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Overview of Trust Law & Trustee Services in the British Virgin Islands 

April, 2014 - Christopher McKenzie

In addition to being the world’s leading international finance centre in which to set up companies, the British Virgin Islands (‘BVI’) is now regarded as one of the world’s premier trust jurisdictions. The general principles of the trust laws of the BVI are derived from those of English trust law. 


The principles of English common law and equity apply, as supplemented by BVI statute. The original Trustee Act was based on the English Trustee Act 1925 and Variation of Trusts Act 1958 but has now been updated by the Trustee (Amendment) Acts, 1993, 2003 and 2013. Other significant statutes relating to trusts and trustee services in the British Virgin Islands are the Virgin Islands Special Trusts Act, 2003 as amended in 2013 (“VISTA”), the Banks and Trust Companies Act, 1990 and the Financial Services (Exemptions) Regulations, 2007 (as also amended in 2013). 

 

Trusts in the BVI may be established by persons in any part of the world with property or investments in any part of the world. Trusts may be discretionary or fixed interest in nature or indeed any other type of trust recognised under English common law. Income from the trust capital may be accumulated for the entire length of the period of the trust and since May 2013 the Trustee Act enables new beneficiary trusts to have a fixed perpetuity period of up to 360 years as an alternative to the old common law period of lives in being plus 21 years. 

 

BVI trusts are in general exempt from registration and filing requirements and there are also very wide exemptions from taxation in the Trustee Act. 

 

There are further provisions in the Trustee Act giving statutory recognition to protectors and authorising the reservation of specified powers to settlors of BVI trusts. The statute also includes provisions enabling standard trustee powers to be incorporated by way of reference to a schedule to the Act, thereby enabling the length of trust deeds to be reduced. 

 

Virgin Islands Special Trusts Act, 2003 

 

- Difficulties which arise from English trust law where trust assets comprise shares 

 

The trust has always been regarded as one of the best ‘succession vehicles’, but its use to cater for the succession of shares in companies has historically been impeded by a rule of English trust law (the ‘prudent man of business rule’) which was designed to help preserve the value of trust investments. This rule traditionally made the trust an unattractive vehicle to hold assets which settlors intend trustees to retain. Another aspect of the rule effectively required trustees to monitor and intervene in the affairs of underlying companies (as the English decisions Re Lucking’s Will and Bartlett v Barclays Bank Trust Co Ltd made clear); this also created difficulties both from the settlor’s standpoint and from that of the trustee.


Footnotes:


Conclusion  The BVI is renowned for its state of the art legislation relating to trusts and trustee services which has been developed in close partnership with the private sector to ensure that it keeps pace with the modern demands on trusts. It is perceived as innovative and flexible and continues to attract positive attention from the international financial community.  The information contained in this memorandum is general in nature and does not constitute legal advice. Appropriate legal and other professional advice should be sought for any specific matter.   Christopher McKenzie Partner – BVI Trusts & Estates/Private Client O’NEAL WEBSTER (UK) LLP 31, Southampton Row London WC1B 5HJ Tel: +44 (0)203 078 7295 (office)  +44 (0)203 078 7297 (direct)  +44 (0)783 702 5118 (cell) Fax: +44 (0)203 008 6015 [email protected] 

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