Michael Doyle of Harneys in Tortola looks at the latest developments in the BVI
The second half of 2013 and the first half of 2014 has been a relatively quiet period for financial and corporate legal developments in the British Virgin Islands (BVI) although external factors continue to affect the BVI legal market.
Internal legal developments
Major legal developments included:
(i) Approved Manager regime
The Investment Business (Approved Managers) (Amendment) Regulations, 2013 (New Regulations) came into force on January 2 2014 opening up the Approved Managers regime to investment managers of non-BVI funds.
The New Regulations permit Approved Managers to manage funds from any recognised jurisdiction that have equivalent characteristics to BVI private or professional funds subject to the $400 million and $1 billion asset caps. Recognised jurisdiction for these purposes means:
Argentina, Australia, Bahamas, Bermuda, Belgium, Brazil, Canada, Cayman Islands, Chile, China, Curacao, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Ireland, Isle of Man, Italy, Japan, Jersey, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Panama, Portugal, Singapore, Spain, South Africa, Sweden, Switzerland, United Kingdom, USA.
The New Regulations also provide that an Approved Manager may provide services to a fund that is not from a recognised jurisdiction where it invests all or a substantial part of its assets in a qualifying BVI or a recognised jurisdiction fund.
(ii) BVI Business Companies (Restricted Company Names) Notice 2013 expanded the scope of restricted names by 46 new words.
(iii) FIA (Amendment) Act 2013 shortened the period that any entity or individual, required to provide information to the Financial Investigations Agency from ten to five working days from receiving a written request.
(iv) Arbitration Act – passed but not in force
The Arbitration Act 2013 has been passed and is currently anticipated to come into force in the first quarter of 2015. The Act aims to establish the BVI as a premier jurisdiction for alternative dispute resolution with respect to resolving domestic and commercial dispute and to make the arbitration procedure in the BVI more modern and attractive for commercial business.
External developments include the continuing implementation of FATCA, UK FATCA and AIFMD
The Government of the British Virgin Islands has entered into a Model 1 intergovernmental agreement (IGA) with the United States to facilitate compliance with FATCA.It is expected that relevant BVI financial institutions will be required to report FATCA information to the British Virgin Islands International Tax Authority (ITA) which in turn will report relevant information to the United States Internal Revenue Service (IRS). It is anticipated that details of the BVI implementing legislation and guidance notes on the same will be released shortly.
(ii) UK FATCA
The BVI Government has signed with the UK a separate inter-governmental agreement (UK IGA) in broadly similar form to the IGA. The UK IGA imposes similar requirements to the IGA, so that BVI financial institutions will be required to identify accounts held directly or indirectly by "Specified United Kingdom Persons" and report information on such Specified United Kingdom Persons to the ITA, which will exchange such information annually with HM Revenue & Customs (HMRC), the United Kingdom tax authority.
The EU Alternative Investment Fund Managers Directive (AIFMD) establishes the regulatory framework for the supervision of alternative investment fund managers that conduct business in the EU. AIFMD came into effect on July 22 2013 subject to certain transitional provisions. Phase II of the AIFMD implementation commenced on July 22 2013 and will continue until July 2015.
The BVI and the European Securities and Markets Authority signed the co-operation arrangements between the BVI Financial Services Commission and 25 EU Member States on July 11 2013. The co-operation arrangements provide the basis for the required exchange of information and the application of the relevant provisions of the AIFMD between EU Member States and the BVI FSC which in essence allows BVI fund managers and mutual funds (Non-EU AIFMs and Non-EU AIFs) to continue to be able to market products within the EU via the various national private placement regimes.
The BVI remains committed to meeting the Phase III and IV requirements by signing cooperation agreements with all EU members, remaining off the FATF blacklist and signing TIEA with jurisdictions where fund marketing is likely.
Multilateral Convention on Mutual Administrative Assistance on Tax Matters
The OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Convention) entered into effect in respect of the BVI on March 1 2014 however no BVI implementing legislation has been passed yet under the MLAT regime to bring it into force as against BVI companies and persons.
National action plans on beneficial ownership
The BVI published a national action plan on beneficial ownership (National Action Plan). The National Action Plan was circulated and public consultation concluded at the end of January 2014.
Tax Information Exchange Agreements
The BVI is now a signatory to 26 Tax Information Exchange Agreements (TIEAs). The BVI signed its 25th TIEA with Poland on November 29 2013, which is likely to come into force in the final quarter of 2014 and its 26th TIEA with Japan on June 1 2014, which is likely to come into force in the second quarter of 2015.
About the author
Michael Doyle is a senior associate in Harneys’ Investment Funds and Regulatory team in the BVI. He advises on: BVI fund and fund manager formation and licensing; restructuring of distressed funds; BVI investment business licensee formation and licensing; BVI fund and other investment business license cancellations and liquidations.