BVI Update - BVI Bearer Share Transition Extended To 2011

Summary

BVI's International Business Companies (" IBCs ") now have an additional 7 years to comply with the new "bearer share" regime introduced by the IBC (Amendment) Act 2003 and the IBC (Amendment) Act 2004.  The IBC (Amendment) Acts will become effective on 1 January 2005 and the bearer share transition period will expire on 31 December 2010.

Full Update

New Bearer Share Regime

The IBC (Amendment) Act 2003 envisaged a deadline of 31 December 2004 for the immobilisation of bearer shares.  This deadline is now deferred to 31 December 2010 through the enactment of the IBC (Amendment) Act 2004, after recommendations given by the private sector panel that a 7-year transition period should be given before the new regime takes full effect.  Both the IBC (Amendment) Act 2003 and the IBC (Amendment) Act 2004 will become effective on 1 January 2005.

The practical effects of the new bearer share regime are summarised below.

Existing companies incorporated before 1 January 2005

• Bearer shares in issue have to be placed with an approved custodian by 31 December 2010.  Alternatively, the outstanding bearer shares should be exchanged for registered shares or they should be cancelled or redeemed by 31 December 2010.
• Bearer shares issued by an existing company on or after 1 January 2005 have to be placed with an approved custodian upon issuance. 
• IBCs with only registered shares in issue but which have the power to issue bearer shares in their Memorandum & Articles of Association (" M&A ") will need to amend their M&A by 31 December 2010 to include a prohibition against the issuance of bearer shares in order to avoid the payment of a higher licence fee.  On or after 1 January 2005, the IBCs shall file a declaration with the Registrar of Companies confirming that no bearer shares are in issue at the time of amendment of the M&A.   
• Fees : From now till 2008, the current licence fee of US$300 will continue to apply to all IBCs with an authorised share capital of US$50,000 or less.  From 2008 till 31 December 2010, a slight increase in the annual licence fee is expected to apply to IBCs which continue to permit the issuance of bearer shares under their M&A.  From 2011 onwards, an annual licence fee of US$1,000 will apply to all IBCs which continue to permit the issuance of bearer shares in their M&A.

New companies incorporated on or after 1 January 2005

• IBCs incorporated on or after 1 January 2005 with the power to issue bearer shares in their M&A will pay the higher annual licence fee of US$1,000.  In addition, the IBCs are required to place the bearer shares with an approved custodian upon issuance.
• IBCs incorporated with an authorised share capital of US$50,000 or less and without the power to issue bearer shares in the M&A will pay the current annual licence fee of US$300.

Register Of Directors

New companies incorporated on or after 1 January 2005

• It is mandatory for a Register of Directors to be kept at the BVI registered office of all IBCs.  The Register of Directors does not need to be filed at the Registrar of Companies and information of directors will continue to remain confidential to third parties. 

Existing companies incorporated before 1 January 2005

• Existing IBCs shall establish and maintain a Register of Directors within 12 months from 1 January 2005.
• The Register of Directors, when established, shall contain details of directors on 1 January 2005, together with all changes in respect of the directors thereafter.  The Register of Directors do not need to contain historical directors information (i.e. directors information before 1 January 2005).
• Where an existing IBC maintained an optional register of directors prior to 1 January 2005, a copy of that register shall be retained at its registered office for a period of at least 10 years from 1 January 2005.

First Directors

• With effect from 1 January 2005, the first director(s) of an IBC shall be appointed within 30 days of the date of incorporation of the company.

Conclusion

Existing IBCs with power to issue bearer shares in the M & A but which do not intend to issue bearer shares should amend their M & A by 31 December 2007 to avoid payment of a higher licence fee.  Clients who wish to acquire new IBCs but who do not need bearer shares should check that the M & A of such companies contain a prohibition against the issuance of bearer shares.  Holders of bearer shares should deposit their bearer shares with an approved custodian by 31 December 2010 (for existing bearer shares) or immediately upon issue (for bearer shares issued on or after 1 January 2005).

For further information or assistance, please call us:

Hong Kong Office: +852 2341 1444
Shenzhen Office: +86 755 8268 4480
Shanghai Office: +86 21 6439 4114
Beijing Office: +86 10 6874 8420

or send email to enquiries@bycpa.com.