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BVI Offshore Trusts - Trustee Ordinance (1961)

The British Virgin Islands has regulated in Cap. 303 the establishment of trusts in the BVI in the Trustee Act. This Act was recently amended by law No. 11 of 2003 (which was published in the Gazette on the 6th of November, 2003) which is the Trustee (Amendment) Act, 2003. The purpose of this amendment was to establish certain new rules for trusts which should make the BVI an attractive Trust jurisdiction. Some of the areas that the Amendment introduced are rules regarding the dealings between trustees and third parties, which will make a BVI offshore trust a more attractive vehicle for commercial transactions. The amendment introduced sections 94 to 109 of the Act, as well as introducing a new First Schedule. It also introduces sections 83A and 84A to the Act, regarding Conflict of Laws and Purpose Trusts.

When setting up a BVI Trust, it is not necessary to register the Trust with the Financial Services Commission or another governmental agency. When a trust is established or a "chargeable instrument" is created, it is simply necessary to affix the necessary stamp (stamp duty) to the document without presenting the instrument to the Treasury, Post Office or other public body. There are formalities which should be followed with respect to the Declaration of Trust or Deed of Trust, but these are minimal compared to certain other jurisdictions. There are no annual government fees payable for BVI trusts which have been duly established.

Section 2 of the Trustee Act establishes the characteristics of the Trust:

	the assets constitute a separate fund and are not part of the trustee's own estate;
	title to the trust assets stands in the name of the trustee or in the name of another person on behalf of the trustee; and
	the trustee has the power and the duty in respect of which he is accountable to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed on him by law.

The reservation by the settlor (or grantor) of certain rights and powers, and the fact that the trustee may himself have rights as a beneficiary, are not necessarily inconsistent with the existence of a trust under the British Virgin Islands legislation.

Section 83A of the Trustee Act (and the First Schedule) deal with the new rules of Conflict of Laws which may apply to BVI Trusts. These new provisions are likely to command a substantial degree of international recognition, as they establish a legitimate and rational approach to issues such as forced heirship, including preventing forced heirship foreign judgments from being enforced against BVI trusts.

Section 84A of the Trustee Act overhauls the provisions regarding purpose trusts. Generally speaking, a "Purpose Trust" is a trust which does not have any beneficiaries, or even general classes of beneficiaries. A Purpose Trust is not supposed to benefit anyone, but rather one that exists for a specific purpose. The purpose can be a specific purpose, such as to own a corporation, or for a general purpose such as to further the creation and preservation of fine art.

Section 84 provides the definition that a "trust for any purpose" means a trust other than a trust

	that is for the benefit of particular persons whether or not immediately ascertainable, or
	that is for the benefit of some aggregate of persons ascertained by reference to some personal relationship.

In order to create a valid purpose trust, whether charitable or not, it is necessary to meet the following criteria:

	the purpose must be specific, reasonable and possible;
	the purpose may not be immoral, contrary to public policy or unlawful;
	at least one trustees of the trust should be a designated person;
	the trust instrument should appoint an "enforcer" - who is the person, who may be a protector, to enforce the trust and provide for the appointment of a successor to such person;
	the enforcer should consent in writing to their appointment to enforce the trust; and
	the trust instrument must specify the event upon the happening of which the trust terminates and provide for the disposition of surplus assets of the trust upon its termination.

The amendments also include provisions regarding the variation of the purposes (due to impossibility, etc.) and an exemption from the rule against perpetual trusts for purpose trusts, as well as anti-abuse provisions.

Part X of the Trustee Act is a new Part introduced by the Amendment, which confronts issues of third party dealings, and the need for a third party contracting with a trustee to undertake a reasonable enquiry into the powers of the trustee, but otherwise to look no further as to the trustee's authority.

Part XI deals with Charitable trusts and borrow from UK Charities legislation.

For more information regarding BVI trusts, please contact Koru. .

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Last modified 09-Feb-2011 17:14 -0500

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