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BVI Government Moves On Bearer Shares

by Carla Johnson, Investors Offshore.com

19 November 2002

A number of offshore jurisdictions have banned bearer shares - which have legitimate uses, but are vulnerable to abuse in money-laundering and other criminal activities - but after announcing in 2000 that it planned to control the issuance of bearer shares, the British Virgin Islands Financial Services Commission (BVI FSC) is now planning legislation which it says will strictly limit improper use of the suspect instruments.

The Government says: 'The proposed regime will provide the business community with the safeguards it is seeking for the purposes of financial transactions while ensuring that regulators and law enforcement organisations are satisfied that they can pursue those who would use bearer shares for illegal purposes.'

The proposed new legislation, which is expected to become law shortly as the International Business Companies (Amendment) Act 2002, is targeted at:

  • Restricting the mobility of bearer shares by mandating that when they are issued they must be held by an approved Custodian within a licensed financial institution and subject to anti-money laundering and customer due diligence obligations;
  • Ensuring that the particulars of directors of International Business Companies are kept in the BVI at the registered office of the company. The information on these registers will be accessible exclusively law enforcement and regulatory officials under relevant legislation or by court order;
  • Allowing for non-resident Custodians who must be specifically approved by the Commission and based in a country not subject to sanction by the Financial Action Task Force (FATF) and satisfy the Commission that necessary and sufficient safeguards are in place for the secure custody of BVI bearer shares;
  • Introducing a two year transition period to facilitate the transfer of existing bearer shares from the old to the new regime;
  • Providing for the Commission to apply to the Court to wind up a company where more than two years has expired after the effective date of the bill and where the company still has bearer shares that are not held by a custodian in accordance with the bill's provisions. The net proceeds from such an order, as in any other liquidation, will be available to holders of the shares upon surrender of the share certificates to the liquidator.

Robert Mathavious, Managing Director of the Financial Services Commission said: "Our approach balances the industry's concerns for privacy and the BVI's desire to facilitate bonafide criminal investigations while respecting the privacy and confidentiality of legitimate business. It is very much in keeping with our international commitment to safeguarding BVI corporate entities from abuse by the fraudulent, the corrupt and the ethically challenged".

Lorna Smith, Head of the BVI Finance Centre said: "As the world's premier international finance centre, the BVI must always be alert to the likelihood of and potential for abuse. These proposals provide a crucial balance between avoiding undue burdens on the business community while maintaining our reputation for sound regulation and good business".

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