BRITISH VIRGIN ISLANDS – Introduces Beneficial Ownership Reporting Requirements

The Beneficial Ownership Secure Search System Act, 2017 (the “BOSS Act”) comes into force in the BVI on 30 June 2017.

The registered agent of an In-Scope Entity in the BVI must maintain a database containing details of beneficial owners of, and registrable legal entities, applicable to BVI companies for which it is registered agent. The database will NOT be public and the information will only be accessible by designated persons specified by BVI competent authorities, principally on proper and lawful requests made by the UK law enforcement agencies.

The Beneficial Ownership Secure Search system is built to ensure that the BVI can efficiently exchange that information in relation to the exchange of notes to assist law enforcement agencies combat tax evasion and money laundering.

Which entities are within scope (“In-Scope Entity”)
Companies incorporated or registered under the BVI Business Companies Act, 2004.

Exemptions
This does not apply directly to foreign companies, or foreign companies that are registered in the BVI as a ‘foreign company’ pursuant to Part XI of the BVI Business Companies Act, 2004.

It also does not apply to companies that were struck off the register of companies prior to 1 January 2016.

Broadly, companies which are exempted from maintaining the beneficial ownership information are:

  • listed on recognised stock exchange (e.g. NYSE, NASDAQ, London, Cayman Islands or Hong Kong Stock Exchanges);
  • 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 BVI licensee (being a company licensed under the BVI financial services regulatory legislation, including an insurance company, bank or trust company);
  • a ‘subsidiary’ of a company that is exempt under (a) or (b) above, being a company where 75% or more of the interests or voting rights are held, directly or indirectly, by an exempt person; or
  • exempted by regulations.

Who are beneficial owners?
A ‘beneficial owner’ is defined as a natural person who ultimately owns or controls a legal entity and includes, though is not restricted to:

  • a natural person who ultimately owns or controls, whether directly or indirectly, 25% or more of the shares or voting rights in 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 company that is in insolvent liquidation, administration or administrative receivership under the Insolvency Act, 2003, the natural person who is appointed as a liquidator, administrator or administrative receiver of the company;
  • In the case of a receiver being appointed over 25% or more of the shares or voting rights in a company, the creditor who appoints the receiver; or
  • In the case of a shareholder in the company who would otherwise be a beneficial owner but is deceased, the natural person acting as a personal representative of the deceased’s estate.

Where two or more persons hold any qualifying interest jointly, whether as joint tenants or tenants in common, then each joint owner shall be the beneficial owner.

A person shall not be treated as a beneficial owner only by reason of:

  • having the benefit of a security interest over shares or voting rights in a company; or
  • having a commercial exposure to the financial performance of a company pursuant to financial derivatives or similar contractual arrangements.

Registrable legal entity
A “registrable legal entity” in relation to a company is a legal entity which:

  • would be a beneficial owner of a company if it were an individual; and
  • one or more of the following applies to it:
    • it is a mutual fund under the Securities and Investment Business Act, 2010 or its subsidiary;
    • it is an entity whose shares or securities are listed on a recognised stock exchange or a subsidiary of such an entity;
    • it is a licensee or foreign regulated person; or
    • it is a sovereign state or a wholly owned subsidiary of a sovereign state.

Obligations of an In-Scope Entity
The obligation to provide updated beneficial ownership information rests on the BVI Company. Company failing to comply with this requirement commits an offence and may be subject to a fine up to US$250,000 or to imprisonment for a term not exceeding 5 years, or both.

An entity shall identify any person who is a beneficial owner or registrable legal entity and notify the registered agent of that information within 15 days of identifying such person or entity. The penalties for non-compliance by an entity may reach a fine not exceeding US$250,000, imprisonment for a term not exceeding 5 years or both. In addition, providing false information can lead to a fine of up to US$75,000, up to 5 years’ imprisonment or both.

An entity must within 15 days of becoming aware of a change in any of the prescribed information relating to beneficial owners notify the registered agent of such changes and the dates that they took place. Penalties for a breach can reach US$10,000. In addition, proving false information can lead to a fine of up to US$75,000, up to 5 years’ imprisonment or both.

Information in the BOSS register

  • With respect to each beneficial owner: name; residential address; date of birth; nationality;
  • Particulars of each company including: the name (including alternative names); incorporation number (or equivalent); date of incorporation; status and registered address; and
  • With respect to each company as outlined in (b): jurisdiction of incorporation; the basis on which the entity is a registrable legal entity; the name of the regulator (if any); and the name of the sovereign state (where the registrable legal entity is a sovereign state or a subsidiary of a sovereign state).

It will also contain date on which such individual or registrable legal entity became or ceased to be a beneficial owner of an In-Scope Entity. The information must be held for 5 years by the registered agent from dissolution of the entity or its continuation out of the BVI.