The Modern Offshore Company Secretary (June 3, 2010)
By Gareth Thomas, Ogier
For this week’s article we thought that we would focus on Company Administration, as this is a sector which generates about 90% of all financial services business in the BVI. In some places in the world, particularly in the onshore jurisdictions, this known as Company Secretarial Practice. Many readers of this article will be familiar with the international body called the Institute of Chartered Secretaries and Administrators (ICSA) that governs all students and members who are presently studying or who have graduated through ICSA’s international qualifying scheme. More and more focus is now being placed, both by employers and regulators, on the ICSA’s professional qualification. Academic qualifications are wonderful, as they lay the foundations, but the real prize is the internationally recognised professional exams, and that is what employers are looking for. Moreover, it is not out of the realm of possibility that one day, in order to hold a client facing role in the financial services industry in the BVI, you must have obtained as minimum a professional certificate in one of the relevant disciplines such as ICSA, Society of Trust and Estate Practitioners (STEP), Compliance, Association of Chartered Certified Accountants (ACCA) or fund administration. So, what is the ICSA? The ICSA is the professional body for chartered secretaries and is recognised throughout the world for the standards and scope of its Qualifying Scheme. 70,000 members and students in over 70 countries have used the ICSA Qualifying Scheme to further their careers. The ICSA Certificate is a foundation qualification which provides an introduction to the offshore financial sector. There are no formal entry requirements, although candidates should display a basic standard of literacy and numeracy. These courses are presently being taught by the Financial Services Institute at H. Lavity Stoutt Community College (HLSCC) in Tortola. You may be surprised to know that we now have the largest ICSA training centre in the region, if you are not making the most of it you are missing out! So, what is the role of the modern offshore company secretary? Simply put, it is the value added service beyond the generic registered agent filing role. Long gone are the days when clients would send us documents to be filed. Now the registered agent, and the soon to be in place “authorised representative role”, has a greater advisory role. Advisors have a thorough understanding of the relevant laws and regulations as well as having a deeper understanding of our client’s business. The bar has been raised, the Financial Services Commission (FSC) now have their game face on, and the Industry has to step up and be ready. Which means that all of those involved within the industry now have to be prepared for this enhanced role, whether it’s the junior corporate administrator or the Managing Director. In the BVI we have the most sophisticated online Registry filing system in the world called VIRRGIN, which processes over 2,000 transactions daily. Not only does this allow for incorporations and other such filings to be made in a time efficient manner, plans are afoot to rollout VIRRGIN’S use to other departments of the FSC. Once this happens, this will further assist practitioners with their day to day applications, tasks and continued obligations.
For more information, comments, suggestions - email:
Website: http://www.bviifc.gov.vg
Securities and Investment Business Act, 2010 (April 15, 2010)
By Simon Schilder, Partner, Ogier
After much anticipation, the BVI has enacted the Securities and Investment Business Act, 2010 (“SIBA”). The enactment of SIBA represents an extremely important step for the continued development of the financial services sector within the BVI, providing the jurisdiction with a further modern and user friendly statute, in tune with the current regulatory environment, which will complement the BVI Business Companies Act, 2004 and the Insolvency Act, 2003.
SIBA has four principle objectives, being to: •introduce an investment business licensing regime to regulate entities conducting “investment business” in or from within the BVI; •adopt restrictions on and regulations for the making of “public issues of securities” into the BVI; •update and modernise the regulation of the BVI investment funds industry, by repealing the current Mutual Funds Act, 1996 and replacing it by SIBA and the Mutual Funds Regulations, 2010; and •introduce a market abuse regime.
The key features of SIBA are as follows: Investment Business Any person carrying on activities constituting “investment business” in or from within the BVI will under SIBA be required to hold an investment business license specifically authorising that kind of investment business. For these purposes, the types of activity constituting investment business are as follows: •dealing in investments; •arranging deals in investments; •managing investments; •providing investment advice; •providing custodial services with respect to investments; • providing administrative services with respect to investments; and • operating an investment exchange.
Schedule 1 of SIBA gives a fairly broad definition of the types of things constituting “investments” for the purposes of SIBA. Schedule 2 of SIBA makes provision for certain investment activities to be excluded from constituting investment business (detailed in Schedule 2 Part B of SIBA as “excluded activities”) and for certain types of persons conducting investment business from being excluded from the requirement to hold an investment business license under SIBA (detailed in Schedule 2 Part C of SIBA as “excluded persons”). Significantly, the scope of SIBA will cover any BVI company carrying on investment business anywhere in the world and any person soliciting a person (including a BVI entity) in the BVI in order to offer a service constituting investment business. Therefore, the investment business provisions under SIBA will have application to both (i) BVI entities conducting investment business outside the BVI; and also (ii) BVI and non-BVI entities conducting investment business within the BVI (unless those activities constitute an exclude activity or the entity conducting the investment business qualifies as an excluded person). Once licensed to conduct investment business, SIBA makes provision for various systems and controls for the operation of a licensee’s business, covering corporate governance, advertisements and other administrative functions. A further regulatory regime will be implemented through the Regulatory Code, 2009 (the “Regulatory Code”), which has been amended so as to bring investment business licensees within the scope of the Regulatory Code, which came into force in the BVI on 1 February 2010.
Public Issues of Securities Another feature of SIBA is that it introduces provisions regulating the offering of securities into the BVI. Under the public issues provisions, subject to limited exceptions, no security may be offered to the public in the BVI unless (i) the offer is contained within a “registered prospectus”; and (ii) the offer complies with the Public Issuers Code. For these purposes, an offer of securities to any person in the BVI or an offer received by a person in the BVI is an offer of securities to the public. Importantly, the mere receipt by a BVI company at its registered office of an offer of securities will not, in itself, be sufficient to make that offer constitute a public offer. Where an offer is deemed to be a public offer and so requiring the prospectus to be registered with the FSC, SIBA and the Public Issuers Code provide for prospectus content requirements, in order to safeguard the interests of investors. In addition, for public issues by BVI companies, certain provisions of the BVI Business Companies Act, 2004 are disapplied by Schedule 6 of SIBA. As an ongoing obligation for public issuers, any amendments or supplements to a registered prospectus are also required to be registered with the FSC and a copy of all such amendments or supplements made available to every person who received a copy of the original prospectus.
In addition to the normal common law remedies available, SIBA also gives the Courts the powers to grant a compensation order in favour of subscribers who purchased securities offered pursuant to a public offer in reliance of a prospectus and suffered loss or damages as a consequence of any untrue or misleading statement contained within that prospectus or omission from that prospectus. Such orders may be made against the issuer; its directors; any guarantor of the issue; any person accepting responsibility for the prospectus; any promoter of the offer (including directors of the promoter); and any other person authorising the contents of the prospectus.
Mutual Funds SIBA repeals the Mutual Funds Act, 1996 and introduces an updated and modernised statutory regime for the regulation of the BVI funds industry, through SIBA and the Mutual Funds Regulations, 2010. The framework for the regulation of BVI funds is not materially altered by the enactment of SIBA and most of the popular concepts remain, such that many of the legislative changes made under SIBA and the Mutual Funds Regulations, 2010 merely codify the existing FSC policy which has developed over recent years in line with accepted international standards. Notable changes introduced by SIBA are as follows: • a codification of the requirement for BVI funds to have at least two directors; • a requirement for all BVI funds to appoint an authorised representative resident in the BVI (being an agent licensed by the FSC to provide authorised representative services); • a change in the minimum initial investment which may be made by investors investing into professional funds, requiring, subject to limited exceptions, all investors to make an initial minimum investment of at least US$100,000 (the previous position under the Mutual Funds Act, 1996 was that a majority of the investors into professional funds were required to invest at least US$100,000); • a change in the timeframe pursuant to which professional funds are able to commence business before receiving recognition from the FSC, enabling professional funds to commence business for up to 21 days before receiving FSC recognition, provided that the professional fund’s application for recognition is submitted to the FSC for consideration within 14 days of the launch date (the previous position under the Mutual Funds Act, 1996 was that a professional fund could commence business for up to 14 days before receiving FSC recognition); and • a requirement for professional and private funds intending not to appoint either an investment manager, administrator or custodian to apply to the FSC for an exemption from the requirement to appoint such a functionary;
In addition to the above, SIBA codifies the current FSC policies in relation to ongoing reporting obligations for funds recognised as either private or professional funds or registered as public funds.
Market Abuse SIBA introduces a market abuse regime which introduces prohibitions against insider dealing in the BVI. The market abuse regime introduced under SIBA is very much in line with accepted international standards.
Transitional Provisions SIBA provides for transitional provisions which are applicable for existing BVI entities which are, on the date of SIBA coming into force either currently licensed under the Mutual Funds Act, 1996 or currently carrying on business activities which constitute “investment business” under SIBA. These transitional provisions will apply during the first six months following the enactment of SIBA and will enable such entities to come into compliance with SIBA during the transitional period without being in breach of SIBA. This will therefore facilitate the smooth transitioning for such entities into the new regulatory regime created by SIBA.
For more information, comments, suggestions - email:
Website: http://www.bviifc.gov.vg
Guide for Prevention of Money Laundering or “Dirty Money? – No, thanks!”
By Sophie Leroy, Christoph Denk, Peter Reichenstein
Today the challenge for Financial Service Businesses (“FSBs”) is double. On the one hand the supervising authorities have strengthened their efforts in fighting organized crime and have implemented higher (and more public) penalties for those who do not comply with rules and regulations. On the other hand, the fast development of legislation requires FSBs to review and adapt their processes constantly. The rapid progression of legislation is driven by countries’ fear of appearing on black or grey lists maintained by various international organizations and individual countries. Challenging though it may be, compliance with best industry practice and international standards enables FSBs to guard themselves against potential exposure to money laundering.
What is “dirty” money? Money earned through criminal activities is said to be “dirty”. For this reason, criminals have an interest in disguising the dubious origin of these funds. Money Laundering, therefore, is the concealing of the origins of money obtained by criminal activities via its introduction into the system of legitimate undertakings. Money Laundering is most commonly associated with illegal drugs, weapons, prostitution, human trafficking, corruption, blackmail, extortion or kidnapping. The precondition for the crime of money laundering is another crime – money laundering is therefore the result of a previous crime. The reason for the definition of such types of crime lies in the fact that law enforcement’s efforts in preventing crimes is in many cases unsatisfactory and the rate of successfully investigated crimes and conviction of criminals is rather low. Hence, the focus is shifted to the proceeds of crime, which in many cases is the very motive for criminal activity. . .
The importance of the Know Your Customer principle (KYC)
At the end of 2008 the UK Treasury asked Mr Michael Foot to conduct a review of the UK’s nine Overseas Territories and Crown Dependencies’ finance centres, which includes the BVI. In his ‘Final Report of the Independent Review of British Offshore Financial Centres’ he recognised that the BVI continues to be a well regulated jurisdiction and highlighted some unique rules we have in place including the Know-Your-Customer standards and beneficial ownership rules that exist in the BVI.
To prevent unintentional involvement in Money Laundering, it is of utmost importance for any business to know its customers. – Who is the person I am doing business with? – Is he/she in control? Who is really calling the shots? In the financial services industry these persons are called the Beneficial Owners.
KYC does not stop at identifying the customer and researching his past and reputation; it also includes information about the nature, the intent and purpose of the business or transaction to be executed. Does it make economic sense? Is it plausible? What is the source of the funds?
In the financial services industry, where there is potential for money laundering, information on clients is collected systematically and condensed into a so-called customer profile. Business transactions and payments are compared to this profile. It is the duty of financial practitioners to investigate inconsistencies and – should a suspicion of money laundering materialize - file a so-called Suspicious Activity Report to the competent authorities.
As systems and know-how on the prevention of money laundering are continuously improving in the financial services industry, other sectors of the economy are being targeted by criminals with a need to launder the proceeds of their crimes. Preferred targets are economic activities which involve cash payments. In the famous “Pizza Connection” case in the eighties, organized crime was found to be using pizza restaurants for laundering the proceeds of drug trafficking by commingling them with the proceeds of perfectly legal economic activities.
Potential weak links include any businesses and persons who are in financial distress. Questions like “Could you do me a favor and take this money in cash and send it from your account by wire transfer or check to XY?” should raise a red flag, irrespective of the business sector or context.
There are many ways in which money can be laundered. Awareness of the potential risks and the likelihood of such risks are key in the avoidance of unintentionally getting involved in money laundering.
For more information, comments, suggestions - email:
Website: http://www.bviifc.gov.vg
Launch of New Professional Association for Insolvency Practitioners
By William Tacon on behalf of all members of RISA.
Late 2009 saw a key initiative in the development of an increasingly important part of the financial services industry in the BVI, albeit one that may not have captured the public imagination as yet. In December 2009, a group of insolvency and restructuring experts launched a new professional association for people involved in this important sector of the economy with the formation of RISA, the Recovery and Insolvency Specialists Association.The recent economic turbulence and recession have resulted in a large number of high profile cases, such as the spectacular collapses of Bear Stearns, Lehman Brothers and the Madoff scandal. These have undoubtedly raised the profile of insolvency practitioners who are appointed as liquidators to sort out the large, complex and often litigious mess left behind by such collapses. Companies in BVI often feature in complex structures created in the US, UK, Europe and the Far East and, as night follows day, local insolvency practitioners and their advisers have a major role in dealing with troubled situations.
In jurisdictions where financial and legal systems are based on English principles, as in the BVI, insolvency practitioners are usually fully qualified accountants, who are supported by experienced lawyers. Indeed, the earliest English Chartered Accountants in the late Nineteenth Century were acting as receivers and liquidators. The current high level of insolvency should therefore be seen against this historic background, insolvency is an inevitable part of the life cycle of all too many companies, funds and regrettably, individuals.
What Do Insolvency Practitioners Actually Do? At the most basic level, we secure, identify and sell assets belonging to an insolvent company and then work out who, amongst potentially competing parties, is entitled to receive the proceeds from the remaining assets, including cash. In large, sudden and spectacular collapses, there are often many complex issues to resolve concerning the entitlement of parties to receive the proceeds from the unraveling of often complex financial structures and instruments, such as derivatives and traded positions in global financial markets. Assets and investments may be held in many jurisdictions and the creditors based in completely different places. Differing laws and legal principles throughout the world make for interesting cross-border issues, as Insolvency Practitioners attempt to act equitably amongst the parties.
In recent years there have been attempts to harmonise insolvency laws in many countries. A good example being within the European Union where the laws have, at least in theory, been harmonised to ensure that creditors in any country within the EU are neither preferred nor impeded from exercising claims in a liquidation in any member state. The United Nations has seen the importance of harmonising cross-border insolvency procedures and introduced the “UNCITRAL model law”. The United States introduced a new chapter of its bankruptcy code – Chapter 15 – which enshrines many of the principles set out in the model law and also by the European Union. These developments might be thought to put an end to cross-border squabbles but in practice, they have not made much difference in cases handled in the BVI.
What Does This Mean for the BVI? Not all cases involve catastrophic failures or fraud. It has always been the case that trading entities will get into financial difficulties; the economic climate has accelerated the pace and volume recently. Virtually all the work undertaken in BVI involves overseas assets and liabilities and it is therefore important that its practitioners are at the forefront of international insolvency matters. We are consulted by companies and their advisers in all significant commercial centres around the globe and have to explain in detail how a BVI insolvency can interrelate with, say, restructuring a large Hong Kong based trading group with interests throughout the world.
When things go wrong, insolvency practitioners have to be retained to advise on how best to sort things out. Insolvency and restructuring is an increasingly important part of the financial services industry in the BVI and there are now 18 professionals who are licensed by the Financial Services Commission to act as insolvency practitioners. To be licensed in the BVI involves meeting stringent standards of professional qualifications and experience. Many of the accounting firms have insolvency and restructuring departments and most are increasing the size of their teams, together with the niche players. Many litigators in the law firms are engaged in advising the office holders and other stakeholders in relation to insolvency proceedings, and they too are growing their teams. The BVI radically overhauled its insolvency related legislation through the introduction of the Insolvency Act, 2003. This modern legislation has proved to be fit for purpose in the most challenging economic climate in living memory. The Act offers a robust framework within which office holders can fulfil their obligations, supported by specialist lawyers, the majority of whom who are resident in the BVI. The newly created Commercial Court has been kept busy during its first year as many liquidators and receivers have been appointed by it, and who in turn often need to seek directions following their appointments. In another first for the BVI, RISA has applied for membership of INSOL International, the global umbrella organisation for insolvency practitioners and if accepted, will become the first offshore jurisdiction to become a member. This reflects the maturity, sophistication and global nature of BVI companies in general and our profession in particular.
Insolvency and restructuring professionals add immeasurably to the financial services offering in the BVI. The existence of a sound legal framework and experienced and well qualified accountants and lawyers who can deal effectively and professionally with insolvency matters is a key part of the invisible bedrock that gives investors the confidence to use BVI companies.
For more information, comments, suggestions - email:
Website: http://www.bviifc.gov.vg
INSURANCE IN THE BVI (IFC BUZZ Feb. 11)
By Simon Owen, Managing Director, Hyperion Risk Solutions Limited The concept of arranging insurance to protect against contingent loss is one that dates back thousands of years. One of the earliest recorded examples is the “Code of Hammurabi” which insured the Babylonian traders of 1750 BC for losses incurred as a result of a vessel transporting their goods being lost at sea. Today, insurance forms part of everyday life and is a prevalent factor in relation to our health, our property and our employment. What are the typical classes of insurance that are available in the BVI? •Automobile insurance is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the insured's vehicle itself. Throughout the BVI an auto insurance policy is required to legally operate a motor vehicle on public roads. •Aviation insurance insures against hull, spares, deductibles, hull wear and liability risks. •Boiler insurance (also known as boiler and machinery insurance or equipment breakdown insurance) insures against accidental physical damage to equipment or machinery. •Builder's risk insurance insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage due to any cause (including the negligence of the insured) not otherwise expressly excluded. •Directors and officers liability insurance protects an organization (usually a corporation) from costs associated with litigation resulting from mistakes made by directors and officers for which they are liable. In the industry, it is usually called "D&O" for short. •Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Some ordinary home-owners property insurance policies do not cover earthquake damage. •Environmental liability insurance protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of pollutants. •A fidelity bond is a form of casualty insurance that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees. •Flood insurance protects against property loss due to flooding. Many insurers do not provide flood insurance. •Health insurance will cover the cost of medical treatments as allowed for under the schedule of benefits and policy terms. •Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. •Marine insurance and Marine Cargo insurance cover the loss or damage of ships at sea or on inland waterways, and of the cargo that may be on them. •Professional liability insurance, also called professional indemnity insurance, protects insured professionals such as architectural corporation and medical practice against potential negligence claims made by their patients/clients. •Property insurance provides protection against risks to property, such as fire, theft or weather damage. For businesses, this often includes business interruption insurance, to cover the financial cost to the company as a result of the property damage. •Public liability insurance covers a business against claims should its operations injure a member of the public or damage their property in some way. •Surety bond insurance is a three party insurance guaranteeing the performance of the principal. •Terrorism insurance provides protection against any loss or damage caused by terrorist activities. •Windstorm insurance is an insurance covering the damage that can be caused by hurricanes and tropical cyclones. Who is licensed to conduct domestic insurance business in the BVI? Under the Insurance Act (2008), all domestic insurance transactions must be placed with a licensed (or exempted) insurance company. Similarly, all agents and brokers used in the process must be licensed by the BVI Financial Services Commission. At present, there are a number of unlicensed insurers and brokers selling insurance products to BVI residents and businesses, meaning that the related policyholders are not protected in the event of any wrongdoing. This is in contravention of the Act and, therefore, those persons using unlicensed providers could also be held accountable for doing so. What are the effects of the newly enacted Insurance Act and Regulatory Code on domestic insurance? The recently enacted Insurance Act (2008) and the accompanying Regulatory Code was drafted to enhance the previous legislation and provide additional protection to BVI policyholders, whether they be individuals or businesses. This is achieved in a number of ways, including a new requirement for foreign based insurers to hold liquid assets in a trust in the BVI. The Financial Services Commission’s primary objective is to ensure that the insurance companies licensed here in the BVI are creditworthy and have the financial strength to settle all claims. In addition, certain provisions have been incorporated to ensure that the BVI’s Financial Services industry is further strengthened by making it a statutory requirement for the likes of trust companies and other service providers to have professional liability insurance in place. By doing so, clients who use the jurisdiction are afforded a further layer of protection in the event of potential errors, omissions and negligent acts carried out by their service providers. For example, the following is stated to apply to trust companies and company managers:
The minimum level of cover for any one claim and in the aggregate shall be the greater of:- (a)three times relevant fees and commissions; (b)thirty times relevant fees and commissions from the single largest customer of the licensed trust company or company manager, including all related customers; or (c)in the case of a licensed trust company, USD 5,000,000 and in the case of a licensed company manager, USD 1,000,000. Why is insurance important to the BVI Financial Services Sector? In all financial services jurisdictions, whether it is London, New York or the BVI, almost all financial transactions involve some element of insurance. For example, the hedge and mutual fund structures established here will generally purchase fund manager liability insurance and directors’ and officers’ coverage. The related service providers, such as the fund administrator, the auditors and the fund’s legal counsel will also purchase similar insurance coverage, giving the fund’s investors a significant level of security in the event of an error, omission, negligent act or crime that adversely affects the fund. Risk transference remains an integral part of the way the financial world operates, so access to a wide-range of insurance products and quality insurance companies will continue to be a factor in the BVI’s continuing success. Interesting Insurance Facts Welsh singer Tom Jones, once insured his chest hair for $7m; -Global insurance premiums total more than $4.3 Trillion; -Rock superstar Bruce Springsteen insured his voice for $6m; -A disturbingly high number of people are insured against alien abduction; -Australian cricketer Merv Hughes, insured his trademark moustache for $370k.
For more information, comments, suggestions - e-mail:
Website: http://www.bviifc.gov.vg
Takeover offers for BVI companies (IFC BUZZ Feb. 4, 2010)
By Simon Schilder, Partner, Ogier
With improving market confidence in the global economy, in recent months there has been a marked increase in global merger and acquisition activity, some of which has involved takeovers of a number of listed BVI companies. By way of background, whilst the BVI does not itself have a stock exchange, BVI companies have proved popular for listings on a number of the world’s stock exchanges, most frequently in New York and London, and since December 2009 they can also now list on the Hong Kong Stock Exchange. When structuring a takeover bid for a BVI company, there is no “one size fits all” approach and a number of the deals which we have seen recently have been structured in different ways. This ability to structure takeover bids for BVI companies in a number of different ways again exemplifies one of the attractions of the BVI as a financial centre, as the BVI Business Companies Act, 2004 (the “Act”) provides for a number of structuring options which can be utilised in a takeover in order to accommodate the priorities and commercial considerations of the parties involved. In structuring a bid for a BVI company, there are five principal structuring options that may be utilised, being:
(a) An offer for all of the issued shares A bid structured as an offer for all the shares in the BVI company involves the bidder making a public offer to acquire the shares owned by the shareholders of the BVI company. The terms of the offer will be contained within an offer document, which will be posted to the shareholders at the address which appears for them in the register of members. Kudelski SA’s recent takeover bid for OpenTV Corp was structured in this way. A bidder, having received acceptances from a sufficient majority of the shareholders to enable it to takeover control of the company, will then declare the offer unconditional and at that point will proceed to acquire the shares of the shareholders accepting the takeover offer. In these circumstances, where a successful bidder acquires 90 per cent. or more of the shares, the Act provides for a mechanic to enable the bidder, if it so chooses, to elect to “squeeze out” the minority shareholders, so as to obtain 100 per cent. of the shares. The Act goes on to provide for a right for shareholders whose shares are being “squeezed out” to dissent to the price being offered for their shares and where an alternative price cannot be agreed, for a “fair value” to be determined by independent appraisers through an appraisal procedure.
(b) A scheme of arrangement An alternative way to structure a takeover offer is by way of a scheme of arrangement under Section 179A of the Act. The provisions of the Act dealing with schemes of arrangement are not dissimilar to the English law equivalent; provisions and schemes of arrangements are a popular way to structure takeovers as it means that rather than obtaining the approval of 90% of the shareholders (as with an open offer), a bidder need only obtain 75% of the shares in order to take over the company. A Section 179A scheme of arrangement has recently been successfully used for Amber Petroleum Ltd’s reverse takeover of AfNat Resources Limited. Under a Section 179A scheme of arrangement, once approved by 75% of the BVI company’s shareholders present and voting on the scheme of arrangement at a Court convened meeting and then sanctioned by the Court, the scheme of arrangement will be binding on all shareholders. This is a clear attraction of structuring a takeover by way of a scheme of arrangement. Significantly, shareholders under a Section 179A scheme of arrangement do not have dissent rights to enable them to dissent from the price being offered for their shares. This means that once the scheme of arrangement is approved, they will receive the same consideration as all other shareholders.
(c) A plan of arrangement In addition to Section 179A schemes of arrangement, the Act also provides for plans of arrangements. Whilst there are clear overlaps between the two concepts, there are also some significant differences, which may provide structuring advantages for some bidders. Unlike a Section 179A scheme of arrangement, shareholders under a Section 177 plan of arrangement have dissent rights, enabling them to dissent to the price being offered for their shares and where a “fair value” can not be agreed an appraisal procedure exists to enable the fair value to be determined by independent appraisers.
(d) A statutory merger or consolidation A further structuring tool which is popular for takeovers in the US market, is the use of the statutory merger regime or a statutory consolidation under Sections 170 to 174 of the Act to structure a takeover of a BVI company. Under the merger provisions, two or more BVI companies (or a BVI company and a foreign company provided that the laws of the jurisdiction of the foreign company permit a statutory merger) can merge in accordance with a procedural process involving approval by each respective company’s directors and shareholders of a plan of merger and the filing of this plan of merger, together with articles of merger, with the Registrar of Corporate Affairs in the BVI. Essilor International SA’s recent takeover bid for FGX International Holdings Limited has been structured in this way and previously Apax Partners takeover bid for Tommy Hilfiger Corporation was also successfully structured as a statutory merger. With effect from the effective date of the merger or consolidation, the assets and liabilities of each constituent company automatically vest in the surviving company or the consolidated company, whilst the BVI company’s shareholders will receive the merger consideration in exchange for their shares. Shareholders again have dissent rights, enabling them to dissent to the price being offered for their shares and where a “fair value” can not be agreed, an appraisal procedure exists to enable the fair value to be determined by independent appraisers. A virtue of either process is that the threshold for shareholder approval of the transaction will, subject to the company’s memorandum and articles of association, be a simple majority.
(e) A disposition of assets A further option available as an alternative to structuring a deal as a takeover of the BVI company, would be for the bidder to agree to purchase the pertinent assets of the BVI company. However, it should be noted that if the assets sold represented more than 50% in value of the assets of the BVI company, the disposition of asset provisions in the Act would apply (unless that Section has been expressly excluded in the company’s memorandum and articles of association). The sale would require the approval of a resolution of shareholders (a simple majority unless the memorandum and articles of association provide for a higher threshold). As before, shareholders will have dissent rights from a disposition of assets, enabling them to dissent to the price being paid.
Simon Schilder 25 January 2010
For more information, comments, suggestions - email:
Website: http://www.bviifc.gov.vg
A Year in the BVI International Finance Centre (IFC BUZZ Jan. 14, 2010)
Sherri Ortiz the Executive Director of the BVI International Finance Centre summarises the IFC’s role over thelast 12 months.
It has certainly been a busy year for the BVI International Finance Centre. (“BVI IFC” or “IFC”) The IFC plays an important role in the promotion and marketing of the territory as a globally integrated and responsible financial services centre. Over the last year, we have continued to ensure that the BVI is the first choice for financial service business worldwide.
In my previous article I touched on the global events from the last 12 months, their impact to the Jurisdiction and how we have responded. In this article however, I’m happy to outline a number of IFC related events that we have initiated over the last year in order to promote the BVI’s financial services industry.
Whilst all of these events play an important part in our promotional activities, the key underlying element is our internal messaging programme which we launched at the beginning of the year. This messaging programme underpins all of our communications when promoting the BVI as the jurisdiction of choice. In order to ensure the success of this programme, we collaborated with our Industry partners, both domestically and internationally to guaranty a unified financial services message.
The month of March proved to be an extraordinarily busy one, as hidden opportunities were revealed and the IFC forged new relationships in a number of emerging markets. The IFC partnered with departments such as H.M. Customs, Virgin Islands Shipping Registry and the Tourist Board in promoting the BVI brand at the Dubai International Boat Show. The dynamics of the partnership between the departments proved quite effective in providing a comprehensive view into many different aspects of the BVI offering in Ship registrations, financial services and tourism. Following our attendance at the Dubai Boat Show and simultaneously the Hedge Fund World Dubai and Offshore Investment conferences, the IFC conducted a reconnaissance visit to India. Meetings were held with India’s private sector service providers in Mumbai, Delhi and Pune.
From the 2nd quarter of 2009 the BVI IFC initiated the GoBVI Financial Services Training, a series of educational workshops designed for public sector officials. These workshops were hands-on and helped to “demystify” the Financial Services Industry through Departmental Cross-Training and information sharing. This educational opportunity will be continued in other government departments throughout 2010.
Additionally, the BVI IFC, in conjunction with the private sector introduced the Financial Services High School Education Program (FSHS Education Program) where for the first, both Public and Private High Schools were included in the training sessions, which provided a greater understanding of the financial services industry; addressed career opportunities available within the industry; confirmed the benefits of continued education and also highlighted certification for financial service related career options.
In May the BVI played host to the 11th annual STEP Caribbean Conference, which has become the leading international forum for discussion, networking and learning for the offshore financial services industry. This event was also executed in conjunction with the Tourist Board and a BVI Welcome was extended by the Premier Hon. Ralph T. O’Neal.
During the same month, the BVI IFC joined the private sector in London and presided over two events: an evening reception for BVI friends based in the UK and a Trust roundtable discussion with leading trust and estate practitioners in London. The event was coordinated by, Private Client Practitioner (PCP). Partnering with highly regarded publications such as PCP is part of our ongoing media strategy to ensure that the BVI remains at the forefront of financial services issues and continues to be viewed as the jurisdiction for domestic and international business.
BVI delegates attended the Alternative Investment Summit in Sao Paulo, Brazil, in May where they promoted the advantages of structuring funds through the BVI and emphasized the wider business benefits and financial offerings of the territory. Due to this event being the region’s only global forum for the hedge fund industry, and coupled with the fact that Brazil is an emerging market of opportunity, it all served to highlight the significance of the BVI’s attendance.
In June, the IFC and members of the private sector attended the Transcontinental Trust Congress in Geneva which enabled the IFC to promote the BVI’s Trust and estate planning services to a wider European audience.
The BVI has been synonymous with not only meeting international standards, but exceeding them as evidenced by our ‘white list’ status, achieved in August when the BVI concluded its 12th Tax Information Exchange Agreement (TIEA).
September has been the first of many innovative strategies. The IFC supported the IFINA conference in Zurich and, spoke on the advantages of doing business in the BVI. In November, a Government Delegation joined ATU (BVI) Ltd. for a promotional tour of three Switzerland cities, (Geneva, Basel and Zurich). The group, which included Hon. Elvis Harrigan, met with private sector service providers and conducted presentations at events which helped to underscore how the BVI maintains its’ position as a leading financial jurisdiction, and in effect, strengthening and reaffirming the BVI Brand.
Mr. Michael Foot was commissioned by the UK Government to conduct a review and provide a report on its Crown Dependencies and Overseas Territories. The findings on the BVI were quite favourable which further endorsed the robustness of our legal and regulatory platform.
The recent delegation trip to London in December, provided the BVI its 16th & 17th (TIEA) while the Premier, Hon. Ralph T. O’Neal’s represented the Territory at the annual OTCC meeting. House of Assembly representative, Hon. Irene Penn O’Neal was also in attendance and the evening concluded with a reception at the London Circle of friends at BVI House, where the Premier took the opportunity to introduce the new BVI House Director, Mr. Kedrick Malone.
So, as you can see it has been a busy year for the BVI IFC and it doesn’t stop there. 2010 promises to be an even more fulfilling year and plans are already underway to ensure the success of the financial services industry and the manner in which we are viewed by our regional and international counterparts.
For more information, comments, suggestions - email:
Website: http://www.bviifc.gov.vg
BVI and its role in the international financial community (IFC-BUZZ 12/3/09)
By Simon Schilder – Partner, Ogier
The BVI may be a small country in terms of its size and population, but it plays a large and important role in the international financial community.
In the current economic and political environment, offshore jurisdictions such as the BVI and the role that they play in the international financial community have been subject to increasing levels of scrutiny by onshore governments and regulators, particularly in Europe and the United States of America. The reasons for this increased level of scrutiny are as much political as they are economic and are likely to lead to the introduction of new international standards by which the suitability of offshore jurisdictions such as the BVI in the international financial community will be judged.
In addition to the introduction of these new international standards, various reports have been commissioned in relation to the role of offshore jurisdictions in the financial crisis which has engulfed the world over the last eighteen months. They have focused on their suitability to continue to play a role in the international financial community in the future. Amongst these, two high profile reports have recently published their conclusions. In the United Kingdom, the UK Government commissioned a report on its Crown Dependencies and Overseas Territories, including the BVI, which was conducted by Michael Foot (the “Foot Report”). Whilst the Foot Report has highlighted certain areas where jurisdictions such as the BVI need to continue to develop, its findings in relation to the role of jurisdictions such as the BVI are positive, concluding that the UK is better off as a consequence. At the same time, a report by Professor James R Hines Jr, from the University of Michigan prepared on behalf of the Society of Trust and Estate Practioners (“STEP”) has concluded that offshore jurisdictions such as the BVI strongly contribute to investment, employment and the efficient functioning of markets and government policies in other countries. These recent endorsements of the role played by offshore jurisdictions such as the BVI in the international financial community are certainly encouraging.
So, why is it that the BVI plays such an important role in the international financial community? The principal reason is because BVI companies provide a tax-neutral platform, which enables investors from different jurisdictions to invest into BVI companies on an equal tax footing (as BVI companies are not subject to tax in the BVI). This goes hand in hand with the popularity of the BVI’s company law statute (the BVI Business Companies Act, 2004) and insolvency law statute (Insolvency Act, 2003), which are both modern and user friendly. The sophistication of the professional service providers living and working within the BVI (such as lawyers, accountants and fund administrators) has made the BVI a popular choice of domicile for offshore vehicles within financing, corporate and investment fund structures throughout the world.
However, in the future, given the legal and regulatory changes currently ongoing throughout the world, other influencing factors are also likely to be relevant in considering whether offshore jurisdictions such as the BVI will continue to play an important role in the international financial community. In this regard, the BVI has been working hard to ensure that it has in place all the requisite laws and regulations to enable it to remain an important member of this community.
Amongst the initiatives that the BVI has been pursuing to achieve this, the most high profile has been the entry into the Organisation for Economic Co-Operation and Development’s (“OECD”) tax information exchange agreements (“TIEAs”). Why are TIEAs important? Whilst there are likely to be many factors by which offshore jurisdictions will be judged in determining their acceptability in the future, probably the most politically emotive factor at the moment is tax transparency. Such that following the G20 meeting in London in April 2009, one of the criteria by which offshore jurisdictions will clearly now also be judged is their progress towards implementing tax transparency, through the adoption of the TIEAs. Following this meeting, all offshore centres have been graded as either being on the white, grey or black list. The benchmark for obtaining the “white list” status (meaning that a jurisdiction has substantially implemented the OECD’s internationally agreed tax standards), which is crucial for any offshore jurisdiction aspiring to play an important role in the international financial community, is for it to have at least 12 TIEAs in place. The BVI, which currently has 15 TIEAs in place, is a country on the OECD’s “white list”. This process of entering into TIEAs has been ongoing for sometime and predates the G20 meeting in April 2009, as the BVI signed its first TIEA in 2002, such that it has had TIEAs in place with both the United States of America and the United Kingdom for a number of years and has committed to agreeing and putting in place further TIEAs.
Within the BVI, we are currently in the process of introducing new financial services regulations through the enactment of the Securities and Investment Business Act (“SIBA”). SIBA and the regulations which will accompany this statute are currently undergoing consultation in the BVI and are expected to be enacted in the next few months. The timing is extremely significant as it will enable the BVI to adopt cutting edge financial services legislation which will be in tune to both the wider legal and regulatory environment, as well as the new requirements, checks and balances demanded by financial institutions, investors and onshore regulators.
The enactment of SIBA along with the proposed accompanying regulations represents an important step towards the implementation of an enhanced regulatory platform for the BVI’s financial services industry. This should ensure that the BVI remains high on the list of offshore jurisdictions utilised by the international financial community in the future.
Fact: Did you know that there is a unit of ambassadors from the public and private sectors, who act as the face and voice of the BVI financial services brand? They are known as “Team BVI”. The members work together to promote the Territory’s competitive financial products and services and represent the BVI at a selection of public forums.
IFC BUZZ 
