The Control of BVI-Issued Bearer Shares

Summary

This is a 2002 consultative Aide Memoire published by the BVI Financial Services Commission explaining the policy behind the then-forthcoming International Business Companies (Amendment) Act 2002, which was intended to bring bearer shares issued by BVI International Business Companies (IBCs) under regulatory control. It describes the custodianship regime, transition arrangements, and new director-record requirements that the Bill was expected to introduce, and was circulated to industry ahead of the Bill's introduction to the Legislative Council.

• Custodianship: Once the Bill becomes law, bearer shares may only be issued to or held by an Authorized Custodian (a Banks and Trust Company Act licensee specifically authorised to act as custodian) or a Recognized Custodian (Category I clearing/settlement organisations, or Category II regulated financial institutions approved by the Commission).
• Information on issue or deposit: When a bearer share is issued to or deposited with a custodian, the issuing company or depositor must give the custodian the beneficial owner's full name, the name of any other person with an interest in the share (or a statement that none exists), and any other prescribed information.
• Offences: It will be an offence for a custodian to accept bearer shares without the required information, and an offence for a company to issue bearer shares other than as prescribed by the Bill.
• Transition period: Existing bearer shares must be brought within an approved custodial arrangement within a two-year grace period from the effective date; after that period the Commission may apply to wind up a company still holding uncustodied bearer shares.
• Fee incentive: Companies wishing to retain the power to issue bearer shares will face a higher licence fee than companies without that power, intended to encourage companies to remove the power.
• Director records: All companies (new and existing) will be required to keep a Register of Directors at their registered office; existing companies have one year from the effective date to comply, and the register is not accessible to the public, only to law enforcement/regulatory officials via compulsory powers or court order.

As a consultative Aide Memoire dated 11 October 2002, this document describes anticipated statutory requirements ahead of enactment rather than being the enacted law itself; readers should verify current requirements against the actual IBC Act amendments and any subsequent legislation, since the bearer share regime described here predates later reforms.

Key obligations

• Once the amending Act is in force, companies may no longer issue or deliver bearer shares except to an Authorized or Recognized Custodian that has agreed to hold them
• Issuing companies or depositors must supply custodians with the beneficial owner's full name, details of any other interest holders (or a nil statement), and any other prescribed information at the time bearer shares are issued or deposited
• Authorized Custodians must keep prescribed records (including transfer records) at their principal office in the BVI and ensure bearer shares remain within their custody and control at all times
• Holders of existing bearer shares must place them with an approved custodian within the two-year transition period or risk the company being wound up on the Commission's application
• Companies wishing to retain the power to issue bearer shares must pay a higher licence fee
• All companies must keep and maintain a Register of Directors at their registered office, with existing companies given one year from the effective date to comply
• BVI-licensed banks/trust companies wishing to act as bearer share custodians must satisfy the Commission that they are fit and proper to hold custodian authorization
• Non-BVI-licensed entities wishing to hold BVI bearer shares must apply for and obtain Recognized Custodian (Category II) status from the Commission

Applies to

International Business Companies (IBCs), Banks and Trust Company Act licensees (potential Authorized Custodians), Recognized Custodians (investment/securities clearing organisations and regulated financial institutions), Registered agents, Company directors

Deadlines

• two-year grace period from the effective date of the Act: Existing bearer shares must be transferred into custody of an Authorized or Recognized Custodian, after which the Commission may seek to wind up non-compliant companies
• one year from the effective date: Existing companies must come into compliance with the new requirement to keep a Register of Directors at the registered office
• effective date of the Bill (expected before start of 2003): From this date it becomes illegal to issue or deliver bearer shares except to an approved custodian, and companies can no longer automatically retain the power to issue bearer shares without a higher fee