The British Virgin Island ("BVI") established the trust concept with the enactment of the BVI Trustee Act in 1961 ("Trustee Act"). A trust is a legally binding arrangement whereby a person transfers assets to another person, who is entrusted with legal title to the trust assets, not for their benefit but for the benefit of a third party who often includes the settlor or a specific purpose. All directives from a settlor to the trustee are included in a document known as the trust instrument. The trust instrument is a private document for the settlor to have all parties' powers, indicating all wishes of management and disposition of the trust.
Trust System in the BVI
English Trust Law heavenly influences the BVI, but has moved beyond to allow perpetuity period of 100 years and most notably to create the commonly known "VISTA TRUST". The current legislation in the BVI regarding trusts was most recently updated by the Trustee (Amendment) Acts of 2013 and 2015 and is supplemented by the Virgin Islands Special Trusts Act 2003 (the "VISTA legislation") (most recently updated by the Virgin Islands Special Trusts (Amendment) Act 2013).
All trust in the BVI is exempt from registration under the Registration and Records Act, and all trustees are exempt from reporting and filing requirements to a high degree of confidentiality. Given the preceding, trusts remain a private agreement between the parties involved. A trust is protected by companies carrying a license under the Banks and Trust Companies Act of 1990.
Forms of Trusts in the BVI
The BVI has created an ample array of trusts to favour the parties' use depending on the circumstances and powers granted.
Enactment of Trust Amendment 2021
The Trust Amendment 2021 (Amendment) was announced on the 9th of July 2021, driving a significant change to the trust law. The Amendment has modified legislative provisions governing BVI trusts, including a strive to modernise and strengthen the BVI trust offering. The Amendment Act has brought forth the main vital changes discussed below.
According to Sections 58 and 59 of the Amendment, the court can approve arrangements for various categories of persons who cannot provide approval (ex minors, unborn children, and unascertained persons). The court will only approve changes if they are not detrimental to the interest of those on whose behalf it is agreeing. It cannot provide approval for adult beneficiaries. The current modification allows the interest of an adult beneficiary to be changed by the court without their consent. As a practitioner, this creates a disadvantage to the essence of why individuals establish a trust. The trust is a private document between parties, and the courts dismantle the privacy of a trust by allowing them to modify it as they please. Another advantage that other practitioners have mentioned is closing a gap when an adult beneficiary cannot provide consent—cases such as multiple beneficiaries in a trust and those with a minority interest.
Section 59A in the Amendment introduces a statutory framework for setting aside the exercise of fiduciary powers on the grounds of inadequate deliberation by the trustee or any other power holder (Ex BVI director of a company, beneficiary of a trust). The new clause allows to consider 1) whether in exercising their powers, the power holder did not consider one or more considerations of fact or law, or both that were relevant to the exercise of the power, or took one or more such consideration. In addition, it must consider 2) the failure of the power holder to exercise fiduciary powers with the effect that it will be treated as having never occurred. With the new Amendment, a BVI Court today is empowered to set aside the exercise of a fiduciary power with the effect that it will be treated as having never occurred. The BVI Court can also make such consequential orders as it sees fit.
Section 83A in the Trustee Act protected the trust governed by the BVI law, which is being attacked because foreign law concerns a party with interest in the trust assets under their personal relationship. The Amendment, on the other hand, has extended the reference of "personal relationship to the settlor" to include a personal relationship to any beneficiary and personal relationship, including stepchildren or children born through artificial fertilisation or surrogacy. Article 83A extends the element that protects against a foreign law applying to a BVI trust so that all questions arising are determined exclusively by BVI law.
In conclusion, a trust is a private structure that the BVI has adopted by common law. The recent reforms are a positive step toward modernising the trust legislation in the BVI that will ensure that the BVI maintains an appealing jurisdiction to continue and do business and structure one's wealth.
If you have any questions about BVI Trusts or any other topic, please feel free to contact us at Contact@viss.com.hk or directly to your Account Manager.
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