Introduction
Following the Government of the Virgin Islands’ report on the public consultation of beneficial ownership of legal entities published in February 2015, the Beneficial Ownership Secure Search System Act 2017 was enacted and came into force on 30 June 2017, which requires certain BVI companies to obtain and maintain updated beneficial ownership information, by way of providing relevant details to its registered agent, who is required to keep a database of such information (the “BVI Regime”).
A similar Beneficial Ownership Register has also been implemented in the Cayman Islands on 1 July 2017 following the conclusion of the public consultation instigated by the Cayman Islands Ministry of Financial Services, Commerce and Environment (the “Cayman Islands Regime”). There will be a transitional period of one year until 30 June 2018 during which certain offences under the Cayman Islands Companies (Amendment) Law 2017 will not be prosecuted.
It should be noted that there is a sharing of beneficial ownership information between the Government of the United Kingdom (“UK”) and (i) the Government of the Virgin Islands, (ii) the Government of the Cayman Islands for the purposes of (i) prevention and reduction of corruption, money laundering, terrorism financing and other serious and organized crime; and (ii) facilitating timely and secure access for law enforcement agencies to such information without informing concerning individuals of such request. As such, law enforcement authorities of UK and BVI, UK and Cayman Islands will have an automatic right to the provision of beneficial ownership information held in the other jurisdiction.
This newsletter gives a brief overview of the beneficial ownership regime in BVI and the Cayman Islands, including the company’s and its registered agent’s duties under such regimes and the consequences of non-compliance.
Duties under the beneficial ownership regime
BVI
The duties under the BVI Regime include the following:
- Taking reasonable steps to identify the company’s beneficial owners and registrable legal entities, including the giving of notices and obtaining their required particulars;
- Establishing and maintaining a registered agent database (“RA database”), which records the company’s beneficial owners and registrable legal entities’ relevant information;
- Keeping the required particulars in the RA database up-to-date; and
- Making the Beneficial Ownership Secure Search System available for inspection and taking of copies by designated law enforcement authorities and having a designated person who has passed security vetting tests and so designated by the Minister of Finance to use the system.
Cayman Islands
The duties under the Cayman Islands Regime include the following:
- Taking reasonable steps to identify any individual who is a beneficial owner of the company or any relevant legal entities in relation to the company;
- Giving notice in writing to beneficial owners and relevant legal entities identified and to any person that it knows or has reasonable cause to believe is a registrable person;
- Beneficial owners and relevant legal entities to supply relevant information to the company;
- Keeping a beneficial ownership register (“BOR”) at the company’s registered office;
- Keeping the required particulars in the BOR up-to-date; and
- Minister for Financial Services to establish a search platform in relation to information on all BOR maintained.
Who is a registrable person?
BVI
A registrable person includes a beneficial owner and a registrable legal entity. A registrable legal entity would include a company incorporated, formed or registered in the BVI and would be a beneficial owner of the company if it were an individual. A person will be considered as a beneficial owner who ultimately owns or controls a corporate or legal entity if he:
- directly or indirectly holds more than 25% or more of the shares in the company;
- directly or indirectly holds more than 25% or more of the voting rights in the company;
- exercises control over the management of the company;
- is appointed as a liquidator, administrator or administrative receiver of the company which is in insolvent liquidation, administration or administrative receivership;
- is the executor or personal representative of the deceased’s estate, where the deceased is a beneficial owner of the company.
Cayman Islands
A registrable person includes a beneficial owner and a relevant legal entity. A relevant legal entity would include a company incorporated, formed or registered in the Cayman Islands and would be a beneficial owner of the company if it were an individual. An individual will be considered as beneficial owner if he:
- directly or indirectly holds more than 25% of the shares in the company;
- directly or indirectly holds more than 25% of the voting rights in the company;
- directly or directly, holds the right to appoint or remove a majority of a board of directors of the company;
- if no individual meets the conditions above, the beneficial owner will be a person who has an absolute and unconditional legal right to exercise, or actually exercises, significant influence or control over the company, other than solely in the capacity of a director, professional advisor or manager.
Company and its registered agent’s duties under the new laws
BVI
- Taking reasonable steps to identify the company’s beneficial owners and registrable legal entitiesA registered agent is required to take reasonable steps to identify the company’s beneficial owners and registrable legal entities and collect the prescribed information. A company is required to identify its beneficial owners and registrable legal entities, and subsequently notify its registered agent of those persons so identified within 15 days of identification.
- Establishing and maintaining a RA database, which records the company’s beneficial owners and registrable legal entities’ relevant informationThe RA database must contain information of each beneficial owner or registrable legal entity, including:
| Beneficial owner | Registrable legal entity |
| Name | Name |
| N/A | Incorporation number |
| Date of birth | Date of incorporation |
| N/A | Status |
| Residential address | Registered address |
| Nationality | Jurisdiction in which the registrable legal entity is formed |
| N/A | Basis upon which the legal entity is designated as a registrable legal entity |
- If there are any exempt persons, the details of the exempted person also have to be provided, including the basis upon which he is designated as an exempt person. Information shall be maintained on a RA database for five years (i) following the dissolution of the company; or (ii) after the company ceased to be a corporate and legal entity as defined by law.
- Keeping the required particulars in the RA database up-to-dateIf a company becomes aware of a change of any of the prescribed information relating to the beneficial owners or registrable legal entities, the company must give notice of the change and the date of such change to its registered agent within 15 days of such knowledge. If a registered agent is notified by a company or otherwise becomes aware of a change of any of the prescribed information relating to the beneficial owners or registrable legal entities, the registered agent must within 15 days update the information on the RA database.
- Making the Beneficial Ownership Secure Search System available for inspection and taking of copies by designated law enforcement authoritiesPerson(s) who have passed security vetting tests and designated by the Minister of Finance (a “Designated Person”) will be the only ones who have access to the Beneficial Ownership Secure Search System and is allowed to conduct a search or access any data within. A Designated Person shall execute a search on the Beneficial Ownership Secure Search System if formally requested to do so by a senior officer of certain governmental authorities, including the BVI Financial Investigation Agency, Financial Services Commission and International Tax Authority.A Designated Person shall provide the results of any search of the Beneficial Ownership Secure Search System within 15 days of the submission of a request for information; if the request is urgent, the search results should be provided within one hour, or such other time as agreed. The particulars of and all matters relating to a request made shall be confidential and shall not disclose the fact of receipt of such request or information supplied to any other person except in accordance with the law.
Cayman Islands
- Taking reasonable steps to identify any individual who is a beneficial owner of the company or any relevant legal entities in relation to the companyCompanies shall take reasonable steps to identify beneficial owners and relevant legal entities in relation to the company. The company may rely, without further enquiry, on the response of a person to a notice in writing sent in good faith by the company, unless there is reason to believe that the response is misleading or false.
- Giving notice in writing to beneficial owners and relevant legal entities identified and to any person that it knows or has reasonable cause to believe is a registrable personThe company would issue a notice, which requires the recipient to reply within one month of receipt (i) to state whether or not they are registrable persons and (ii) if so, to confirm, correct and supply any required particulars. The company may also issue notice to a registered shareholder or legal entity that the company knows or has reasonable cause to believe is a relevant legal entity in relation to itself, if it knows or has reasonable cause to believe that such shareholder or legal entity knows the identity of a registrable person.However, the company is not required to give notice if it knows that the individual or entity is not a registrable person, or it has already been informed of the individual or entity’s status as a registrable person and has received all the required particulars.
- Beneficial owners and relevant legal entities to supply relevant information to the companyBeneficial owners and relevant legal entities have the duty to notify the company of its status as a registrable person in relation to the company and provide required particulars including the date on which it acquired that status. This duty must be complied within one month beginning with the day on which it came to know of its registrable status, or has no reason to believe the required particulars are stated in the BOR.
- Keeping a BOR at the company’s registered officeThe company must keep its BOR at its registered office. Ordinary resident companies shall engage either a corporate services provider or the Registrar of Financial Services to assist them to establish and maintain their BOR. Other companies such as ordinary non-resident companies should engage a corporate service provider to assist them to establish and maintain their BOR if they are. The BOR must contain the below information of each beneficial owner or relevant legal entity:
| Beneficial owner | Relevant legal entity |
| Full legal name | Corporate or firm name |
| Residential address | Registered or principal office |
| Date of birth | Legal form of the entity and the law by which it is governed |
| Information identifying the individual from their passport, driver’s license or other government-issued document, including– ID number
– Country of issue – Date of issue and expiry |
Register of companies in which it is entered and its registration number (if applicable) |
| Date on which the individual became or ceased to be a registrable person in relation to the company | |
- Companies which are not required to maintain a BOR must file written confirmation of the relevant exemption, including details of the exemption that applies and necessary supporting information. The particulars of a registrable person shall be maintained on the BOR for five years following the date on which the person ceased to be a beneficial owner or relevant legal entity.
- Keeping the required particulars in the BOR up-to-dateThe company shall give notice to the registrable person if there are any registrable changes, which take place when (i) the registrable person ceases to be a registrable person in relation to the company; or (ii) any other changes that result in the required particulars entered into the BOR being materially incorrect or incomplete.If the company becomes aware of a registrable change or has reasonable cause to believe change has occurred with respect to a registrable person whose required particulars are stated in the BOR, the company must give notice to the registrable person as soon as reasonably practicable. If a registrable person becomes aware of a registrable change and has not received a notice from the company within one month of the change, he should notify the company of the change and provide the relevant details.
- Minister for Financial Services to establish a search platform in relation to information on all BOR maintainedThe Minister for Financial Services has a duty to establish a search platform that must (i) be secure and accessible only by the Minister for Financial Services or other persons so designated, (ii) contains all company beneficial ownership information in the respective BORs; and (iii) prevent disclosure to any person against whom a search is made, except otherwise permitted. A search of a company’s BOR is permitted when formally requested and certified to be proper and lawfully made by a senior official of the following authorities, such as the financial intelligence unit, financial reporting authority etc. Information relating to a request for beneficial ownership information, including the fact that such request was made, shall not be disclosed to any person other than authorised personnel or the law enforcement agency that requested the search.
Consequences of non-compliance
Pursuant to the BVI Regime and Cayman Island Regime, failure to comply with the relevant requirements may give rise to criminal liability for both the company and its registered agent. In addition, under the Cayman Island Regime, if the notice addressee does not comply with or respond to the notice issued by the company within 1 month from the date of the notice, he may be criminally liable, unless he can validly establish that the requirements in the notice are frivolous or vexatious.
Conclusion
The introduction of the Beneficial Ownership Registry and Beneficial Ownership Secure System is in line with international practice. In the long run, by enhancing transparency in relation to “ownership” of companies, it ensures BVI and the Cayman Islands remain trusted and competitive places for doing business.
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This article is written by ONC Lawyers and was first published on their website.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.
