British Virgin Islands: The BVI’s New Trust Legislation: Two Years On

Every so often there are historic moments for trust lawyers. One such moment was when Lord Walker handed down the decision of the Privy Council in Schmidt v Rosewood1 and another was that on which the Cayman Islands’ ‘STAR trusts’ law2 came into force. 1 March 2004, the day on which both the Virgin Islands Special Trusts Act, 2003 and the BVI’s Trustee (Amendment) Act, 2003 (the ‘Amendment Act’) came into effect, was another of these momentous occasions.

Both the Virgin Islands Special Trusts Act and the Amendment Act are highly innovative and well thought out statutes dealing with a number of important areas of trust law in which reform was long overdue and, in the intervening two year period, considerable use has been made of the new statutory provisions.

Conflict of laws, purpose trusts and trustees’ dealings with third parties are just three of the areas which the Amendment Act covers.

In the words of Professor Jonathan Harris of Birmingham University ‘The [Amendment Act] contains arguably the most sophisticated set of choice of law rules dealing with both ‘rocket’ and ‘rocket-launching’ aspects of the trust to be found in any offshore jurisdiction… . Overall, the BVI rules are a highly sophisticated attempt to regulate both rocket-launching and rocket aspects of the trust. They strike a balance between respect for standard conflict of laws principles wherever possible, and the demands of a pragmatic set of rules which embrace settlor autonomy and insulate BVI trusts from attack by foreign laws. The combination of such rules with wide bases of jurisdiction for the BVI courts should make the conflict of laws rules applicable to trusts in the BVI an attractive package.’3

In order to make it easier for trustees to deal with third parties, the BVI has also adopted many of the recommendations of the English Trust Law Committee4. These reforms5 make the BVI the jurisdiction of choice in which to set up trusts for use in commercial transactions.

The Amendment Act also contains new legislation which provides the BVI with a clear and comprehensive regime for all new purpose trusts. This legislation secures the place of the BVI as one of the premier jurisdictions in which to set up purpose trusts - and these trusts are increasingly used for structured finance transactions.

More significantly still, the Virgin Islands Special Trusts Act created an alternative trust regime which enables special trusts, known as VISTA trusts, to be set up. The Act permits shares in BVI companies (and the underlying assets of the companies) to be retained for so long as the directors think fit and disengages the trustee-shareholder from management responsibility.6

Over the last two years, the VISTA legislation has generated an immense amount of positive international interest and a significant number VISTA trusts have already been set up.

Examples of some of the situations in VISTA has provided the ideal solution as follows:

  • Where a trustee’s involvement in an underlying company’s affairs is undesirable or inappropriate. It provides the perfect solution to the concerns which arose from the decision in Bartlett v Barclays Bank.7
  • Where the settlor wishes to retain control: many VISTA trusts have been structured so that the settlor has this control at the director (company) level.
  • Where the settlor intends the shares which were to be settled on trust and/or the underlying assets of a company to be retained
  • Where the underlying assets of a trust involve a degree of risk which is inappropriate for a trustee of a non–VISTA trust.
  • Where charitable or non-charitable purpose trusts are needed for securitisations and off-balance sheet transactions.

Typically shares in non-BVI companies and/or other assets are held by the BVI company the shares of which are held by the trustee of the VISTA trust. VISTA then prevents the trustee from being able to procure a disposal of underlying assets or from being able to engineer an intervention in the affairs of controlled subsidiaries.

Both VISTA and the Amendment Act were based on proposals which were made to the BVI government by the BVI Branch of STEP: the implementation of the relevant proposals demonstrates the close collaboration between government and the private sector in terms of working together to create flexible and innovative solutions which meet the legitimate needs of the BVI’s international client base.

STEP BVI is now working on further proposals for trust law reform, so watch this space!

Footnotes

1. Now contained in Part VIII of the Trust Law (2001 Revision).

2. [2003] UK PC 26.

3. Launching the Rocket – Capacity and the Creation of Inter Vivos Transnational Trusts in Glasson (ed.) International Trust Laws (Jordans, loose-leaf). The new BVI provisions are now contained in sections 82 and 83A of the Trustee Act.

4. In its Report Rights of Creditors against Trustees and Trust Funds http://www.kcl.ac.uk/depsta/law/tlc/reports.html.

5. The new provisions are to be found in Part X of the Trustee Act.

6. For further information on VISTA trusts see the author’s chapter in Thomas and Hudson – The Law of Trusts at paragraphs 40.25 to 40.65 (reproduced in International Trust Laws at paragraphs A6.135 to A6.180 and the Journal of International Trust and Corporate Planning Vol 11 No. 2 2004 at pages 63 to 82) and VISTA Trusts by Christopher McKenzie and John Glasson which is just about to be published in STEP’s Technical 7. [1980] Ch. 818.

7. [1980] Ch. 818.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions