British Virgin Islands: A Jurisdiction Of Choice For Family Offices

There is increasing wealth globally. More and more families want to manage and optimise their wealth, and have adequate and appropriate arrangements in place to deal with major life events such as marriage, divorce, separation, death, and the birth of a child.

Families want to grow their wealth, preserve it, and ensure that it can be passed as smoothly and seamlessly as possible to succeeding generations, including the unborn. New entrepreneurs have similar desires in relation to the wealth they are acquiring.

Credit Suisse’s Global Wealth Report 2021 stated that global wealth is projected to rise by 39 per cent over the 2021-2025 period to US$583 trillion, and that wealth per adult will increase by 31 per cent. The number of global millionaires could exceed 84 million by 2025, a rise of almost 28 million from 2020. The increase of millionaires will not only occur in developed countries such as the USA or other developed countries in Europe, but it is also expected to rapidly increase in lower-income countries, with the largest increase (92.7 per cent) being in China. The number of ultra-high-net-worth individuals (UHNWIs) with net worth exceeding US$50 million will also increase.

Asset protection is a common concern of high-net-worth and ultra-high-net-worth individuals, particularly persons from certain areas of the world, as are philanthropic and charitable considerations. IFCs, which are integral parts of the global economy, contribute significantly to meeting this ever-growing demand, and BVI is an IFC of choice for family offices.

BVI is a mature and respected IFC, and meets the essential requirements for the establishment of a family office. Among these requirements are a solid and modern legal and legislative framework and environment, a strong regulatory system, access to experienced professional and business services, a good name and reputation, political and economic stability, and an overall positive social and business environment. BVI  also has a range of well-qualified, sophisticated professionals and service providers,  licensed and regulated by the BVI Financial Services Commission (the FSC) and various professional bodies.

Among the services available in BVI for family offices are advice on appropriate ownership structures including trusts, foundations, private trust companies, fund structures (whether incubator funds or approved funds, and whether standing alone or as part of a larger structure), partnerships, philanthropic or charitable structures, and succession planning for future generations through wills and trusts.

BVI is a multifaceted IFC, providing a wide range of services, but its hallmark remains the BVI business company, which continues to be globally recognised for its versatility, flexibility and affordability. BVI companies are frequently used as vehicles for the establishment of funds, including segregated portfolio companies (SPVs), trusts, and other legal structures. BVI has a strong well-coordinated infrastructure that strengthens and enhances its offerings as an ideal IFC for family offices.

The Eastern Caribbean Supreme Court (ECSC) comprises a High Court, which has Commercial, Civil and Criminal Divisions. The Commercial Division in particular is experienced in and regularly handles multi-jurisdictional high value disputes, many involving families and issues of succession. Appeals lie from all Divisions of the High Court to the Court of Appeal. The Privy Council is the final court of appeal.

Generally, appeals from final decisions of the Court of Appeal lie as of right to the Privy Council, and leave is required to appeal to the Privy Council from interlocutory decisions of the Court of Appeal.

In its judgment in the case Chhina v Nazir and Another[1], delivered on 14 May 2024, on appeal from BVI, the Privy Council gave clarity to and essentially settled the issues which had previously existed in relation to whether there was an appeal as of right to the Privy Council or not.

 As in all human relations and endeavours, disputes arise from time to time within families and in relation to family offices. Dynastic family disputes, especially in relation to wills and trusts, are not unknown. A well-structured family office should include strong enforceable dispute resolution provisions, including in appropriate cases, an effective arbitration clause, instead of leaving disputes to be resolved by the courts.

The BVI International Arbitration Centre (BVI IAC), which was established in 2014, provides a respected and efficient facility and institution for the arbitration of disputes, including those which may involve family offices.

The BVI IAC was established by the Arbitration Act, 2013, a modern arbitration law that is based on the ‘gold standard’ UNCITRAL Model Law. The BVI IAC is underpinned by its modern Arbitration Rules which came into effect in 2021. BVI is effectively party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention) and as such, its arbitral awards are enforceable in over 172 state parties worldwide. In turn, BVI recognises and enforces arbitral awards from those States.

The BVI IAC has an extensively diverse Panel of Arbitrators who come from common law as well as civil law jurisdictions, are geographically and gender diverse, speak several languages, are of diverse cultural, ethnic and religious backgrounds, and in various ways are leaders in international arbitration. The BVI IAC therefore offers parties a wide range of options in their choice to seek arbitration as a means to resolve disputes.

Disputes within family offices often arise among family members. The robust confidentiality provisions in BVI’s Arbitration Act, coupled with the Courts’ modern Civil Procedure Rules and procedures that value confidentiality and privacy, make BVI an ideal arbitration ‘seat’ and make the BVI IAC ideally suited for the arbitration of disputes among families. The BVI Courts are supportive of arbitration, and their decisions have long reflected and affirmed that pro-arbitration stance. As a general principle and as a matter of public policy, BVI Courts enforce arbitral awards.  

In keeping with their commitment to Alternate Dispute Resolution, BVI courts, particularly in the Civil Division of the High Court, increasingly refer matters to mediation. This is particularly beneficial to families and family offices, as, among other things, mediation facilitates the preservation of relationships, is confidential, and can lead to relatively speedy, cost-effective, confidential, and creative resolution of disputes, crafted by the parties themselves.

On 31 July 2023, the Eastern Caribbean Supreme Court Civil Procedure Rules (Revised Edition), 2023 came into effect.  A new and important feature of the revised Rules is Part 38A, which provides for Judicial Settlement Conferences. The Judicial Settlement Conference is “intended to complement the provisions for mediation as an alternate dispute resolution mechanism for promoting the early disposition of cases.” The Rule emphasises the confidentiality of the proceedings in a Judicial Settlement Conference on the part of all involved, including the presiding judge. This is yet another significant development in BVI that enhances its offerings for family offices.

BVI’s robust regulatory framework, known for meeting due diligence and compliance requirements and observing best practices, is another feature that makes it ideal for the establishment of family offices. The International Tax Authority (ITA), established by the International Tax Authority Act, 2020  plays an important role in ensuring that BVI meets globally accepted regulatory standards and best practices.

A relatively recent and interesting development in BVI, which may have important implications for family offices, and which may be of particular interest to entrepreneurs, is the digital asset industry. BVI has seen the establishment of blockchain and cryptocurrency platforms, and the Commercial Court has rendered decisions which, among other things, recognise cryptocurrency as currency.

Consistent with its longstanding reputation, the FSC has adopted a cautious, vigilant, and constructive approach to the regulation of the industry. In 2020, the FSC issued a Guidance Note on digital assets, and in 2022, the House of Assembly of The Virgin Islands enacted the Virtual Assets Services Providers (VASP) Act, which establishes a supervisory framework for virtual assets, and for providers in the industry.

There is a dedicated Division within the FSC that deals with VASPs, and fundamental prerequisites to the grant of licences under VASP are that fit and proper requirements, as well as all anti-money laundering requirements, are met.

All indications are that BVI will increasingly be an IFC of choice for family offices and that there will be a growth in the use of IFCs by family offices.

[1] [2014] UKPC 10 (Privy Council Appeal No. 0040 of 2023).

Dancia Penn OBE QC
Dancia Penn is Queen's Counsel and a legal advisor in areas including commercial, corporate, civil, financial services, corporate governance and regulatory matters. Dancia is also an arbitrator and mediator; she serves as President of the BVI Arbitration Committee, and speaks regularly on arbitration, mediation, law and governance. She is also on the Roster of Arbitrators at Arbitration Place, Toronto and the Legal Services Panel of The Government of The Virgin Islands.