Continuing Requirements For BVI Partnerships

The Partnership Act, 1996 (as amended) (the "Act") and the Mutual Legal Assistance (Tax Matters) Amendment Act 2003 (as amended) ("MLAT") set out a number of on-going administrative and record-keeping obligations with which all partnerships incorporated in the British Virgin Islands ("BVI") must comply. Failure to comply with these obligations can result in fines being imposed against the general partners and them being exposed to liabilities and/or the partnership being "struck off" the register of limited partnerships (the "Register") maintained by the BVI Registrar of Partnerships (the "Registrar").

There are three types of partnerships that can be incorporated in the BVI:

a general partnership (where all the partners have unlimited liability for the debts and obligations of the partnership)
a local limited partnership (where the general partners have liability, the limited partners have limited liability and the general partners may own property in the BVI and/or carry on business with persons resident in the BVI), and
an international limited partnership (where the general partners have liability, the limited partners have limited liability but BVI property may not be owned nor may any business be carried on with persons resident in the BVI –(only commercial transactions and activities outside the BVI).

This guide deals only with the continuing requirements of international limited partnerships ("Partnerships").

All Partnerships must have at least one:

general partner, who is authorised to engage in the management of the Partnership and who carries out the business of the Partnership, and
limited partner, who usually contributes funds to the Partnership, but has limited liability.

Registered Office and Registered Agents

All Partnerships are required to appoint a registered agent and maintain a registered office, physically located in the BVI. The registered agent must be a regulated entity, licensed by the BVI Financial Services Commission to provide registered agent services. In certain circumstances, it is possible for the registered agent to be the general partner of the Partnership. The Partnership's registered office is usually the office of its registered agent. If the Partnership changes its registered office or registered agent, it must notify the Registrar.

If a Partnership fails to comply with these obligations, it commits an offence and is liable on summary conviction to a fine of US$100 in respect of each day or part thereof during which the contravention continues.

Memorandum of Partnership

A Partnership must file and maintain a memorandum of partnership ("Memorandum") with the Registrar, which is available for public inspection. The Memorandum must include: (a) the name of the Partnership; (b) a description of its objects and the purpose(s) for which it was established; (c) the address of its registered office and the name and address of its registered agent; (d) the names and addresses of its general partners; and (e) details of the term (if any) for which it is to exist.

The Memorandum should also include a statement that: (a) the Partnership is limited; (b) every partner not named as a general partner in the Memorandum is a limited partner; and (c) the Partnership will not carry on any business in contravention of the Act.

If any changes are made to its Memorandum, the Partnership must submit a supplementary memorandum to the Registry.

If a Partnership fails to comply with these obligations, it commits an offence and is liable on summary conviction to a fine of up to US$5,000.

Given that details of the Partnership's general partner are disclosed in the Memorandum and therefore available for public information, it is common for the general partner to be a BVI company (thus details of its directors and shareholders remain private).

Articles of Partnership

A Partnership must maintain a copy of its partnership agreement or articles of partnership ("Articles") at the office of its registered agent. If a Partnership fails to comply with this obligation, it commits an offence and is liable on summary conviction to a fine of up to US$5,000.

The Articles govern the relationship between the general partner and the limited partners of the Partnership. The Articles and their terms are not filed with the Registrar. They remain a private document that is not available for public inspection. Consequently, the identity of each limited partner remains confidential.

Register of Partnership Interests

A Partnership must also maintain a register noting the interests of each of its limited partners (the "Register of Partnership Interests") at the office of its registered agent. The Register of Partnership Interests must confirm: (a) the name and address of each limited partner; (b) the amount and dates of contributions made by each limited partner; and (c) the amount and date of any payment representing a return of any part of any limited partner's contribution.

The Register of Partnership Interests must be updated within 21 business days of any change in the particulars required to be entered therein.

Financial Records

All Partnerships must maintain financial records (and underlying documents) that are sufficiently detailed to show and explain the Partnership's transactions and which will, at all times, enable the financial position of the Partnership to be determined with reasonable accuracy (the "Financial Records"). MLAT provides that the Financial Records must include accounts, although it does not stipulate any accounting procedures that the Partnership needs to adhere to.

The Financial Records must be kept for a minimum of five years from either:

the completion date of the transactions to which the Financial Records relate, or
the date the Partnership terminates the business relationship to which such Financial Records relate.

A Partnership can maintain its Financial Records at any location. If the Financial Records are not maintained at the Partnership's registered office, the Partnership must notify its registered agent in writing of the physical address where the Financial Records are maintained. If the Partnership changes the physical location where the Financial Records are kept, it must notify (in writing) its registered agent of the new location within fourteen days.

If a Partnership fails to correctly maintain its Financial Records, it commits an offence and is liable on summary conviction to a fine of up to US$5,000 and/or imprisonment for a term of up to two years or, on conviction on indictment to a fine of up to US$100,000 and/or imprisonment for a term of up to five years.

Compliance Documents

A Partnership must provide its registered agent with certain know-your-client compliance information about its general partners, limited partners, controlling owners and ultimate beneficial owners.

The registered agent must receive compliance information on at least two of the Partnership's general partners (or the sole general partner, if applicable) and all individual or corporate limited partners that have contributed a 10 per cent. (or more) interest in the Partnership.

A Partnership must provide its registered agent with updated compliance documents every three years and/or when there are any relevant changes to its Register of Partnership Interests.

Annual Fees

A Partnership must pay the Registrar an annual licence fee of US$500. Although the Act is silent about the Registrar's power to strike a Partnership off the Register for non-payment of this fee, in practice the Registrar does so and imposes additional financial penalties on the Partnership.

A Partnership will also have to pay its registered agent an annual fee, for providing registered agent and registered office services.

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.

British Virgin Islands: Continuing Requirements For BVI Partnerships