PRESS RELEASE – 30 October 2003

BVI Clarifies New Bearer Share Regulatory Regime

The BVI Government has announced that the special panel appointed by the Financial Services Commission (FSC) to recommend the way forward for the new regulatory regime introduced by the International Business Companies (IBC) (Amendment) Act 2002, has completed its final report.  The main recommendations have been welcomed by practitioners and users of IBCs.

The Act requires all bearer shares to be held in the custody of either an “authorised” or “recognised” custodian and for bearer shares to be immobilized.  It also provides for companies to amend their memoranda of articles of association, which currently give an IBC the power to issue bearer shares.  Following passage of the Act, the FSC commissioned the panel to make recommendations on the way forward.

The panel’s main recommendation is to propose a seven-year transition period before the new bearer shares legislation takes full effect. 

For the first four years, the situation would essentially stay as it is for existing IBCs.  After that, for a further three years, those IBCs that retain the power to issue bearer shares would pay a small increase in their license fee.

Any IBC – whether incorporated before or after the effective date of the IBC (Amendment) Act – that amended its memorandum of association to prohibit the issue of bearer shares would file at the Registry of Companies, together with an extract of the amendment, a declaration to the effect that no bearer shares are in issue.

A Bill to amend the separate FSC Act, making provision for “authorised” and “recognised” custodians, will be introduced in the BVI legislature shortly. The Bill will make service providers licensed under any BVI financial services legislation eligible for consideration as an authorised custodian.  In addition, a body corporate incorporated or formed outside the BVI that is not a resident in, and does not have a place of business in the BVI will also be eligible as an authorised custodian.

Hon. Dr. Orlando Smith, Chief Minister said: “The panel have worked hard to satisfy the demands made on them.  I thank them for their work and for producing such a sound piece of work in such a short time.  Final touches to implement the policy are underway in the Attorney General’s chambers and legislation will be introduced during this session.”

Mr. Robert Mathavious, Managing Director/CEO of the Financial Services Commission, said, “The panel has dealt with this issue according to the BVI’s guiding principles of self-regulation, market discipline and official oversight.  We also wanted to avoid undue burdens on the service providers, their clients and the Register.  I believe that the recommendations are a sensible combination of balancing effective regulation with recognition of the commercial needs of the market.”

1.         The Panel

The panel was appointed on 29^th August.  The members were:

- Richard A Peters, Harney Westwood & Riegels

- Dancia Penn OBE QC, Dancia Penn & Co

- Luis Manzanares, Morgan & Morgan Trust Corp Limited representing the

  Association of Registered Agents

- Barry Goodman, Trident Trust Company (BVI) Limited representing the

  Association of Registered Agents

- Robin Gaul, Deputy Chairman of the Board of the FSC

In addition Mrs. Myrna Herbert, Registrar of Companies, and Mr. Mark McKenzie, Director of Policy and Research of the FSC, attended all meetings in ex-officio capacities.

Mr. Richard Peters served as Chairman of the Panel and Mr. Mark McKenzie was Recording Secretary.

2.         Other changes to the FSC Act

The Bill to amend the FSC Act will also stipulate that all applicants for approval as authorised custodians will have to satisfy the FSC that they meet the fit and proper criteria and that they have the necessary security and compliance systems and procedures in place for safe custody of their bearer shares.

To determine whether a body corporate incorporated and operating outside the BVI is fit and proper as an authorized custodian, the FSC will also have regard to the prudential regulation and anti-money laundering regulations with which it had to comply.

With regard to “recognized” custodians of bearer shares, current thinking is that the FSC would accept as a recognized custodian an investment exchange or clearing organization that operated securities clearance or settlement systems in a jurisdiction which was a member of the Financial Action Task Force.