The BVI Share Trust

Published 25 Nov 2014

The BVI Share Trust (‘Share Trust’) is designed to provide individuals who own shares in a BVI company with a succession planning tool whilst ensuring that, for the remainder of their lifetime, they are able to continue to manage and operate the business of the company in the way they see fit and to receive the economic benefits of share ownership. 

Where BVI company shares are held by an individual on death, the shares cannot be validly distributed until the deceased’s will has been probated in the BVI courts. Since shares in a BVI company are considered to be movable property under BVI law, the law of the jurisdiction of domicile at death is applicable as the law governing succession. Therefore forced heirship may apply and may result in distributions contrary to the deceased’s wishes and a very expensive probate process.

This is especially relevant in the Middle East and Latin America where Shariah law or forced heirship regimes are commonplace as is also the case in many Civil Law jurisdictions. It is also important to note that the law of the place of domicile will also govern the ability of the shareholder to dispose of their property, competence to make a will and the manner in which the property is disposed – meaning issues like the technical formalities of a will, e.g. the number of witnesses that must be present, can impact on the distribution. 

The probate process also includes the public disclosure of the ownership of the company and the identity of the heirs and is time consuming and costly. During probate, the company’s assets and bank accounts may be frozen and, if the individual dies without a valid will, the process is even more complicated and costly.

While a traditional discretionary trust could avoid many of these disadvantages, for many the loss of control over the management of the company and its investment policy is not acceptable. The Share Trust allows the individual to control the company but, on death, ensures that the shares are distributed, according to the stated wishes, with a minimum of delay, cost and publicity.

The Share Trust is specially designed to hold BVI company shares and is established in accordance with the Virgin Islands Special Trusts Act, 2003 (‘VISTA’). There are two primary documents which constitute the establishment of a Share Trust: a trust deed which confers a life interest in the share on the settlor, and a rights deed which governs the circumstances in which shares can be re-transferred to the settlor prior to his death or incapacity. The rights deed also sets outs the basis on which the settlor is willing to transfer shares to the trustee and the basis on which the trustee is willing to accept the shares as an addition to the trust.

The key advantages are as follows: 

  • Avoidance of the need to prove probate in the BVI courts
    The settlor can in the trust deed determine the beneficiaries and the proportion in which they will benefit
  • Automatic succession by the beneficiaries to the shares on the settlor’s death
  • The share transfer is confidential
  • The settlor or appointee remains a director during the settlor’s lifetime and enjoys lifetime income and voting rights
  • Automatic succession to the office of director on the settlor’s death
  • The settlor can revoke the arrangement at any time
  • The arrangement can be terminated and re-established at any time during the settlor’s lifetime
  • The arrangement can also apply on the settlor’s incapacity, as set out in the deeds

The Share Trust structure gives owners of shares in a BVI company unprecedented freedom to manage succession to those shares with minimal interference to the business of the BVI Company or enjoyment of the company’s profits. It has the added advantage of completely avoiding a public application for probate in the BVI courts and, therefore, maintains confidentiality, saves costs and avoids the inevitable delays that an application for probate would entail. 

 

This publication is intended to provide an overview of the subject matter and is not comprehensive in nature or to be construed as legal or tax advice. We recommend that clients seek professional advice on any particular matter. 

 

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