Following recent revisions of the British Virgin Islands' (BVI) companies and investment funds laws, the BVI has now turned its attention to its trust regime.

New legislation was enacted in May 2013 modernising the jurisdictions four primary pieces of trust legislation – the Trustee Act 1961, the Bank and Trust Companies Act 1990, the Trust Corporation (Probates and Administration) Act 1947 and the Virgin Islands Special Trust Act 2004 (VISTA).

VISTA

A VISTA trust disengages the traditional duty of a trustee to monitor and intervene in the running of an underlying company, therefore enabling a settlor to maintain control of the company, through the Office of Director Rules (ODRs), whilst enjoying the succession advantages of a trust arrangement.

VISTA purpose trusts are often combined with Private Trust Companies (PTC) to establish a family structure providing maximum flexibility and control for a settlor wishing to preserve family assets for the next generation.

In summary, as a result of the amendments, the restrictions as to the trustees on VISTA trusts have been relaxed; property may be appointed onto VISTA trusts from existing BVI trusts; and the circumstances in which the legislation will (or will not) apply has been clarified.

The principal amendments are as follows:-

  • There is a change in the definition of a "Designated Trustee". The previous definition was restrictive. It has been changed to include Class 1 trustee licenceholders and PTCs.

Also, co-trusteeship are now permitted provided one trustee is a Class 1 Licenceholder or a PTC. Pursuant to the Financial Services (Exemptions) Regulations 2007, PTCs are exempt from the usual licensing requirements under the Bank and Trust Companies Act 1990. It will therefore be possible for trust companies without a BVI licence to be involved in the administration of VISTA structures. This may prove to be very appealing and an incentive for foreign service providers to create VISTA trusts. This will also be of interest to both families seeking to retain control and also to service providers without a BVI licensed trust company.

  • There is increased flexibility as to when the provisions of VISTA may apply to shares in a BVI business company. The amendments allow designations to be revoked, suspended or "triggered" at a later date.
  • A key change permits shares to be added to a VISTA trust from other BVI trusts where one trustee is a designated trust and for a VISTA trust to be created by the exercise of powers conferred by another trust with at least one designated trustee. Previously, it was difficult for existing BVI trust structures to move into the VISTA regime. The changes therefore allow ordinary trusts governed by BVI law to resettle or to appoint assets onto VISTA trusts. Previous legislation made such a re-classification complex.
  • VISTA trustees now have an express right to certain documents and accounts of the underlying business company. This enhances the current trustee–shareholder entitlements. This underlines the fact that VISTA trustees can still exercise (and therefore should consider whether to exercise) certain shareholder rights, particularly in relation to financial information.
  • It will be possible to allow for the ODRs, as detailed in the trust instrument, in accordance with the wishes of the settlor to extend trustees' duties in relation to the appointment and removal of directors. A settlor may now specify a more active role for a trustee, such as imposing a duty on the trustee to make certain enquiries as to whether specific events had occurred, which would trigger an obligation to appoint or remove directors.
  • "Appointed Enquirers" are permitted to be remunerated and the trustee obliged to provide them with trust documents and information. The previous legislation was silent on these points. Section 15 of VISTA has been amended to allow for a settlor to impose fiduciary duties upon the trustee in respect of the assets of the company. This will allow for modification of the trustee duty of care and will lead to opportunities to establish trust instruments with bespoke trustee duties.

Amendments to the Trustee Act

  • The maximum perpetuity period has been increased from 100 years to 360 years. This is in line with the current maximum period of certain other jurisdictions. This extended period covers all trusts, including those governed by VISTA. Purpose trusts will continue to be exempt from the rule against perpetuities. This amendment will only impact upon those trust instruments established after May 15 2013.
  • The purpose trust legislation introduced in 2013 has been amended so as to allow a BVI PTC to be a designated trustee of a purpose trust. This will allow greater flexibility in structuring family arrangements and should lead to BVI purpose trusts becoming more popular.
  • The provisions in Section 101, which, if incorporated into the trust instrument and governs the relationship between trustees and creditors has been extended to cover loans of assets in addition to loans of money. This will help to offer further security for lenders.
  • For chargeable instruments executed after May 15 2013, trust duty and the relevant penalties have increased from US$100 and US$200 to US$200 and US$400 respectively.

Amendments to the Trust Corporation (Probate and Administration) Act

Previously probate could not be granted to a corporate executor unless such corporate executor fell within the definition of a "trust corporation". Such a trust corporation must:-

(a) have a place of business in the BVI;

(b) be empowered by its Memorandum and Articles of Association to undertake trust business; and

(c) satisfy capitalization requirements (a capital threshold of US$600,000).

The amendments allow a company which holds a Class 1 Trust Licence to qualify as a "trust corporation" under the Act. This removes the capital requirement test on the basis that a Class 1 Trust Licenceholder is sufficiently regulated. A company not holding such a licence will need to satisfy a revised capital requirement of US$1 million.

The change will also enable Class 1 Trust Licenceholders to act as executors and administrators. This will be of benefit to such trust companies allowing them to offer estate administration services.

Conclusion

The amended legislation allows greater flexibility in the BVI's trust regime. The VISTA regime has been strengthened and an increase in the potential use of PTCs will now enable BVI trusts to be promoted more readily outside the BVI. Extending the maximum trust period to 360 years is also a welcome move for long term planning by promoting wider flexibility.

Simcocks

Simcocks is an established provider of offshore legal services broadly grouped into the areas of corporate and commercial, dispute resolution and private client.

The private client team has been recommended by researchers from the independent legal directory, The Legal 500. Clients include trust companies, financial institutions, wealth managers, family offices, high net worth individuals as well as legal and accounting intermediaries.

Within the department there is a dedicated trust and foundation team. Staff advise settlors, trustees, beneficiaries and protectors on all aspects of trust disputes and Simcocks has acted in some of the highest value litigation involving offshore trusts.

The team is very strong and benefits from Advocates with substantial technical expertise together with a wide range of experience. Some are members of the Society of Trust and Estate Practitioners, the Pensions Management Institute, the Chartered Insurance Institute and are qualified lawyers in the Isle of Man and the BVI.

In association with Samuels Richardson & Co
British Virgin Islands

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.