	Beth Anne Gray J., LL.B. (Hons.) & Victoria Tejada LL.B. P.O. Box 832-0816 - World Trade Centre - Panama City - Republic of Panama International Legal Services

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Press Release No. 5 of 2004

7 May 2004 - PRESS RELEASE

British Virgin Islands prepared to immobilise bearer shares - encourages applications for "custodian" status from July

The BVI is poised to take a major step in July towards immobilizing bearer shares by starting the applications procedure for custodians of bearer shares.

New legislation will ultimately require all bearer shares in BVI International Business Companies (IBCs) to be held by a custodian and thus immobilized. Companies formed before 1 January 2005 will have until 31 December 2010 to comply. Companies formed after 1 January 2005 must comply from their date of formation.

To enable custodians to be in place by 1 January 2005, the BVI Financial Services Commission will consider applications to act as custodians from 1 July 2004.

Those eligible to apply as an “authorised” custodian will be service providers licensed under any BVI financial services legislation, as well as bodies corporate incorporated or formed outside the BVI that are not resident in, and do not have a place of business in the BVI.

Those eligible to apply as a “recognised” custodian will be investment exchanges or clearing organisations that operate securities clearance or settlement systems in a jurisdiction which is a member of the Financial Action Task Force.

All applicants to be “authorised” custodians will have to satisfy the Financial Services Commission that they meet certain “fit and proper” criteria and have the necessary systems in place for safe custodian of their bearer shares.

For bodies corporate, the commission will consider the prudential regulation and anti-money laundering regulations with which the bodies have to comply.

The Commission may attach conditions to its approval and vary or revoke these.

To assist potential applicants for custodian status, the Commission has issued a new Aide Memoire, entitled, Criteria for Approval of Authorised Custodians of Bearer Shares of BVI Incorporated Companies. Besides setting out the criteria the Commission will use when approving custodians, the Aide Memoire addresses, inter alia, the duty of custodians and the grounds on which the Commission may revoke approvals.

Commenting on the new bearer shares regime, Robert Mathavious, Managing Director and CEO of the Financial Services Commission, said, “These measures enable the BVI to comply with all international standards including the 40 anti-money laundering recommendations of the Financial Action Task Force. They are the result of close cooperation between the BVI private sector, government and regulator. The Commission encourages all potential custodians to apply from 1 July.

To see a copy of the Aide Memoire - click here.

	The International Business Companies (Amendment) Acts of 2003 and 2004 provide the legal framework for immobilizing bearer shares. The Acts are due to come into force on 1 January 2005.
	The Financial Services Commission (Amendment) Act of 2004 addresses the regulatory framework for immobilizing bearer shares, in particular the rules governing custodians. It is due to come into force on 1 July 2004.
	IBCs will be able to amend their Memoranda of Association to state that they are authorized to issue only registered shares and that these may not be exchanged for bearer shares. They will be required to file this statement with the BVI Registrar of Companies, along with a declaration that they have no bearer shares in issue.
	The new rules are the result of extensive consultation with BVI service providers. They are based on the recommendations of a private sector panel that the Financial Services Commission convened to examine the issue.
	Although the IBC (Amendment) Act of 2003 envisaged a deadline for immobilization of bearer shares of 31 December 2004, the private sector panel recommended a seven-year transition period before the new legislation took effect. A further IBC (Amendment) Act of 2004 gave effect to this recommendation, setting a new deadline for immobilisation of 31 December 2010.

Most of the 500,000 IBCs registered in the BVI currently have the power to issue bearer shares. Whether they have in fact issued these and have bearer shares outstanding is not certain.

Bearer shares are not unique to BVI IBCs. They are widely used in Europe by non-listed companies and are also popular in Latin America, the Far East and some US states.

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[ BVI - Press Release ] [ Aide Memoire 3 (2004) ] [ Statement - Mathavious ]

Last modified 26-Sep-2007 17:37 -0400

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Last modified 26-Sep-2007 17:37 -0400