Starting a business in another country can be difficult, but it is an excellent approach for internationalizing your firm, increasing earnings, and cutting operational costs. Finding an overseas jurisdiction with the correct economic and political climate, low tax rates, solid property rights, and a smooth incorporation process is one of the obstacles investors confront.
What Business Vehicle you can choose
Business corporations offer the most flexibility and are a popular option for incorporation. They are beneficial for structures involving partners from different jurisdictions that require a neutral vehicle.
The BVI also provides general and limited partnerships (with or without legal personality).
The BVI law recognizes two forms of partnerships:
- All partners are liable for the partnership’s debts and liabilities (general partnerships).
- Partners with limited liability (limited partnerships).
A limited partnership has legal personality unless it chooses to be registered without it. However, a limited partnership with a legal personality is not the same as a body corporate. A limited partner with legal personality has the following rights (Limited Partnership Act 2017 (LPA)):
- The right to sue on behalf of the limited partnership.
- The right to create a charge over the partnership’s assets.
- The power to register a charge against the limited partnership and have priority under BVI law.
There is no estate, inheritance, succession, gift tax, rate, duty, levy, or other charge payable on any stake in a limited partnership by persons not residents of the BVI. All payments made by a limited partnership to nonresidents of the BVI and any capital gains realised on nonresidents’ interests in a limited partnership are exempt from the Income Tax Act.
2. Joint Venture
A business corporation formed under the rules of the British Virgin Islands is a common and valuable joint venture instrument. Establishing these firms, particularly for investment into China, is a general practice area. A firm will generally have two or more shareholders and a shareholders’ agreement that governs their relationship. A joint venture firm can be used for various purposes, such as holding stock in an operating company or financing the purchase of a specific asset.
Typically, the shareholders’ agreement governs any arrangements between the parties. When forming a joint venture business, evaluate if a specialized memorandum and articles of association are required to ensure that the arrangement outlined in the shareholders’ agreement is enforceable according to its provisions. According to the BVI Business Companies Act, two or more members of a business may, by a written agreement, provide that while exercising any voting rights, the shares held by them can be treated as follows:
- As provided by the agreement.
- As the parties agree.
- In accordance with any procedure that they agree on.
The shareholders’ agreement also governs the company’s management and administration and the transfer of shares. Certain aspects of the shareholders’ agreement may need to be included in the joint venture company’s memorandum and articles of association.
The following can all be established in the BVI:
- Discretionary trusts.
- Fixed interest trusts.
- Charitable trusts.
- Trusts with protectors.
- Purpose trusts.
- Virgin Islands Special Trust Act (VISTA) trusts.
These trusts are the most versatile and efficient for both settlor and beneficiaries. After forming the trust, the settlor relinquishes ownership interest in the trust’s assets (unless certain powers are reserved). The trustee has broad authority over the trust fund and decides whether, when, and to whom capital or income should be allocated. As a result, beneficiaries are not considered to have a distinct interest in the trust property but merely a right to be considered by the trustee.
Under BVI law, charitable trusts can be set either to provide new funds or support existing charities. A trust is charitable under BVI law if all of its aims are charitable:
- The relief of poverty.
- The advancement of education.
- The advancement of religion.
- Other purposes are beneficial to the community at large.
- It has an element of public benefit.
VISTA trusts let a settlor accomplish what power and duty exclusion in a trust instrument cannot (since no provision in a trust instrument can deprive a trustee of the power to exercise rights that it holds as a matter of company law). The trust deed must state that VISTA applies, and the shares must be in a BVI company. VISTA also permits a settlor to define “office of director rules” in advance, requiring the trustee to maintain a specified board composition during the trust period.
4. Private Company
According to the BVI Business Companies Act, every BVI business company must have a registered agent. An application to the Registry to incorporate a BVI business company may only be made by the person who will be the firm’s first registered agent. The Act forbids the Registrar from accepting an application made by anyone other than the applicant.
Only a person who has been licenced by the FSC as a company management company under the Company Management Function, 1990, or as a Class I or III trust company under the Banks and Trust Companies Act, 1990, may act as the registered agent of a BVI business company.
Minimum Capital Requirement
There is no idea of approved capital in the BVI Business Companies Act (BCA). Companies incorporated under the BCA are authorised to issue a restricted number of shares. The firm’s memorandum of association may authorise the company to issue unlimited shares.
Whatever your motivations for establishing an offshore business, there is little doubt that the British Virgin Islands can be the finest choice. However, the key to finding offshore business success lies in locating the best location for your company’s needs and partnering with an experienced BVI Company Registry. Starting Business may be the ideal outsourcing partner for you.