BVI Offshore Trust Sector – Company Types, Benefits & More

The British Virgin Islands (BVI) has long been recognized as a premier offshore jurisdiction for establishing and administering trusts. For the benefit of others (referred to as the Beneficiaries, who may include the Settlor) or for a specific purpose, a person (referred to as the Settlor) transfers assets to another person (referred to as the Trustee), who is granted legal title to the trust’s assets.

BVI trust firms are a specific kind of company that manages or administers any trust or settlement; they do so as a qualified trustee, protector, or administrator. 

Additionally, a BVI trust corporation serves as the executor/administrator of the decedent in relation to a Class I trust license as well as the trustee under wills.

COMPONENTS OF A BVI TRUST COMPANY

• The settlor: The person who creates the trust, gives assets to the trustee, and instructs the trustee to handle and manage those assets on behalf of the beneficiaries is known as the settlor.
• The Trustee: The trustee is the person in charge of administering assets or money that have been set aside in a trust for the benefit of another party.
• The beneficiaries: The beneficiaries are those who are entitled to financial gain from the assets held in trust.
• Trust Fund
• The Protector: This individual is in charge of carrying out particular administrative and strategic activities that are ordinarily not the duty of the Settlor, Trustee, or Beneficiaries.

A BVI Private Trust Company (also known as a “PTC”) is established with the express aim of acting as a trustee for a single trust or a network of connected, related trusts. When they don’t want to transfer their assets to a third-party trust firm or want to create distinct family trusts, international business owners or High-Net-Worth families frequently utilize BVI Private Trust Companies to function as trustees of trusts.

OTHER CHARACTERISTICS OF A BVI PRIVATE TRUST COMPANY

• There is no need for local directors or authorized representatives;
• A BVI PTC must file its articles of incorporation and memorandum in public. They don’t have to list the directors, shareholders, or any trusts for which the PTC is the trustee, though.
• In contrast to the register of directors, the register of members is not required to be lodged with the BVI Private Trust Company. The general public cannot access it because it is not a public record.

COMMON TYPES OF BVI TRUSTS

Discretionary Trust and Fixed Interest Trust:

A discretionary trust allows the trustee to have discretion in distributing trust assets among a class of beneficiaries. The trustee can consider individual beneficiary needs and circumstances when making distribution decisions. In contrast, a fixed-interest trust provides specific beneficiaries with fixed entitlements or interests in the trust’s income or assets. This type of trust can be useful for wealth preservation, asset protection, and estate planning.

VISTA Trust (Virgin Islands Special Trusts Act):

The VISTA trust is specifically designed for holding and managing shares in BVI companies. It allows the settlor to retain certain powers and rights as a shareholder while benefiting from the asset protection and confidentiality features of a trust. The VISTA trust is commonly used for estate planning, succession, and wealth preservation purposes, particularly for holding and managing family business interests.

Non-Charitable Purpose Trust:

The BVI allows the establishment of non-charitable purpose trusts, which are trusts set up for specific non-charitable purposes rather than for the benefit of individuals. These trusts are designed to achieve particular objectives, such as holding and managing assets for the benefit of a specific project, preserving family history or heritage, or promoting social, educational, or environmental causes. Non-charitable purpose trusts in the BVI can be perpetual, allowing for long-term objectives and are known for their flexibility and innovative uses in estate planning and asset management.

BENEFITS OF FORMING A BVI PRIVATE TRUST COMPANY

Forming a British Virgin Islands (BVI) Private Trust Company (PTC) offers several benefits for individuals and families seeking to manage their wealth and preserve assets. Here are some advantages of establishing a BVI Private Trust Company:

• Control and Flexibility – A PTC allows the settlor (creator of the trust) to have greater control and flexibility over the management and administration of their assets. As the owner of the PTC, the settlor can appoint themselves or trusted individuals as directors, enabling them to actively participate in the decision-making process regarding trust matters.
• Tailored Family Governance – A PTC facilitates the implementation of customized family governance structures. This allows the settlor to establish rules, guidelines, and protocols for the management and distribution of trust assets, ensuring that their family’s specific needs, values, and objectives are met.
• Enhanced Privacy and Confidentiality – The BVI provides a high level of privacy and confidentiality for trust structures. By establishing a PTC in the BVI, the settlor can maintain anonymity and keep their personal details out of public records, providing a shield of privacy.
• Asset Protection – BVI PTCs can provide a layer of asset protection for the settlor and beneficiaries. By transferring assets to the trust, they are safeguarded from potential risks such as lawsuits, creditors, or other financial challenges.
• Estate Planning and Wealth Succession – A PTC facilitates efficient estate planning and wealth succession. By transferring assets to the trust, the settlor can ensure the orderly transfer of wealth to future generations, minimizing probate and potential disputes, while also providing for the ongoing management and distribution of assets.
• Tax Efficiency – The BVI offers favorable tax advantages for PTCs and their beneficiaries. With proper structuring and planning, it is possible to minimize or eliminate certain taxes, such as capital gains tax, income tax, or estate tax, depending on the settlor’s jurisdiction and applicable tax laws.

DISADVANTAGES OF FORMING A BVI PRIVATE TRUST COMPANY

• Costs – Setting up and maintaining a PTC can be expensive, particularly in terms of legal and administrative fees. The complexity of establishing a PTC structure, along with the need to comply with regulatory requirements, can result in higher costs compared to other wealth management structures.
• Oversight and Compliance – BVI PTCs are subject to regulatory oversight and compliance requirements, which can add an additional layer of complexity and cost. The PTC must maintain accurate records and ensure that it meets all regulatory obligations, including those related to anti-money laundering and know-your-customer rules.
• Limited Use – A PTC may not be suitable for all individuals or families, particularly those with smaller estates or fewer assets. The complexity and costs associated with establishing a PTC may not be justified if the assets held in the trust are relatively modest

LAWS AND RULES THAT APPLY TO BVI OFFSHORE TRUST BUSINESS

Although it has progressed beyond English law to include purpose trusts, the BVI trust law is largely based on English trust law. The Trustee Ordinance Act of 1961 (“the Act”) is supplemented by the Virgin Islands Special Trusts Act of 2003 (the “VISTA legislation”), which was most recently amended by the Virgin Islands Special Trusts (Amendment) Act of 2013.

Together, the Banks and Trust Companies Act of 1990, the Regulatory Code of 2009, and the Financial Services Commission Act of 2001 establish a comprehensive legal framework for the Commission’s regulation and oversight of trust activities carried out in and outside of the Virgin Islands.

The Financial Services Commission has the authority to direct the Banking & Fiduciary Services Division, which is in charge of managing the trust industry. It ensures that all BVI trustee service providers doing business in and out of the BVI adhere to the trust laws, global regulatory standards, and accepted best business practices. Regarding trust business, the Division is responsible for administering the Banks and Trust Companies Act of 1990 (BCTA).

The Private Trust Company Regulations, also known as The Financial Services (Exemptions) Regulations 2007, were changed in 2021 and are now known as The Financial Services (Exemptions) (Amendment) Regulations 2021. The following recent legislative amendments make BVI Private Trust Company more appealing:

• Prior to this change, no one connected to a BVI Private Trust Company (PTC) was permitted to receive compensation while the PTC was engaged in “unremunerated” trust work. A director of an unpaid PTC may currently be compensated for their professional director services.
• Changes made to the “business activity” requirements for PTCs now allow PTCs to engage in other activities besides trustee services in the British Virgin Islands.

Reach out to us at Relin Consultants for further assistance.