by a designated person, one of the four BVI competent authorities:
  • Financial Investigation Agency;
  • Financial Services Commission;
  • The International Tax Authority; or 
  • Attorney General’s Chambers.


Which companies are exempt from the requirements of the BOSS Act?


A corporate and legal entity:
  • which is recognised, registered or otherwise approved as a mutual fund under the Securities and Investment Business Act, 2010 including an approved fund, an incubator fund, a public fund, a professional fund and a private fund;
  • the securities of which are listed on a recognised stock exchange;
  • a corporate and legal entity exempted by the legislation;
  • a corporate and legal entity which is a subsidiary of a corporate and legal entity which falls in paragraph (a) or (b) above; and
  • a licensee.


Are companies that have been struck off, liquidated or continued-out exempt?


BVI Business Companies that were struck from the Registry of Corporate Affairs after 31 December 2015 are not exempted from the BOSS Act and are required to ensure that the registered agent has the correct beneficial ownership details. The BOSS Act does not apply to BVI Business Companies struck off prior to 1 January 2016. 

A BVI Business Company that was dissolved (either by being struck off for a sufficient period of time or because they have been liquidated) prior to 1 July 2017, is exempt from the BOSS legislation. Any company dissolved after 30 June 2017 will have had their beneficial ownership information uploaded to the RA data base. When a BVI Business Company ceases to be an active corporate and legal entity, the beneficial ownership information will be maintained on the RA database for a minimum of five (5) years. 

Companies that are in liquidation still need to make filings under the BOSS Act until they are dissolved. If a company is subsequently restored, those obligations all revive. This shines an unwelcomed spotlight on another issue arising under BVI law - where companies are restored without the registered agent's knowledge. This issue is not unique to the BOSS Act.


Is there a grace period?


The BVI government has announced a six-month grace period in relation to the imposition of any penalties under the BOSS Act. No amendment has been made to the Boss Act in this regard but this appears to be a valid and enforceable extra statutory concession.

The expectation is that the grace period will be used to fix some of the more reported disparities between the secure portal and the BOSS Act.


What steps must registered agents and BVI Business Companies follow?


Step 1
Determine if the BVI Business Company is in or out of scope under the BOSS Act. If in scope (a BVI Business Company active as at 30 June 2017 or struck off after 31 December 2015)  please proceed to Steps 2 to 4. If you need assistance determining whether or not your BVI Business Company is in or out of scope or whether or not your Company can be considered an exempt person, please contact us at Harneys. If your BVI Business Company is deemed an exempt person, the only information to be uploaded to the RA database are the details of the exempt person such as the name and any alternative names, the date and number of incorporation, the status and registered office address in addition to the basis or bases upon which the exempt person is designated as an exempt person must be recorded in the RA Database by the registered agent. 

Step 2
It is important to ensure that beneficial ownership details held by the registered agent are complete, correct and current. Every BVI Business Company must take reasonable steps to determine who its beneficial owner/s is/are and must notify the registered agent of any changes to the details previously submitted within 15 days of having been made aware of such a change.

Step 3 
The registered agent (the CSP) must take reasonable steps to obtain information on the beneficial owners of the companies it provides company administrational services to and enter details of all “registrable persons” for the purposes of the Boss Act in the RA database. The information required to be entered in the RA database by the BOSS Act can be found here: BO – Natural Person and BO – RLE.

Step 4 
Once the CSP has obtained the information from the company, the CSP must upload it in the RA database within 15 days of being notified. Beneficial ownership details and due diligence requirements must also be met under the AML regime (due diligence to be collected for all owning 10% or more) and the documentation collected must demonstrate and support the beneficial owner details provided to be maintained on the RA database.

This guide does not constitute and should not be taken as legal advice. If you would like legal advice on any issue raised by this update, please contact your usual Harneys contact. 

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