BVI beneficial ownership registration regime28 Nov 2017
The topic of corporate transparency through the creation of a central registry of company beneficial ownership information has been extensively debated in recent years and came to the political fore at the Lough Erne G8 Summit in June 2013, at which the official theme was tax evasion and transparency.
Since this Summit, certain UK Overseas Territories, including the BVI, have published plans demonstrating their commitment to the facilitation of access to beneficial ownership information and on 30 June 2017 the BVI Government manifested its commitment in the enactment of the Beneficial Ownership Secure Search System Act, 2017 (the "BOSS Act"). The BOSS Act effectively implemented the terms of Exchange of Notes and the accompanying Technical Protocol in respect of the sharing of beneficial ownership information agreed between the UK Government and the BVI Government on 8 April 2016 (the "Exchange of Notes").
So, what then, does the legislation mean and how does the Beneficial Ownership Secure Search System (the "BOSS") work? This briefing note examines the BOSS Act and how the search system works, explores the disclosure exemptions and discusses the overall impact of this legislation vis-à-vis the BVI's current anti-money laundering regime and the jurisdiction's previous position on information disclosure.
The BOSS Act and how the BOSS will work
All information appearing on the platform is confidential and will not be publicly available. It is only accessible through the BOSS, which enables a search to be conducted across the network of separate registered agents' databases.
Searches on the BOSS will only be conducted:
- following receipt of a formal request from a senior officer of any of the Financial Investigation Agency, the BVI Financial Services Commission, the BVI International Tax Authority and the BVI Attorney General Chambers (together, the "BVI Authorities");
- once the request has been vetted and certified as proper and lawful and in compliance with the Exchange of Notes (note that a search request to any of the BVI Authorities would need to originate from the UK Financial Intelligence Unit of the National Crime Agency before a search of the BOSS can take place); and
- by designated persons, each of whom will have been security vetted and required to swear an oath of confidentiality prior to being designated and such designated persons will conduct the search from physically secure premises in the BVI and on a secure IT system.
Information on a beneficial owner appearing on the platform is restricted to name, residential address, date of birth and nationality, albeit that it is anticipated that identification numbers (such as those appearing on passports, driving licences or other government issued identification) will soon also be required to appear on the platform.
In looking at the application of the BOSS Act, it is critical to consider the prescribed definition of "beneficial owner" as the BOSS Act will, of course, have no application to those persons falling outside of this prescribed definition and information on such persons is not required to be collected. The BOSS Act defines a beneficial owner as the natural person who ultimately owns or controls a corporate or legal entity and includes, though is not restricted to:
- in the case of a legal person (other than a listed company), a natural person who ultimately owns or controls, whether directly or indirectly, 25 or more per cent of the shares or voting rights in the legal person; or
- in the case of a legal person, a natural person who otherwise exercises control over the management of the legal person; or
- 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; or
- in the case of a corporate and legal entity which 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 corporate and legal entity; or
- in the case of a receiver being appointed over 25 or more per cent 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 deceased, the natural person acting as an executor or a personal representative of the deceased's estate.
Particulars are also required to be included on the search platform of any legal entity connected to a corporate and legal entity (referred to in the Act as a "registrable legal entity") which:
- would be a beneficial owner if it were an individual; and
- one or more of the following applies to it:
- it is a legal entity which is an "exempt person" (as described below);
- it is a listed company (as defined below);
- it is a licensee or a foreign regulated person (as defined in the Anti-Money Laundering Regulations, 2008); or
- it is a sovereign state or a wholly owned subsidiary of a sovereign state.
It is worth noting that where there is a bona fide legal dispute as to the beneficial ownership of any interest in a corporate and 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 on the platform prior to the determination of the matter, unless the court or tribunal so orders. In addition, the BOSS Act will not treat a person as a beneficial owner only by reason of having the benefit of a security interest over shares or voting rights in a corporate and legal entity.
The retention period of information held on the platform is five years following the dissolution, or other cessation, of the corporate and legal entity.
The BOSS Act provides for a number of exempt persons for which corporate and legal entities and registered agents are not required to provide and collect, respectively, the prescribed beneficial owner information, and these include the following:
- mutual funds recognised, registered or otherwise approved as such 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 ("mutual funds");
- corporate and legal entities whose securities are listed on a recognised stock exchange (a "listed company");
- corporate subsidiaries of mutual funds or a listed company (provided that the mutual fund or listed company holds a beneficial interest in at least 75 per cent of the shares in such subsidiary);
- persons licensed under BVI financial services legislation (i.e. licensees as defined in the BVI Regulatory Code, 2009); and
- entities that are exempt by regulations.
The licensed persons' exemption is helpful for the BVI's investment funds industry, given that BVI regulated funds and BVI investment managers will not be required to disclose beneficial ownership information. However, private equity funds structured as corporates are caught by the BOSS Act, albeit that the 25 per cent threshold contained in the beneficial owner definition will, in practice, limit investor disclosure requirements.
Note that registered agents are not required to maintain information on the platform in respect of corporate and legal entities that have ceased to exist or have been struck off the Register of Companies before 1 January 2016 (and which have not been subsequently restored).
Registered agents in the BVI have, for years, been subject to extensive obligations under anti-money laundering legislation to collect and maintain up to date beneficial ownership information in respect of entities to which they provide services. As noted in the Exchange of Notes, these obligations were extended in the latter part of 2016 to require registered agents to collect and maintain beneficial ownership information on business introduced to them by intermediaries based outside of the BVI.
The BVI's anti-money laundering regime is, and has for many years now, been both extensive and robust. The BOSS Act has not been enacted for the purpose of "curing" a failing anti-money laundering regime, but rather to streamline a system of information exchange. Prior to the enactment of the BOSS Act, the BVI Government co-operated fully with overseas competent authorities' requests for information on beneficial owners of BVI entities. This legislation is not intended to be used as a mechanism for "fishing expeditions", but as a legitimate tool to prevent and detect corruption, money laundering and terrorist financing.
The BVI Government has remained consistent in its approach and commitment to the prevention of financial crime and to international co-operation. The enactment of the BOSS Act is yet another demonstration of the BVI Government's unwavering dedication to regulate properly a successful and transparent international financial services centre.