The British Virgin Islands are a British Dependant Territory composed of over 50 islands, islets and cays located approximately 60 miles (95 kilometres) East of Puerto Rico. The total land area is approximately 60 square miles (155 square kilometres) and the total population is approximately 21,000. The principal island is Tortola, with a population of about 13,500. The capital of Road Town is located on Tortola. Access to the islands is easy by air and sea; the main gateways are Puerto Rico and the U.S. Virgin Islands, which lie immediately to the west. The Territory is politically stable and has a high level of internal self-government.

The government consists of a British appointed Governor and thirteen democratically elected members of a Legislative Council who, in turn, elect Ministers. The Executive Council of the Territory consists of the Governor, the Deputy Governor, the Ministers and the Attorney General. The United Kingdom, through the Governor, is responsible for defence, external affairs, internal security, and the administration of justice. The legal system is primarily based on that of Great Britain and there is legislation to regulate and protect corporate, banking, trust, mutual fund and insurance operations. All domestic matters are legislated locally, by the Legislative Council, including taxation.

There are no capital gains taxes, inheritance taxes or death duties in the Territory. Government revenues are derived from local income tax, import duties, stamp duties, license fees and company fees.

The British Virgin Islands are a party to two double taxation treaties, with Japan andSwitzerland, which the United Kingdom entered into many years ago. These treaties were extended to cover the British Virgin Islands, although the Territory does not have a tax treaty with the United Kingdom itself. The treaties themselves are little used. There are no plans to negotiate any new tax treaties.

The Territory has adopted the U.S. Dollar as the local currency. There are no exchange controls and no restrictions on the free movement of funds.

In recent years the British Virgin Islands has become a significant international finance centre. The government seeks to maintain and enhance the Territory's reputation in international finance through a policy of ongoing consultation and active support of the offshore industry.

TYPE OF COMPANY FOR INTERNATIONAL TRADE AND INVESTMENT

International Business Companies (or IBCs) are companies incorporated under the International Business Companies Ordinance 1984 (as amended). This Ordinance provides for the establishment of tax exempted companies with extended privileges and contains strict confidentiality requirements. It provides for the re-domiciliation of companies from other jurisdictions in the Territory and also provides for companies to move their domicile out of the Territory, to be continued elsewhere. International Business Companies are by far the most popular and widely used type of company.

The international finance community has embraced the British Virgin Island's IBC. Since the initial passage of the legislation in 1984, the Territory has incorporated about 600,000 companies by the end of 2003. The BVI legislation has been so successful that it is considered the ideal model by many new jurisdictions seeking to establish an offshore financial industry.

Some of the more significant features and advantages of an International Business Company are:

• It requires a minimum of only one founder, one shareholder, and one director (who can all be one person).
• It need not appoint any operating officers
• Its shareholders, directors and officers may be individuals or corporations and of any nationality.
• It need not hold shareholder's or director's meetings in the British Virgin Islands.
• It can hold meetings of directors or shareholders by telephone or other electronic means; alternatively, directors as well as shareholders may vote by proxy.
• It need not hold an Annual General Meeting.
• Its shares may be denominated in any currency and in more than one currency.
• Its shares may be issued with or without par value.
• Its minimum issued and paid-in capital can be one fully paid share.
• Its shares may be issued for consideration other than cash.
• Its shares may be issued in bearer form, transferable by delivery only (insuring complete confidentiality of ownership and simplifying the transfer of assets between parties).
• If a governmental authority outside the British Virgin Islands seizes the shares, or any other interest, in the Company in connection with nationalization, expropriation, confiscatory tax, other governmental charge, etc., the Company or a shareholder may apply to the BVI court for an order that the Company disregard the seizure and continue to treat the person from whom the shares were seized as continuing to hold the shares.
• The Company can buy back or redeem its own shares from shareholders and hold them as treasury shares or cancel them.
• It is required to keep only such accounts and records as the directors consider necessary or desirable and these may be kept abroad.
• It is not required to prepare financial statements or to appoint auditors.
• It is not required to file any return of shareholders, directors or officers, although such registers may be filed at the Companies Registry if so desired.
• It is not required to maintain registers of directors or officers, although such registers may be maintained at the registered office.
• Its incorporation documents (Certificate of Incorporation and Memorandum and Articles of Association), which include the location of its registered office in the Territory and the identity of its registered agent, are the only documents required to be filed at the Companies Registry as a matter of public record. These documents do not contain the identity of the ultimate directors or shareholders of the Company. An IBC is not required to disclose any particular information on its letterheads.
• It can amend its Articles of Association by a director's resolution passed at a board meeting called at three days notice and attended by at least 50% of the directors.
• It can be incorporated within 24 hours of the receipt of instructions, if necessary. Actual incorporation documents are available from the Companies Registry within a few days thereafter.
• Its name may end with any of the following words, or their abbreviations: Corporation, Incorporated, Limited, Societe Anonyme, or Sociedad Anonima (Corp., Inc., Ltd., S.A.).

RESTRICTIONS ON TRADING

Cannot trade within British Virgin Islands or own real estate there. Cannot undertake the business of banking, trust company, insurance, mutual fund and related businesses, assurance or reinsurance. However, the legislation does allow an IBC to carry on the following activities within British Virgin Islands:

• make or maintain deposits with local banks in British Virgin Islands;
• make or maintain professional contact with persons in British Virgin Islands;
• prepare or maintain books and records within British Virgin Islands;
• hold meetings of its directors or members within British Virgin Islands;
• hold lease of property for use as an office in British Virgin Islands;
• own a vessel(s) registered in British Virgin Islands;
• hold shares in another British Virgin Islands IBC.