In order to comply with its obligation under the Exchange of Notes Agreement which it entered into with the UK back in April 2016, the British Virgin Islands (BVI) has enacted Beneficial Ownership Secure Search System Act 2017 (BOSS Act). The Act came into effect on 30 June 2017. The BOSS Act was almost immediately amended by the Beneficial Ownership Secure Search System (Amendment) Act 2017, which also came into force on 30 June. The BVI is an important offshore jurisdiction and international tax and law enforcement authorities believe that the corporate veil is used for fraudulent practices. The enforcement of the act is aimed to clamp down tax evasion, money laundering, and terrorism financing.
The Exchange of Notes Agreement facilitates the sharing of information relating to beneficial ownership between the BVI and the UK government. The BOSS Act paves way for the setting up of a safe system for storing, retrieving and providing access to such information. The Beneficial Ownership Secure Search System, known as BOSS System, will enable the authorities to have a searchable database of BVI entities and their ownership details.
The BOSS Act co-exists with the Anti-Money Laundering Act (AML Act); therefore, the entities are required to comply with the KYC obligations as prescribed under the AML Act. It is of interest to note that the AML Act requires entities to collect and record KYC on natural persons who directly or indirectly control 10% or more of the shares or voting rights of a legal entity.
Related Article: Company Setup Requirements for British Virgin Island
Who is a Beneficial Owner?
A beneficial owner is the natural person who ultimately owns or controls a corporate or legal entity and include, though not limited to:
- a natural person who ultimately owns or controls, whether directly or indirectly, twenty five or more per cent of the shares or voting rights in the legal person;
- in the case of a legal person, a natural person who otherwise exercises control over the management of the legal person;
- in the case of a legal arrangement
- the partner or partners who control the partnership;
- the trustee or other person who controls the legal arrangement; or
- the settlor or other person by whom the legal arrangement is made.
- In case of insolvent entities that are undergoing liquidation, administration or administrative receivership, the natural person who is appointed as a liquidator, administrator or administrative receiver of the corporate and legal entity; or
- in the case of a receiver being appointed over twenty five or more per cent of the shares or voting rights in a corporate and legal entity, the creditor who appoints the receiver; or
- in the case of a shareholder who would otherwise be a beneficial owner but is deceased, the natural person acting as an executor or a personal representative of the deceased’s estate.
Where two or more persons hold any qualifying interest jointly, whether as owners or tenants, then each of them is a beneficial owner.
It must also be noted that a person shall not be treated as beneficial owner merely for having the benefit of a security interest of the qualifying share or voting rights or for having commercial exposure to the financial performance of a registrable entity pursuant to financial derivatives or similar contractual arrangements.
What is a registrable entity
A registrable legal entity in relation to a corporate and legal entity is a legal entity which:
- would be a Beneficial Owner of the corporate and legal entity if it were an individual; and
- one or more of the following applies to it:
- it is a legal entity which is an exempt person;
- it is a legal entity the securities of which are listed on a recognised stock exchange;
- it is a licensee or a foreign regulated person; or
- it is a sovereign state or a wholly owned subsidiary of a sovereign state
A Registered Agent must maintain the following information in the BOSS Register:
- The particulars of each corporate and legal entity including
- the name, including alternative names;
- the incorporation number or its equivalent;
- date of incorporation;
- registered address; and
- With respect to each beneficial owner of the corporate or legal entity:
- residential address;
- date of birth; and nationality.
- With respect to each registrable legal entity of the corporate and legal entity:
- details of the registrable legal entity as outlined in section A above
- jurisdiction in which the registrable legal entity is formed;
- the basis or bases upon which the legal entity is designated as a registrable legal entity;
- where the registrable legal entity is a foreign regulated person, the name of the jurisdiction of regulation and the name of the foreign regulator; or
- where the registrable legal entity is a sovereign state or a wholly owned subsidiary of a sovereign state the name of that sovereign state and (if applicable) wholly owned subsidiary.
- With respect to an exempt person
- the details of the exempt person as outlined in subsection (3)(a); and
- the basis or bases upon which the exempt person is designated as
Who is exempted from BOSS?
An exempt person is a person who meets one or more of the following conditions:
- a corporate and legal entity which is recognised, registered or otherwise approved as a mutual fund under the Securities and Investment Business Act, 2010 including an approved fund, an incubator fund, a public fund, a professional fund and a private fund;
- a corporate and legal entity the securities of which are listed on a recognised stock exchange;
- a licensee;
- a corporate and legal entity which is a subsidiary of a corporate and legal entity that falls within paragraph (a) or (b); or
- a corporate and legal entity exempted by regulations.
Confidentiality and Security of Data
- It is not accessible to the general public. It is accessible only by designated persons who have passed security-vetting tests, have made an oath of confidentiality and are considered fit and proper by the BVI authorities. Such persons are bound by confidentiality.
- The designated persons can have access to the system only from designated secure premises and a secure IT system within BVI.
- The designated persons shall search the system only on formal requests made by senior authorities from the following BVI government bodies:
- the Financial Investigation Agency,
- the Financial Services Commission,
- the International Tax Authority, or
- the Attorney General’s Chambers.
Other Key Points
- The obligation of providing ownership details and any changes thereof shall rest on the BVI entities.
- The Registered Agents (RA) shall take reasonable efforts to identify the Beneficial Owners and registrable entities of each corporate and legal entities for which they act as Registered Agents.
- Registered Agents are not required to identify the Beneficial Owners who own the interest, directly or indirectly, in a registrable entity of a corporate/legal entity that is identified by the agent.
- The RA should maintain information collected in the database for a period of five years following the dissolution of the entity or for five year after the entity ceases to be a corporate/legal entity.
- The entities that have ceased to exist, or were struck off before 1 January 2016 need not comply with the BOSS Act.
- No change shall be recorded in the case of a beneficial ownership when a bona fide dispute over the beneficial ownership of the said interest is under adjudication by a court or tribunal.
- Failure to comply with the obligation is an offence that would attract a fine of up to US$250,000 or an imprisonment for a period of up to five 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.
- An entity shall notify the registered agent of information relating to beneficial ownership or any changes to the information relating to the beneficial ownership within 15 days of identifying such person or entity. Penalties for not informing changes in the relevant information could be up to US$10,000.
The BOSS Act is not going to significantly impact the prevailing information sharing procedure. The RAs are already required to maintain a register of Beneficial Owners and BVI authorities can still request and gain access to the information contained in the register. Hence, the RAs need not take any additional efforts to meet their obligations under the new compliance system; however, the Act would streamline the establishment of a centrally-maintained database that is accessible in a secure environment by designated persons. Such a single platform will ensure that the information is reported promptly and are subjected to reporting, security and confidentiality standards.
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