Establishment of trusts on the BVI is carried out according to the principles of common English law and the law of equity that operate in their territory under the Common Law (Declaration of Application) Act 1705 and the West Indies Associates States Supreme Court (Virgin Islands) Act, and other regulatory acts, such as:

The Trustee Act and the Trustee (Amendment) Acts (of 1993 and 2003) - originally, the Trustee Act was adopted in 1961 on the basis of such English regulatory acts as the Variation of the Trust Act (1958) and the Law Property Act (1925), but in 2004 it underwent significant changes due to the amendments adopted in 1993 and 2003. This document identifies the most significant characteristics of the trust, the powers of the trustee and determines under what circumstances the trustee is responsible for the management of the assets of the trust.

The Banks of Trust Companies Act (1990) - this document specifies the requirements for issuing licenses for the provision of trust services for the corporate trustee. In 2007, this act was supplemented by the enforced Financial Services (Exemptions) Regulations, in which it is allowed to establish private trust companies in the territory of the British Virgin Islands. And these companies have the opportunity to become trustee without issuing a license for trusts that are opened for the management of the assets of one family.

The Trustees’ Relief Act - On the basis of this act, the trustee can apply to the court for obtaining recommendation on the assets management in the event of controversial situation, and at the same time the trustees can be exempted from liability for their actions or their consequences, if they were carried out in accordance with the recommendations of the judicial authority.

The Virgin Islands Special Trusts (VISTA) Act (2003) - this act legitimated such type of the trust as VISTA, to which shares of only those companies that are registered in the British Virgin Islands (BVI) are transferred. There are also restrictions in the management of shares, especially regarding their sale, and in the case of ordinary trust, the trustee is entitled to dispose of the property.

Registration of a "classic" trust

On the basis of the Trustee Act and the Trustee (Amendment) Acts (1993 and 2003, accordingly), the trust established in the territory of the British Virgin Islands and under the laws of the BVI has such characteristics as:

  • Its assets are isolated assets and are not part of the personal property of the trustee.
  • The rights to the assets of the trust are assigned and secured in favour of the trustee or the person acting on his behalf.
  • The trustee is entrusted with the rights and obligations under which he manages and administers the assets of the trust and is responsible for this according to the constituent documents of the trust established and in accordance with applicable current legislation.

The powers of the trustee are regulated by the "rule of rational governance", according to which the trustee shall manage the assets transferred to the disposition of the trust in such way as to obtain the maximum economic advantages for the beneficial owners of the trust. Wide-ranging powers to the greatest possible extent entrusted on the trustee allow him to even sell the assets of the trust, if there is unconditional benefit from the transaction for the beneficial owners of the trust.

The fundamental right of the beneficial owner is to receive income from assets transferred to the disposition of the trusts and return these assets to his property when the trust is disincorporated. Moreover, during the existence of the trust, the beneficial owner can not manage and dispose of the assets transferred to the trust, because from the moment of their transfer he is not their legal owner.

The established trust may fall within the scope of the definition of “sham”, if it is proved that either the founder of the trust or its beneficial owners tried to influence the assets management or limit the powers of the trustee.

Either the court will be provided with evidence that the beneficial owners did not intend to transfer their assets to the trustee’s disposal, and the trust could not be established lacking this fact.

In order to protect the interests of beneficial owners, whose actions are not always directed to quick receiving the income from the sale of assets, the constituent documents of the trust often provide for range of rights for the founder or the protector appointed by the founder.

Paragraph 86 of the Trustee Act prescribes, on the basis of the constituent trust documents, granting of the following rights to the trust's founder or his protector:

- choose the legal jurisdiction for the management of the trust;

- change the selected legal jurisdiction;

- remove the trustees from the positions held;

- appoint new or additional trustees;

- if necessary, exclude beneficial owners from the list of trust;

- supplement or replace the existing beneficial owners by any persons at own discretion;

- give his consent for certain actions of trustees or refuse conditionally or unconditionally.

It should be noted that the Trustee Act allows to encharge the trustee with obtaining permission from the protector or the founder of the trust to perform certain actions, for example, sale of trust assets. But it is necessary to understand that, when establishing the trust, it is essential to strike balance between the interests of the beneficial owners and the permissive powers of the trustee, in order not to increase the risk of recognizing the trust as sham.

Private trusts

Establishment of trusts and management activities under the legislation of the British Virgin Islands (BVI) are subject to mandatory licensing and control by the Financial Services Commission. In 2007, the Financial Services (Exemptions) Regulations were adopted, which made it possible to declare the trustee without obtaining license.

But this applies only to the trustees managing one or several trusts, which were established with the purpose of gaining profit by members of only one family, i.e. it became possible to develop private trust companies (hereinafter referred to as the PTC).

Such act as the Financial Services (Exemptions) Regulations clearly stipulates the requirements for the PTC:

  • This type of trust falls under the jurisdiction of the British Virgin Islands and is established or re-registered under the Law on Commercial Companies of the BVI.
  • The constituent documents should indicate that the trust is established as the PTC.
  • The PTC is registered by analogy of limited liability companies, in which the liability of shareholders is limited to special guarantee or amount paid on shares.
  • The PTC abbreviation, indicating that the company is private, shall necessarily be in the name of the company.
  • The company serves only for the members of one particular family (parents, children, brothers, sisters, married couple, etc.) and can not offer its services to third parties.
  • The company's activities can not differ from the trustee’s activities.
  • It is prohibited to make a profit by the company for its operation as a trustee or administrator of the trust.
  • The workforce of the PTC shall necessarily include registered local agent with the necessary license.

If all of the indicated requirements are met by the PTC, then it is exempt from mandatory trust licensing in the British Virgin Islands. It should be noted that the obligations of the agent registered in the PTC include periodic verification of the company for compliance with the requirements of the Private Trust Company.

In case the company ceases to meet these requirements, it is obliged to be licensed according to the Banks of Trust Companies Act in order to continue the trust activity.

The establishment of the PTC is advisable in the event that all beneficial owners (members of one family) want to form the trust, but for various reasons do not have the desire to entrust their assets with the professional trustee. One of the main issues in establishing a private company is the appointment of directors and control over trusts during their existence.

The director of the PTC under the laws of the BVI can be natural person over the age of 18 who was not held responsible for violation of legislation. Proceeding from this, the member of the family that established the trust can be appointed as the director of the private company. He/she should only have corresponding experience in assets management to make profit for the family from establishing this trust.

Obviously, the legislation of the British Virgin Islands provides sufficiently manifold possibilities for the PTC.

To register a "classic" trust, contact the lawyers of Law&Trust International. We have been working for several years in this direction.