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 Organisation of a corporate vehicle for Charitable use in the British Virgin Islands. Introduction
Under British Virgin Islands' law, there are four types of company which might be suitable for use as charitable vehicles. Very briefly, these are: an international business company. A company limited by guarantee and not having a share capital or shares. A company limited by guarantee but having a share capital. A company limited by guarantee, not having a share capital but having shares. A brief outline of the major advantages and disadvantages of each of the various alternative company structures is as follows:
- International Business Company ("IBC")
The company would be incorporated under the International Business Companies Act, Cap. 291 ("IBCA"). The company would be a company with limited liability. An IBC's shares are to be fully paid on issue (although the shares may be issued for a promissory note or other written debt obligation) with the result that members have statutory limited liability. Where shares have been issued for a note or written debt obligation, members remain liable for amounts outstanding or unpaid on the note or obligation until settled.
IBCs may be incorporated for any objects or purposes not prohibited under the IBC Act or under any other law for the time being in force in the British Virgin Islands. Accordingly, it would be possible for the company's objects to be confined to specified (or general) charitable purposes.
IBCs are not subject to any tax in the British Virgin Islands. They are, however, required to pay an annual government licence fee (currently US$300.00 if the authorised capital of the company does not exceed US$50,000.00; US$1,000.00 if the authorised capital exceeds US$50,000.00; and in the case of an IBC with an authorised capital not in excess of US$50,000.00 and with some or all of its shares having no par value, or one with no authorised capital, the fee is currently US$350.00).
The shareholders of an IBC are not subject to income tax, state, succession, inheritance, gift tax with respect to shares or other securities in the IBC provided that they are not resident in the British Virgin Islands. If the company is to be incorporated purely for charitable purposes and individual shareholders are not to be permitted to benefit, the IBC's articles would need to eliminate, for example, the shareholders' rights to receive dividends and their entitlements on the company's dissolution. An IBC must maintain a registered office in the British Virgin Islands and must have a registered agent in the British Virgin Islands.
No public record is maintained as to the identity of the shareholders or the directors of an IBC, unless the IBC chooses to file these registers. An IBC may have a single shareholder and single director. These may be corporate and non-resident. Shareholders and directors may pass resolutions by way of a written consent without the necessity of attending a meeting (unless otherwise provided by the articles). There are no requirements for an annual general meeting of shareholders. An IBC may purchase and own its own shares.
Trusts, partnerships and unincorporated associations as well as individuals are all entitled to hold shares in an IBC. The International Business Companies Ordinance provides that the word "Limited", "Corporation", "Incorporated', "Sociétè Anonyme" or "Sociedad Anonima" or the abbreviation "Ltd.", "Corp.", "Inc." or "S.A." must be part of the name of every company incorporated under the Ordinance, but that an IBC may use and be legally designated by either the full or the abbreviated form.
- General Comments
Companies incorporated under the International Business Companies Act are exempt from all taxes in the British Virgin Islands. All dividends, interests, royalties, compensations and other payments made by an International Business Company to persons who are not resident in the British Virgin Islands are exempt from tax levied by the British Virgin Islands Income Tax Ordinance (Cap 189). There is no stamp duty on the transfer of any documents, including share transfers; there is no withholding tax, capital gains tax, capital transfer tax, estate duty, inheritance tax or succession tax payable on the death of a member of an International Business Company who is not resident in the British Virgin Islands.
Although it is possible to utilise the International Business Companies Act to form IBCs as charitable companies limited by shares, this course of action does require some complex and rather artificial modifications to the usual corporate structure and administrative provisions of such IBCs. For this reason, IBCs are not usually recommended as charitable vehicles unless there is an overriding reason to do so (for example, if it is necessary for the vehicle to have only one member, which is something which is not permitted under the Companies Act). | | 1. A company limited by guarantee can undertake commercial activities without the need for any subscribed equity capital.
2. No requirement to disclose beneficial owners; no requirement to file annual returns or financial statements; no requirement to hold annual general meetings of members or directors.
3. Control of the company is achieved without holding of shares.
4. Exclusion of the membership from registration on a share register or annual return of members.
5. The members, directors, and officers may be of any nationality and may be residents of any country.
6. Directors and/or officers can be either corporate entities or natural persons.
7. Ownership in the form of membership can be made non-transferable in the articles of association.
8. The accounting books of the company may be kept at the registered office of the company or abroad.
9. Ability to utilize the company as a succession vehicle. Asset devolution on the death of a member can be achieved without requirement for probate (for this purpose it is recommended to instruct a BVI Law Firm to draft the company M&A).
10. Ability (subject to appropriate tax advice being taken by the client) in certain tax jurisdictions for distribution from the company to be categorized as capital gain rather than as income. |
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- Company Limited by Guarantee with no Share Capital and No Shares
A company limited by guarantee would need to be incorporated under the Companies Act (Cap. 285) since such a company may not be incorporated under the International Business Companies Act. Again, to be recognised as a charity under British Virgin Islands law, its objects would need to be exclusively charitable under the Territory's laws.
The company would be obliged to have a registered office in the British Virgin Islands to which communications and notices may be addressed. Details of the registered office must be notified to the Registrar and the company must affix its name conspicuously on the outside of such registered office. The company would be obliged to hold a general meeting at least once a year. The company would be a public company and would have to be incorporated with at least five members.
Since the company would have no share capital and no shares, the persons who held "interests" in the company would not be "shareholders" but they would instead be "members". The company's articles would have to state the number of members with which the company proposed to be registered and the company would be obliged to serve notice of any increase to the Registrar.
Members would be able to have equal voting powers. Members would be able to resign their membership or transfer the same. In the event that the company is wound up, the members' liability would be limited to the amount guaranteed by them. As a matter of British Virgin Islands law, this liability remains for one year after their ceasing to be members of the company. The company would not have to file an annual return and accordingly, the names of the members would not be a matter of public record. The company would be obliged to keep a register of members at its registered office, which would be open to inspection gratis, by any member upon request and by any other person upon payment of the sum of US$0.24.
The company would have to maintain a register of directors and would be obliged to file the same with the Registrar of Companies and notify the Registrar of any changes to it. The company would not be obliged to file any audited accounts with the Registrar of Companies. As in the case of an IBC, if the company is to be a charity, its articles would need to be structured in such away as to ensure that its shareholders receive no dividends and are not entitled to any benefits, for example, on a winding up.
- Company Limited by Guarantee Having a Share Capital
The company would be incorporated under the Companies Act (Cap. 285) since it may not be incorporated under the International Business Companies Act. To be regarded as a charity under British Virgin Islands law, its objects would need to be exclusively charitable. The company would be obliged to have a registered office in the British Virgin Islands to which communications and notices may be addressed. Details of the registered office must be notified to the Registrar and the name of the company must affix its name conspicuously on the outside of such registered office.
The company would be obliged to hold a general meeting at least once a year. In the event that the company is wound up, members' liability would be limited to the amount guaranteed by them and any amounts owing on their shares. As a matter of British Virgin Islands law, this liability remains for one year after their ceasing to be members of the company. The company would be obliged to state the amount of its share capital in its articles and the company would be obliged to serve notice of any increase to the Registrar.
The company would have to file an annual return listing its present members and those who have ceased to be so within the past year. The names of the members would therefore, be a matter of public record. The company would be obliged to keep a register of members at its registered office, which would be open to inspection gratis, by any member upon request and by any other person upon payment of the sum of US$0.24. Provided that it was not constituted as a public company, the company would not be obliged to file audited accounts with the Registrar of Companies.
Again, if the company is to be a charity, its articles would need to be structured in such a way as to ensure that its shareholders receive no dividends and are not entitled to any benefits, for example, on a winding up.
- Company Limited by Guarantee Having No Share Capital but with Shares
This is similar to the form of guarantee company that was permitted in the UK prior to the 1900 UK Companies Act. Members' liability here is limited to the amount of their guarantee, the shares merely providing a method of determining relevant members' interests within the company. The company would be incorporated under the Companies Act (Cap. 285) since it may not be incorporated under the International Business Companies Act. To be regarded as a charity its objects would need to be exclusively charitable as a matter of British Virgin Islands law.
The company would be obliged to have a registered office in the British Virgin Islands to which communications and notices may be addressed. Details of the registered office must be notified to the Registrar and the name of the company must affix its name conspicuously on the outside of such registered office.
The company would be obliged to hold a general meeting at least once a year. In the event that the company was wound up, members' liability would be limited to the amount guaranteed by them. As a matter of British Virgin Islands law, this liability remains for one year after their ceasing to be members of the company.
The company would not have to file an annual return and accordingly, the names of the members would not be a matter of public record. The company's articles would have to state the number of members with which the company proposed to be registered and the company would be obliged to serve notice of any increase to the Registrar.
The company would be obliged to keep a register of members at its registered office, which would be open to inspection gratis, by any member upon request and by any other person upon payment of the sum of US$0.24. The company would have to maintain a register of directors and would be obliged to file the same with the Registrar of Companies and notify him of any changes to it. If the company was constituted as a private company, it would be required to have a minimum of two members at all times. The company would not be required to file any audited accounts with the Registrar of Companies. If the company is to be a charity, its articles would need to be structured in such a way as to ensure that its shareholders receive no dividends and are not entitled to any benefits, for example, on a winding up.
- General Comments
With respect to companies incorporated under the Companies Act (C-E above), please note that:
The Companies Act specifically allows that if an association to be formed as a limited company is to be formed for promoting commerce, art, science, religion, charity or any other useful object, and intends to apply its profits, if any, other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Registrar may allow registration of the company without the word "Limited" as part of its name; and
Companies Act companies are subject to income tax in the British Virgin Islands. If the company is deemed to be "resident" in the British Virgin Islands (which depends on from where the company is managed and controlled), it will pay income tax at 15% on its worldwide income. A company which is deemed non-resident is only liable to tax at 15% upon the profits arising or received in the British Virgin Islands. If a company is resident, but is an "offshore trading company", meaning that 90% of its profits arise from business carried on exclusively outside the British Virgin Islands, it is only liable to pay income tax at the rate of 1%. However, companies which are charities are generally exempt from income tax (other than that on any income from any trade or business carried on by the charity).
If you would like further information on British Virgin Islands Trust or Charity law or details of how Coddan can help you with your trust enquiries, please contact us.
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UK Company With Bearer Shares
BVI Corporate Vehicle for Charitable Use
£ 995.00
Guarantee Company registration in the BVI takes approximately 2 to 5 working days. The BVI Non-Profit incorporation fee includes:
Company name availability confirmation and reservation
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