Beneficial Ownership Secure Search System Act, 2017

Beneficial Ownership Secure Search System Act, 2017

June 2017

Introduction

The Beneficial Ownership Secure Search System Act, 2017 (the “BOSS Act”) comes into force in the BVI on 30 June 2017. The BOSS Act was almost immediately amended by the Beneficial Ownership Secure Search System (Amendment) Act, 2017, which also comes into force on 30 June.

This BOSS Act facilitates the effective storage and retrieval of beneficial ownership information for all BVI companies and legal entities using the Beneficial Ownership Secure Search system.

The BVI Government signed an exchange of notes agreement with the UK Government in April 2016. The Beneficial Ownership Secure Search system is built to ensure that the BVI can efficiently exchange that information in relation to the exchange of notes. The beneficial ownership information in the system will also be available to other authorities in the BVI to ensure that they are able to meet their international obligations. Importantly, the system will not be accessible by the public.

Under section 9(6) of the BOSS Act, the obligation to provide updated beneficial ownership information rests on the BVI company.

A BVI company that fails to comply with this section commits an offence and maybe subject to a fine up to US$250,000 or to imprisonment for a term not exceeding 5 years, or both.

Key provisions

Listed below are the key parts of the BOSS Act, which directly affect your BVI company. You should pay particular attention to points 3 and 5:

  1. All BVI companies must comply with the requirements of the BOSS Act. The Amendment Act made clear that entities that have ceased to exist, or were struck off before 1 January 2016 do not need to comply with the BOSS Act.
  2. Beneficial ownership information on each company must be added to the system. The definition of a ‘beneficial owner’ is summarised in the definitions section below.
  3. An entity shall identify any person who is a beneficial owner or registrable legal entity (see definitions section) and notify the registered agent of that information within 15 days of identifying such person or entity. The penalties for non-compliance by an entity may reach a fine not exceeding US$250,000, imprisonment for a term not exceeding 5 years or both. In addition, providing false information can lead to a fine of up to US$75,000, up to 5 years’ imprisonment or both.
  4. The BOSS Act sets out the information that the registered agent must hold for the BVI company or legal entity; the beneficial owners and registrable legal entities. The prescribed information is set out in the definitions section below. 
  5. An entity must within 15 days of becoming aware of a change in any of the prescribed information relating to beneficial owners notify the registered agent of such changes and the dates that they took place. Penalties for a breach can reach US$10,000. In addition, proving false information can lead to a fine of up to US$75,000, up to 5 years’ imprisonment or both.

Other important provisions

Other important parts of the BOSS Act include the following:

  1. A registered agent shall take reasonable steps to:
    (a)  identify the beneficial owners and registrable legal entities of each company for which it acts as registered agent; and
    (b)  collect the prescribed information with respect to each company for which it acts as registered agent.
    We may therefore, from time to time, contact you about the beneficial ownership of your company.
  2. A registered agent is not required to identify any beneficial owner of a company if it holds its interest, directly or indirectly, in the entity through a registrable legal entity (see definition below).
  3. The information must be held for 5 years by the registered agent from dissolution of the entity or its continuation out of the BVI.
  4. Access to the Beneficial Owner Secure Search system is restricted to designated persons who have passed security vetting tests, have made an oath of confidentiality and are considered fit and proper by the BVI authorities. Access to the system by those persons will be from physically secure premises and a secure IT system. As stated above, it is not publicly accessible.
  5. A designated person will conduct a search of the system if formally requested to do so by a senior officer of the following BVI bodies: the Financial Investigation Agency, the Financial Services Commission, the International Tax Authority, or the Attorney General’s Chambers.
  6. The designated persons are bound by strict obligations of confidentiality. 

Definitions

The definition of a ‘beneficial owner’ is set out in full in section 6 of the BOSS Act, and the definition of a ‘registrable legal entity’ is set out in section 8. Although we summarise the definitions below, we recommend that you review them in full. The ‘prescribed information’ is contained in section 10.

Beneficial owner

A ‘beneficial owner’ is defined as a natural person who ultimately owns or controls a legal entity and includes, though is not restricted to:
(a) a natural person who ultimately owns or controls, whether directly or indirectly, 25% or more of the shares or voting rights in the legal person;
(b) in the case of a legal person, a natural person who otherwise exercises control over the management of the legal person;
(c) in the case of a legal arrangement:

(i) the partner or partners who control the legal partnership;
(ii) the trustee or other person who controls the legal arrangement; or
(iii) the settlor or other person by whom the legal arrangement is made.

Where two or more persons hold any qualifying interest jointly, whether as joint tenants or tenants in common, then each joint owner shall be the beneficial owner.

The BVI Government does have the power to issue guidance notes in relation to the determination of beneficial owners. We are not aware that the Government is currently producing any guidance notes.

Registrable legal entity

A ‘registrable legal entity’ in relation to a company is a legal entity which:
(a) would be a beneficial owner of a company if it were an individual; and
(b) one or more of the following applies to it:

(i) it is a mutual fund under the Securities and Investment Business Act, 2010 or its subsidiary;
(ii) it is an entity whose shares or securities are listed on a recognised stock exchange or a subsidiary of such an entity;
(iii) it is a licensee or foreign regulated person; or
(iv) it is a sovereign state or a wholly owned subsidiary of a sovereign state.

Prescribed information

For each company, the information to be included in the BOSS register is as follows:
(a) the particulars of each company including: the name (including alternative names); incorporation number (or equivalent); date of incorporation; status; registered address; and registered address;
(b) with respect to each beneficial owner: name; residential address; date of birth; and nationality; and
(c) with respect to each company: the details of the entity as outlined in (a); jurisdiction of incorporation; the basis on which the entity is a registrable legal entity; the name of the regulator (if any); and the name of the sovereign state (where the registrable legal entity is a sovereign state or a subsidiary of a sovereign state). 

Please refer to The Beneficial Ownership Secure Search System Act, 2017 (click here) and the Beneficial Ownership Secure Search System (Amendment) Act, 2017 (click here) for details.

If you have any further queries, please kindly contact your account manager for assistance.