Sunday, 17 November 2013

Trust Law in the BVI

New Trust legislation in the BVI has broadened the range of trust options accessible to private clients and enhanced BVI trust legislation by making some welcome modifications that boost the attractiveness of BVI trusts as part of international wealth planning and financial structures.

The British Virgin Islands are previously a well-respected trust jurisdiction - mainly because BVI trust law is derived from English trust law, and additional supplemented by statute to offer a variety of flexible and user-friendly trust structuring options to stylish private clients.

The latest legislation came into effect in May 2013 to refine further the trust offering in the BVI, especially the use of Private Trust Companies ("PTCs") and VISTA trusts. The latest changes should help to ensure the BVI remains at the forefront of international trust planning and a jurisdiction of selection for high net worth and ultra high net worth families from around the globe.

The main changes are summarised below:

The Trustee Act

(i) Trust Period – For all new trusts established after May 15, 2013, the maximum perpetuity period has been increased from 100 years to 360 years. For practical purposes, this extends the life of new trusts beyond 4 generations of beneficiaries, which is more than enough for most private trusts.

(ii) Purpose Trusts – the BVI already has highly developed legislation for the creation of non-charitable purpose trusts, but there is a requirement that at least one trustee must be a "Designated Person", which has until now meant a lawyer or auditor in BVI or a BVI trust licence holder. Now this definition has been amended so as to include PTCs. This further enhances the utility of PTCs for those persons who would rather not use a third party, regulated trustee for purpose trusts (including VISTA trusts).

iii) Trust Duty - The trust duty fee has been increased from $100 to $200 and the late fee will increase from $200 to $400 for each year it remains unpaid.

(iv) Third Party Lending/Security – Previously, any third party lending money to a trustee could request (for its own protection and only where there is an express provision in a trust deed that section 101 of the Trustee Act applies) that the trustee restrict its powers of investment, distribution and appointment and removal of trustees. Amendments have now been enacted so as to extend the application of Section 101 to lenders of any assets, not just money. So, this will help to offer further security for third party lenders in future by helping to preserve the value of the trust corpus.


The Virgin Island Special Trusts Act (VISTA) has been in force since 2004. VISTA trusts have become a popular trust structure for holding shares in BVI companies, because VISTA removes the trustees' responsibility to monitor and intervene in the management of the BVI company held in trust, whilst offering the same flexibility for planning as a regular trust. Some welcome clarifications have been made to this legislation.

(i) Application of VISTA is now variable –Although generally considered to be a possibility any way, amendments confirm that a new VISTA trust can now specify the circumstances in which the VISTA regime will apply or cease to apply during the lifetime of a trust. The power to make the declaration that VISTA will apply/cease to apply can be vested in an individual or a committee but not in any of the trustees.

(ii) Conversion of Non-VISTA Trusts - BVI non-VISTA trusts can now be converted into VISTA trusts provided they meet all the conditions to qualify as such ( e.g. holding BVI company shares) and provided further that one of the trustees of the trust is a PTC or a trust licence holder.

iii) Number of VISTA Trustees –previously VISTA stated that there could only be one trustee of a VISTA trust and that that trustee had to be a trust licence holder. Now, in addition to permitting a PTC to act as a trustee of a VISTA trust, VISTA has been amended so as to permit the appointment of additional trustees, provided that there is at least one trustee that is a PTC or trust licence holder. This means that non-BVI resident individuals or non-BVI companies can now be co-trustees of VISTA trusts, if preferred.

(iv) BVI Company Shares - The rules as to which BVI companies cannot be held in a VISTA trust have been updated to reflect changes in BVI corporate legislation. VISTA trust can now be formed for all types of BVI Company other than those that are licensed in the BVI.

(v) Appointed Inquirer - In relation to permitted grounds for complaint, it is provided that an appointed inquirer can be paid from the trust assets and is to be given information about the trust.

(vi)  Corporate Settlors - It has been made clear that corporate settlors can establish VISTA trusts.


BVI PTCs have been able to act as trustees of trusts without the need to obtain a BVI trust licence since 2007. They have become very popular, especially among High-Net-Worth families and clients from civil law jurisdictions who do not necessarily welcome the prospect of transferring their wealth to an independent third party trustee when establishing a trust.

PTCs can only avoid licensing in the BVI if they undertake "unremunerated trust business" or (for related family trusts where the PTC is to charge fees for its services) "related trust business".

The problem previously was that if a settlor was included in the class of beneficiaries, then the relevant trust could not fall within the category of "related trust business", which meant the PTC could not charge for its services. That position has now been rectified, so that a PTC can now charge for its services for family trusts where the settlor is in the class of beneficiaries.


The new legislation has brought about some very positive changes for the BVI – expanding the suite of trust vehicles available to international clients and assisting the jurisdiction in cementing and promoting its position as a leading jurisdiction for international wealth planning structures.
Winston Wambua

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