Regulations Enabling BVI Private Trust Companies To Operate With A Licensing Exemption

28th April 2008

Walkers Global have sent me an email containing one of their “Client Advisories”, describing the new rules enabling unlicensed private trust companies (PTCs) to be established in the British Virgin Islands (BVI) if specific conditions are satisfied.

They set out the advantages of PTCs:

PTCs have become increasingly popular over the last 15 to 20 years. A PTC may be defined as a company which is incorporated with its main function being to act as the trustee of a specific trust or a number of related trusts. It should be contrasted with a professional corporate trustee, bank or financial institution which offers its services to the general public for a fee.

PTCs operate within the framework of general company law and trust law, but they will also generally be subject to at least some regulatory requirements.

PTCs enjoy the benefit of limited liability and perpetual existence which are usually the features of corporate vehicles and have the following further advantages:

The principal advantage of a PTC is that, like the BVI’s VISTA legislation, the establishment of a PTC generally enables settlors or settlors’ family members or their appointees to exercise a significant degree of control over trustees’ decisions by being directors of PTCs; this enables them to respond quickly to issues which arise and to make decisions on the basis of their own personal knowledge and changing circumstances;

The corporate structure will be readily understood by non-professionals, especially those from non-trust jurisdictions and can be easily integrated into a family office or commercial structure;

Confidentiality can be preserved and this is an issue which is of increasing importance to those from jurisdictions where concerns over financial privacy are driven by issues of personal safety;

A PTC enables the trustee’s charges to be kept in check; and

PTCs are often set up in circumstances in which the underlying assets of a trust are to comprise of speculative investments or investments which involve a degree of risk which might be regarded as unacceptable to a risk-averse professional trustee.

They then set out the conditions that need to be satisfied:

In order to qualify as an exempt PTC under the Regulations the following conditions must be satisfied:

The company must be a BVI company which was first incorporated under the BVI Business Companies Act (’BCA’), but companies which were originally incorporated under the International Business Companies Act and which have re-registered under the BCA will also be eligible if certain elections are or have been made;

The company’s memorandum must state that it is a private trust company;

The company must be a limited company (whether limited by shares or by guarantee) and its name must include the designation ‘(PTC)’;

The company’s registered agent must hold a class 1 trust licence under the BVI’s Banks and Trust Companies Act, 1990 (as amended);

The company must not solicit trust business from members of the public;

The company must carry on no business other than that of being the trustee, protector or administrator of trust (or managing or administering trusts); and

All of the company’s trust business must be ‘unremunerated trust business’ or ‘related trust business’.Although the term is defined widely to prevent potential abuse, in most cases a company will be carrying on ‘unremunerated trust business’ where no remuneration is paid to the company or anyone associated with it in respect of the provision by the company of its trustee services. However it is permissible for professional directors who are not otherwise associated with the company to be remunerated and payments to the company to cover its legitimate expenses (such as the Government’s incorporation and renewal fees, the fees of otherwise unconnected professional advisers, and the fees of the registered agent) will not in general be regarded as remuneration for these purposes.

The man who knows about these things is Christopher McKenzie, who can be contacted at christopher.mckenzie@walkersglobal.com. You can sign up to their Client Advisories here.

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